N-30D 1 y38806n-30d.txt SEMI-ANNUAL REPORTS 1 THE TRAVELERS VARIABLE PRODUCTS FUNDS SEMI-ANNUAL REPORTS JUNE 30, 2000 [TRAVELERS GRAPHIC] MANAGED ASSETS TRUST HIGH YIELD BOND TRUST CAPITAL APPRECIATION FUND MONEY MARKET PORTFOLIO THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO SOCIAL AWARENESS STOCK PORTFOLIO UTILITIES PORTFOLIO [TRAVELERS LIFE & ANNUITY LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 2 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- DEAR SHAREHOLDER: We are pleased to provide the semi-annual report for the Travelers Variable Products Funds -- Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio ("Trust" or "Portfolio") and the Travelers Series Trust -- U.S. Government Securities, Social Awareness Stock and Utilities Portfolios ("Portfolio(s)") for the period ended June 30, 2000. The information stated in this letter represents the opinion of the manager or managers and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities may remain in or out of the Trusts or Portfolios. This letter briefly discusses general economic and market conditions. A detailed comparison showing the growth of a hypothetical $10,000 invested in each Portfolio since inception can be found in this report. Past performance is not indicative of future results. We hope you find this report to be useful and informative.
The Performance of the Travelers Variable Products Funds* (December 31, 1999 - June 30, 2000) Managed Assets Trust.......................................... 2.66% High Yield Bond Trust......................................... 1.20 Capital Appreciation Fund..................................... (1.02) Money Market Portfolio........................................ 2.89 U.S. Government Securities Portfolio.......................... 5.16 Social Awareness Stock Portfolio.............................. (1.25) Utilities Portfolio........................................... 6.29
MARKET SCHEDULE OF SUBACCOUNT COMMENTARY INVESTMENTS ---------- ---------- ----------- Managed Assets Trust........................................ 2 8 High Yield Bond Trust....................................... 3 17 Capital Appreciation Fund................................... 3 23 Money Market Portfolio...................................... 4 25 U.S. Government Securities Portfolio........................ 36 40 Social Awareness Stock Portfolio............................ 36 41 Utilities Portfolio......................................... 37 44
MARKET AND ECONOMIC OVERVIEW Stocks declined in the second quarter of 2000, leaving many of the major indexes down for the first half of the year as investors debated potential rate increases by the Federal Reserve Board ("Fed"). Volatility continued to be a major theme with both the Dow Jones Industrial Average ("DJIA")(1) and the Nasdaq Composite Index ("Nasdaq")(2) registering record one-day point losses. The breadth of the declines affected a wide range of stocks including many small- and large-capitalization company stocks, growth stocks and value stocks. (Growth stocks are shares of companies with historically strong and relatively predictable earnings growth rates. Value stocks are shares of companies that are believed to be undervalued but have positive longer-term business prospects.) Momentum investing and dot.com stocks were out of favor replaced, in many cases, by a renewed interest in companies that many investors believed may provide real earnings and strong financials. Concerns about higher interest rates peaked in mid-May, when the Fed raised interest rates an additional 50 basis points.(3) The specter of rising rates was a catalyst for the weak performance of all of the major indexes during the period. The DJIA, which is made up of "Old Economy" companies, declined 8.44% during the reporting period. (The "Old Economy" represents --------------- * Please note that data represents past performance, which is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 1 The DJIA is a price-weighted average of 30 actively traded blue-chip stocks. An investor cannot invest directly in an index. 2 The Nasdaq is a market value-weighted index that measures all domestic and non-U.S. based securities listed on the NASDAQ stock market. An investor cannot invest directly in an index. 3 A basis point is 0.01% or one one-hundredth of a percent. 1 3 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- more established, "blue-chip" companies.) The Standard & Poor's 500 Index ("S&P 500")(4) of large-company stocks fell 0.43%, while the Standard and Poor's MidCap 400 Index(5) ("S&P MidCap 400") of medium-size company stocks and the Russell 2000 Index(6) of small-company stocks advanced 8.97% and 3.04%, respectively, for the six months ended June 30, 2000. For the sixth consecutive time in the last year, the Fed acted to raise interest rates in May to slow the U.S. economy, increasing the federal funds rate by 50 basis points to 6.5%. (The federal funds rate is the interest rate that banks with excess reserves at a Fed district bank charge other banks that need overnight loans. The fed funds rate, as it is called, often points to the direction of U.S. interest rates.) The increase of the target overnight interest rate marked its highest level in nine years and reflected Fed action intended to address risks of an economy with higher inflationary pressures. The Fed continued to stress its concern that there is a disparity in the growth of demand and potential supply, which may foster inflation and jeopardize the economy's performance. In theory, higher rates may potentially hurt stocks, because slower growth often hinders profits at the same time that alternative investments become more attractive. Accordingly, many interest-rate sensitive stocks experienced price declines after the recent Fed decision. In June, many investors were relieved after the Fed left interest rates unchanged during its latest policy meeting. Although the central bank noted that inflation risks persist, the decision made against more interest rate increases was ruled out for the time being. Generally, monetary policy takes time to filter through the economy and the full effect of higher interest rates may not be felt for months. MANAGED ASSETS TRUST Managed Assets Trust ("Trust") seeks to provide a high total investment return through a fully managed investment policy. For the six months ended June 30, 2000, the Trust returned 2.66%. In comparison, the Lehman Brothers Government/ Corporate Bond Index(7) returned 4.18% and the S&P 500 returned a negative 0.43% for the same period. (Past performance is not indicative of future results.) Signs that the economy is returning to a more moderate growth path enabled financial markets to recover in late May and June after suffering for most of the first two months of the second quarter. The recovery included both stock markets and credit risk areas of the U.S. bond markets. These markets benefited by investors sharply increasing the probability that the end of the Fed's tightening is in sight. The bond markets' forecast for the future of short-term interest rates has now returned to where they were at the beginning of the year. Bonds outperformed stocks led by U.S. Treasuries, mortgage-backed securities and municipal bonds in the second quarter of 2000. The Lehman Brothers Government/Corporate Bond Index was up 1.45% in the quarter versus a negative 2.65% return for the S&P 500. Smaller capitalization stocks underperformed with the Russell 2000 Index down 3.78% and the Nasdaq down in price by over 13%. The Trust outperformed the benchmark by 13 basis points in the quarter (negative 0.89% versus negative 1.02% for the blend of 60% S&P 500, 40% Lehman Brothers Government/Corporate Bond Index). The stock portion of the Trust's portfolio underperformed the S&P 500 in the second quarter by 45 basis points but is still ahead by 39 basis points for the six months ended June 30, 2000. The speculation in the stock market has started to unwind. Many Internet and technology stocks are down sharply from their highs earlier in the year and are actually having layoffs. The market has not benefited as much from the recent decline in interest rates because earning expectations are declining along with the slowdown in the pace of economic growth. The managers feel that the internal corrections the market is undergoing are healthy and reduce the risk of substantial decline in the broad indices. The biggest risk to the market is accelerated economic growth leading to their view that the Fed, in turn, has to be more aggressive. --------------- 4 The S&P 500 is a market capitalization measure of 500 widely held common stocks. An investor cannot invest directly in an index. 5 The S&P MidCap 400 is a market-value weighted index, consisting of 400 domestic stocks chosen for market size liquidating and industry group representation. An investor cannot invest directly in an index. 6 The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. An investor cannot invest directly in an index. 7 The Lehman Brothers Government/Corporate Bond Index tracks the performance of the overall bond market and is a broad measure of the performance of government and corporate fixed-rate debt issues. An investor cannot invest directly in an index. 2 4 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- HIGH YIELD BOND TRUST The High Yield Bond Trust ("Trust") seeks generous income. The assets of the Trust will be invested in bonds which, as a class, sell at discounts from par value and are typically higher-risk securities. For the six months ended June 30, 2000, the Trust returned 1.20%. In comparison, the Lehman Brothers Aggregate Bond Index(8) posted a return of 3.99% for the same period. (Past performance is not indicative of future results.) Along with most credit sectors, the high yield market turned around in the second quarter. The widening in spreads was proportional to risk, in general, allowing lower-quality high yield issues to advance more strongly. At the annualized pace thus far, however, the sector's performance was still poor based on historical measures. Mutual fund flows into high yield investments picked up at the end of quarter as well, but is still off for the year versus 1999. Credit concerns have recently spilled from the high-tech industry, where start-ups have been seeing a dry-up of venture capital and increased funding costs, which has led to cash flow worries into mainstream markets such as the finance and retail sectors. However, the default picture overall appears to be somewhat unique, with increases in actual defaults accompanied by a decrease in those that are close but have not yet defaulted. The high yield sector for the year has been hit harder than any other sector of the bond market, but in the second quarter, the high yield market performed better than long-term corporate bonds and emerging market debt. The managers think that if the current spread-tightening trend continues, there is reason to believe that high yield bonds may continue to see more gains than their investment grade counterparts,(9) due to a potential overreaction to credit issues in the first five months of the year. CAPITAL APPRECIATION FUND The Capital Appreciation Fund ("Portfolio") seeks growth of capital through the use of common stocks. Income is not an objective. The Portfolio invests principally in common stocks of small to large companies that are expected to experience wide fluctuations in price. For the six months ended June 30, 2000, the Portfolio returned a negative 1.02%. In comparison, the S&P 500 returned a negative 0.43% for the same period. (Past performance is not indicative of future results.) If one looks just on the surface, not much happened in the stock market in the first half of 2000. The popular averages finished with only minor changes to the downside. But scratch the surface, or better yet, ask any former day trader to describe the period, and a far more fascinating and moreover, complex story becomes evident. During the first two months of the year, speculative activity in the stock market rivaled the greatest manias in history. After a blazing end to the last century, many technology stocks continued to tear ahead, accompanied by what the manager believes to be a sense of entitlement by people who were convinced that their time had come to get rich merely by speculating in "New Economy" stocks regardless of valuation or risk. Meanwhile, the vast majority of sound companies not perceived to be part of that technology wave suffered from neglect, if not outright liquidation. With business conditions favorable, executives were at a loss to explain the poor performance of their stocks. In fact, it was a flow-of-funds matter, as investors switched money out of conservative investments into more "aggressive" vehicles. Simply put, the rapid flow of money into the tech-laden NASDAQ(10) in search of fast, and ultimately unrealistic gains, sucked the life out of the rest of the stock market. But by mid-March 2000, the Fed had raised interest rates enough to bite, and with prices of many speculative stocks in the stratosphere, and market capitalizations (i.e., the number of shares multiplied by the stock price) at levels never seen before, there was not enough money to send them higher. Prices weakened a bit, and recovered to within the heights seen in mid-March, and started slipping again. Like the aftermath of a wild party, people who had known nothing but good times, woke up feeling a bit queasy. Selling began slowly, but picked up steam as panic began to replace greed, and by mid-April, only a month after setting new highs, the Nasdaq declined 40%. By any historic standard that should be considered a crash. In comparison, the bear market of 1973-1974 took two years to decline 40%. --------------- 8 The Lehman Brothers Aggregate Bond Index is a broad based measure of the performance of taxable bonds in the U.S. market with maturities of at least one year. An investor cannot invest directly in an index. 9 Investment grade bonds are rated AAA to BBB by major credit rating agencies. 10 The NASDAQ is a computerized system that provides brokers and dealers with price quotations for securities traded over the counter as well as for many New York Stock Exchange listed securities. 3 5 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- The manager has written in the past that it was a matter of if, and not when, technology stocks would break. According to the manager, the consequences for the overall market were dependent on whether money would then flow into the previously neglected industrial and financial stocks. For a brief moment in April, the picture appeared bright, as so-called "Old Economy" stocks rallied. However, in June, Nasdaq began to recover, and most other stocks started slipping. On balance, then, the overall market lost a bit of ground in the first six months, but the internal rotation was intense and rapid, making it very difficult to achieve much progress. In fact, the rapid rotation made it relatively easy to lose money, as many stocks simply evaporated after momentum broke. There were some big declines in stocks with household names and widespread ownership. The manager believes it is important to view the stock market with some historical perspective. After several years of significantly above-average gains, a flat or even declining market should not be viewed as a disaster. Earnings did not keep pace with gains in stock prices over the past few years. Therefore, a period during which earnings and dividends play catch-up would be a reasonable scenario to expect. That may be preferable to a general teeth-rattling decline that took the market to less excessive valuations. Interestingly, for the first time in recent memory, the strong U.S. economy, coupled with investor neglect of so many stocks, has created what the manager thinks are many outstanding values, particularly in the industrial sector. The series of interest rate rises by the Fed has caused people to wonder if we will have to suffer a "hard landing," otherwise known as a steep recession. In the manager's opinion, it is more likely that the Fed has engineered a "soft landing" or slowdown, rather than sending the U.S. economy into a slump. It seems possible that if that outcome becomes more widely accepted, money could flow into some of the very inexpensive stocks that have become available. At any rate, those areas of neglect now seem to have a much more favorable risk-reward ratio than many of the high fliers, which even having come down, still sell at price-to-earnings ("P/E") or price-to-revenue ratios(11) that are way too high for comfort. Throughout the first six months of 2000, the manager attempted to increase the Portfolio's holdings in what the manager viewed as good companies when their stocks were down, and trim positions when they got particularly expensive. The manager did use the extreme weakness in Microsoft after the antitrust ruling to add to the position of the portfolio. MONEY MARKET PORTFOLIO The Money Market Portfolio ("Portfolio") seeks to provide shareholders with high current income from short-term money market instruments while emphasizing preservation of capital and maintaining a high degree of liquidity. The Portfolio pursues this objective by investing in securities maturing in one year or less. For the six months ended June 30, 2000, the Portfolio returned 2.89%. (Past performance is not indicative of future results.) Please note that the investment in the Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio. The Portfolio's average maturity was kept short at 20 days and gradually lengthened to 30 days in order to capture higher yields. Currently, the manager's target will be to keep the average life of the Portfolio at about 35 days. The manager believes that a peak in short-term interest rates may occur later on this year or early in 2001 and will extend accordingly. --------------- 11 The P/E ratio is the price of a stock divided by its earnings per share. The price-to-revenue ratio is the price of a stock divided by its revenues. 4 6 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- In closing, we would like to thank you for your investment in Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio. Sincerely, /s/ HEATH B. MCLENDON Heath B. McLendon Chairman July 27, 2000 5 7 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 6/30/00 (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/00+ 2.66% Year Ended 6/30/00 9.73% Five Years Ended 6/30/00 16.69% Ten Years Ended 6/30/00 13.48% CUMULATIVE TOTAL RETURN ----------------------- 6/30/90 through 6/30/00 254.22% + Total return is not annualized, as it may not be representative of the total return for the year.
This chart assumes an initial investment of $10,000 made on June 30, 1990, assuming reinvestment of dividends, through June 30, 2000. The Lehman Brothers Government/Corporate Bond Index is a weighted composite of the Lehman Brothers Government Bond Index, which is a broad-based index of all public debt obligations of the U.S. Government and its agencies and has an average maturity of nine years and the Lehman Brothers Corporate Bond Index, which is comprised of all public fixed-rate non-convertible investment grade domestic corporate debt, excluding collateralized mortgage obligations. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market. [LINE GRAPH]
LEHMAN BROTHERS GOVERNMENT/CORPORATE STANDARD & POOR'S MANAGED ASSETS TRUST BOND INDEX CONSUMER PRICE INDEX 500 INDEX -------------------- -------------------- -------------------- ----------------- 6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000 12/90 10,366 10,573 10,300 9,400 12/91 12,616 12,278 10,615 12,258 12/92 13,265 13,209 10,923 13,191 12/93 14,502 14,666 11,223 14,517 12/94 14,177 14,151 11,524 14,708 12/95 18,022 16,874 11,816 17,933 12/96 20,605 17,363 12,208 22,048 12/97 24,875 19,057 12,415 29,403 12/98 30,209 20,862 12,615 37,854 12/99 34,504 19,948 12,991 45,815 6/00 35,422 20,782 13,300 45,618
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- HIGH YIELD BOND TRUST AS OF 6/30/00 (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/00+ 1.20% Year Ended 6/30/00 1.30% Five Years Ended 6/30/00 9.49% Ten Years Ended 6/30/00 10.20% CUMULATIVE TOTAL RETURN ----------------------- 6/30/90 through 6/30/00 164.04% + Total return is not annualized, as it may not be representative of the total return for the year.
This chart assumes an initial investment of $10,000 made on June 30, 1990, assuming reinvestment of dividends, through June 30, 2000. The Lehman Brothers Aggregate Bond Index, an unmanaged index, is composed of the Lehman Brothers Intermediate Government/Corporate Bond Index and the Mortgage Backed Securities Index and includes treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. The First Boston High Yield Index Top Tier is a broad-based market measure of high yield bonds, commonly known as "junk bonds." [LINE GRAPH]
LEHMAN BROTHERS FIRST BOSTON HIGH HIGH YIELD BOND TRUST AGGREGATE BOND INDEX CONSUMER PRICE INDEX YIELD INDEX TOP TIER --------------------- -------------------- -------------------- -------------------- 6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000 12/90 9,347 10,896 10,610 10,093 12/91 11,786 12,640 10,935 12,402 12/92 13,337 13,574 11,252 13,485 12/93 15,057 14,898 11,561 15,591 12/94 15,013 14,463 11,871 15,562 12/95 17,336 17,135 12,172 18,469 12/96 20,118 17,757 12,576 20,449 12/97 23,450 19,470 12,789 23,031 12/98 24,987 21,162 12,994 23,098 12/99 26,092 20,989 13,382 24,125 6/00 26,404 21,826 13,700 24,367
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 6 8 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 6/30/00 (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/00+ (1.02)% Year Ended 6/30/00 30.97% Five Years Ended 6/30/00 35.17% Ten Years Ended 6/30/00 23.63% CUMULATIVE TOTAL RETURN ----------------------- 6/30/90 through 6/30/00 734.02% + Total return is not annualized, as it may not be representative of the total return for the year.
This chart assumes an initial investment of $10,000 made on June 30, 1990, assuming reinvestment of dividends, through June 30, 2000. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market. The Russell 2000 Index is a capitalization weighted total return index which is comprised of 2,000 of the smallest capitaled U.S. domiciled companies with less than average growth orientation whose common stock is traded in the United States of the New York Stock Exchange, American Stock Exchange and NASDAQ. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. [LINE GRAPH]
CAPITAL APPRECIATION STANDARD & POOR'S FUND 500 INDEX RUSSELL 2000 INDEX CONSUMER PRICE INDEX -------------------- ----------------- ------------------ -------------------- 6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000 12/90 8,838 9,400 7,936 10,300 12/91 11,945 12,258 11,591 10,615 12/92 14,048 13,191 13,724 10,923 12/93 16,168 14,517 16,315 11,223 12/94 15,398 14,708 6,770 11,524 12/95 20,997 17,933 8,696 11,816 12/96 26,920 22,048 10,131 12,208 12/97 33,958 29,423 12,397 12,415 12/98 54,886 37,879 12,082 12,615 12/99 84,258 45,846 14,649 12,991 6/00 83,402 45,649 15,094 13,300
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 7 9 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 59.5% ----------------------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 3.5% 8,400 Bed Bath & Beyond Inc.+..................................... $ 304,500 7,300 Best Buy Co., Inc.+......................................... 461,725 8,000 Circuit City Stores, Inc. .................................. 265,500 10,827 CVS Corp. .................................................. 433,080 33,795 Home Depot, Inc. ........................................... 1,687,638 8,900 Interpublic Group of Cos., Inc. ............................ 382,700 10,000 Kohl's Corp.+............................................... 556,250 30,200 The Limited, Inc. .......................................... 653,075 14,100 Lowe's Cos., Inc. .......................................... 578,981 11,800 McDonald's Corp. ........................................... 388,662 6,000 Omnicom Group Inc. ......................................... 534,375 21,710 Sears, Roebuck & Co. ....................................... 708,289 10,827 Target Corp. ............................................... 627,966 2,739 Visteon Corp.+.............................................. 33,207 24,600 Walgreen Co. ............................................... 791,812 66,460 Wal-Mart Stores, Inc. ...................................... 3,829,774 ----------------------------------------------------------------------------------------------------- 12,237,534 ----------------------------------------------------------------------------------------------------- CONSUMER STAPLES -- 3.7% 28,700 ACNielsen Corp.+............................................ 631,400 7,200 Adolph Coors Co., Class B Shares............................ 435,600 10,727 Anheuser-Busch Cos., Inc. .................................. 801,173 4,600 Avery Dennison Corp. ....................................... 308,775 9,000 Bestfoods................................................... 623,250 43,300 Cendant Corp.+.............................................. 606,200 42,605 Coca-Cola Co. .............................................. 2,447,125 14,684 Colgate-Palmolive Co. ...................................... 879,205 14,364 Kimberly-Clark Corp. ....................................... 824,134 22,080 PepsiCo, Inc. .............................................. 981,180 47,015 Philip Morris Cos. Inc. .................................... 1,248,836 27,532 Procter & Gamble Co. ....................................... 1,576,207 16,262 Safeway Inc.+............................................... 733,823 15,844 SYSCO Corp. ................................................ 667,428 ----------------------------------------------------------------------------------------------------- 12,764,336 ----------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 2.3% 4,842 Clear Channel Communications, Inc.+......................... 363,150 14,200 Comcast Corp., Special Class A Shares....................... 575,100 7,511 Gannett Co., Inc. .......................................... 449,252 10,161 The New York Times Co., Class A Shares...................... 401,360 7,700 The Seagram Co. Ltd. ....................................... 446,600 24,422 Time Warner Inc. ........................................... 1,856,072 12,500 Tribune Co. ................................................ 437,500 26,786 Viacom Inc., Class B Shares+................................ 1,826,470 41,595 The Walt Disney Co. ........................................ 1,614,406 ----------------------------------------------------------------------------------------------------- 7,969,910 -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 8 10 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- FINANCIAL -- 5.5% 29,649 American Express Co. ....................................... $ 1,545,454 21,876 Bank of America Corp. ...................................... 940,668 16,500 Bank of New York Co., Inc. ................................. 767,250 21,121 Bank One Corp. ............................................. 561,027 11,600 Bear Stearns Cos. Inc. ..................................... 482,850 8,108 Capital One Financial Corp. ................................ 361,819 18,900 Charles Schwab Corp. ....................................... 635,513 25,002 Chase Manhattan Corp. ...................................... 1,151,655 4,908 Equity Residential Properties Trust......................... 225,768 18,052 Fannie Mae.................................................. 942,089 4,300 Fifth Third Bancorp......................................... 271,975 18,600 Firstar Corp. .............................................. 391,762 23,523 FleetBoston Financial Corp. ................................ 799,787 14,250 Freddie Mac................................................. 577,125 14,200 Household International, Inc. .............................. 590,187 2,313 J.P. Morgan & Co. .......................................... 254,719 10,481 Lehman Brothers Holdings Inc. .............................. 991,110 23,800 MBNA Corp. ................................................. 645,575 12,775 Merrill Lynch & Co., Inc. .................................. 1,469,125 28,682 Morgan Stanley Dean Witter & Co. ........................... 2,387,776 13,200 National City Corp. ........................................ 225,225 9,600 Paine Webber Group Inc. .................................... 436,800 6,500 Providian Financial Corp. .................................. 585,000 4,948 State Street Corp. ......................................... 524,797 8,900 T. Rowe Price Associates, Inc. ............................. 378,250 24,700 Wells Fargo & Co. .......................................... 957,125 ----------------------------------------------------------------------------------------------------- 19,100,431 ----------------------------------------------------------------------------------------------------- HEALTH CARE -- 6.2% 16,046 Abbott Laboratories......................................... 715,050 10,900 Allergan, Inc. ............................................. 812,050 21,613 American Home Products Corp. ............................... 1,269,764 4,900 Baxter International Inc. .................................. 344,531 36,596 Bristol-Myers Squibb Co. ................................... 2,131,717 5,400 Cardinal Health, Inc. ...................................... 399,600 21 Crescendo Pharmaceuticals Corp.+............................ 423 12,704 Eli Lilly & Co. ............................................ 1,268,812 18,400 HCA - The Healthcare Corp. ................................. 558,900 25,211 Johnson & Johnson........................................... 2,568,370 17,266 Medtronic, Inc. ............................................ 860,063 44,138 Merck & Co., Inc. .......................................... 3,382,074 106,891 Pfizer Inc. ................................................ 5,130,768 20,492 Pharmacia Corp. ............................................ 1,059,180 24,368 Schering-Plough Corp. ...................................... 1,230,584 ----------------------------------------------------------------------------------------------------- 21,731,886 ----------------------------------------------------------------------------------------------------- INSURANCE -- 2.3% 9,000 Aetna Inc. ................................................. 577,688
SEE NOTES TO FINANCIAL STATEMENTS. 9 11 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- INSURANCE -- 2.3% (CONTINUED) 21,754 The Allstate Corp. ......................................... $ 484,027 5,481 Ambac Financial Group, Inc. ................................ 300,427 3,800 American General Corp. ..................................... 231,800 24,630 American International Group, Inc. ......................... 2,894,025 7,900 CIGNA Corp. ................................................ 738,650 12,800 Cincinnati Financial Corp. ................................. 402,400 12,500 Lincoln National Corp. ..................................... 451,562 4,100 Marsh & McLennan Cos., Inc. ................................ 428,194 6,900 MBIA, Inc. ................................................. 332,494 25,000 MetLife, Inc.+.............................................. 526,562 11,400 MGIC Investment Corp. ...................................... 518,700 ----------------------------------------------------------------------------------------------------- 7,886,529 ----------------------------------------------------------------------------------------------------- MATERIALS & PROCESSING -- 1.0% 3,300 Alcan Aluminum Ltd. ........................................ 102,300 15,940 Alcoa Inc. ................................................. 462,260 12,300 Barrick Gold Corp. ......................................... 223,706 12,657 The Dow Chemical Co. ....................................... 382,083 16,422 E.I. du Pont de Nemours & Co. .............................. 718,463 8,384 Georgia-Pacific Group....................................... 220,080 8,302 International Paper Co. .................................... 247,503 5,106 The Mead Corp. ............................................. 128,927 2,700 Nucor Corp. ................................................ 89,606 4,200 Phelps Dodge Corp. ......................................... 156,188 2,600 Praxair, Inc. .............................................. 97,337 7,400 Rohm & Haas Co. ............................................ 255,300 2,000 Union Carbide Corp. ........................................ 99,000 19,200 W.R. Grace & Co.+........................................... 232,800 3,635 Weyerhaeuser Co. ........................................... 156,305 ----------------------------------------------------------------------------------------------------- 3,571,858 ----------------------------------------------------------------------------------------------------- OIL/ENERGY -- 3.6% 6,600 Apache Corp. ............................................... 388,163 5,400 Baker Hughes Inc. .......................................... 172,800 10,984 Chevron Corp. .............................................. 931,581 9,962 Conoco Inc., Class B Shares................................. 244,692 13,288 Enron Corp. ................................................ 857,076 57,397 Exxon Mobil Corp. .......................................... 4,505,636 7,810 Halliburton Co. ............................................ 368,534 6,500 Kerr-McGee Corp. ........................................... 383,094 6,700 Occidental Petroleum Corp. ................................. 141,119 4,300 Phillips Petroleum Co. ..................................... 217,956 34,134 Royal Dutch Petroleum Co. ADR............................... 2,101,374 8,938 Schlumberger Ltd. .......................................... 666,998 8,700 Texaco Inc. ................................................ 463,275 4,500 Tosco Corp. ................................................ 127,406 4,850 Transocean Sedco Forex Inc. ................................ 259,159
SEE NOTES TO FINANCIAL STATEMENTS. 10 12 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- OIL/ENERGY -- 3.6% (CONTINUED) 5,000 USX-Marathon Group Inc. .................................... $ 125,312 12,054 The Williams Cos., Inc. .................................... 502,541 ----------------------------------------------------------------------------------------------------- 12,456,716 ----------------------------------------------------------------------------------------------------- PRODUCER DURABLES -- 4.6% 6,407 Agilent Technologies, Inc.+................................. 472,516 5,500 Ball Corp. ................................................. 177,031 4,200 Black & Decker Corp. ....................................... 165,113 3,867 Caterpillar Inc. ........................................... 130,995 6,000 Eastman Kodak Co. .......................................... 357,000 4,154 Emerson Electric Co. ....................................... 250,798 8,600 FedEx Corp.+................................................ 326,800 164,402 General Electric Co. ....................................... 8,713,306 16,336 Honeywell International Inc. ............................... 550,327 10,400 Ingersoll-Rand Co. ......................................... 418,600 8,500 Johnson Controls, Inc. ..................................... 436,156 12,565 Masco Corp. ................................................ 226,955 3,700 Minnesota Mining & Manufacturing Co. ....................... 305,250 10,200 PE Corp. - PE Biosystems Group.............................. 671,925 9,159 PerkinElmer, Inc. .......................................... 605,639 14,800 Solectron Corp.+............................................ 619,750 37,146 Tyco International Ltd. .................................... 1,759,792 ----------------------------------------------------------------------------------------------------- 16,187,953 ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 21.9% 10,800 ADC Telecommunications, Inc.+............................... 905,850 5,100 Adobe Systems Inc. ......................................... 663,000 6,700 Advanced Micro Devices, Inc.+............................... 517,575 8,200 Altera Corp.+............................................... 835,888 36,736 America Online, Inc.+....................................... 1,937,824 21,440 Amgen Inc.+................................................. 1,506,160 10,900 Analog Devices, Inc.+....................................... 828,400 11,800 Apple Computer, Inc.+....................................... 618,025 17,126 Applied Materials, Inc.+.................................... 1,552,044 10,800 AT&T Wireless Group+........................................ 301,050 6,900 Automatic Data Processing, Inc. ............................ 369,581 4,400 Biogen, Inc.+............................................... 283,800 19,243 The Boeing Co. ............................................. 804,598 3,900 Broadcom Corp., Class A Shares+............................. 853,856 113,528 Cisco Systems, Inc.+........................................ 7,216,124 28,082 Compaq Computer Corp. ...................................... 717,846 7,700 Computer Associates International, Inc. .................... 394,144 5,600 Comverse Technology, Inc.+.................................. 520,800 7,800 Corning Inc. ............................................... 2,105,025 29,984 Dell Computer Corp.+........................................ 1,478,586 31,516 EMC Corp.+.................................................. 2,424,762 13,200 First Data Corp. ........................................... 655,050 11,500 Global Crossing Ltd.+....................................... 302,594
SEE NOTES TO FINANCIAL STATEMENTS. 11 13 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 21.9% (CONTINUED) 18,300 Hewlett-Packard Co. ........................................ $ 2,285,212 56,086 Intel Corp. ................................................ 7,497,997 31,488 International Business Machines Corp. ...................... 3,449,904 8,200 L-3 Communications Holdings, Inc.+.......................... 467,912 26,500 Lockheed Martin Corp. ...................................... 657,531 8,900 LSI Logic Corp.+............................................ 481,712 54,345 Lucent Technologies Inc. ................................... 3,219,941 15,100 Micron Technology, Inc.+.................................... 1,329,744 85,434 Microsoft Corp.+............................................ 6,834,720 35,170 Motorola, Inc. ............................................. 1,022,128 7,700 Network Appliance, Inc.+.................................... 619,850 22,200 Nextel Communications, Inc.+................................ 1,358,362 51,800 Nortel Networks Corp. ...................................... 3,535,350 49,530 Oracle Corp.+............................................... 4,163,616 12,500 QUALCOMM Inc.+.............................................. 750,000 4,800 Siebel Systems, Inc.+....................................... 785,100 23,952 Sprint PCS Group+........................................... 1,425,144 27,900 Sun Microsystems, Inc.+..................................... 2,537,156 6,658 Tellabs, Inc.+.............................................. 455,657 6,300 Teradyne, Inc.+............................................. 463,050 28,068 Texas Instruments Inc. ..................................... 1,927,921 14,322 United Technologies Corp. .................................. 843,208 5,300 VERITAS Software Corp.+..................................... 598,983 9,100 Xilinx, Inc.+............................................... 751,319 8,210 Yahoo! Inc.+................................................ 1,017,014 ----------------------------------------------------------------------------------------------------- 76,271,113 ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.6% 1,874 AMR Corp.+.................................................. 49,544 5,900 Delta Air Lines, Inc. ...................................... 298,319 20,917 Ford Motor Co. ............................................. 899,431 9,642 General Motors Corp. ....................................... 559,838 11,100 Harley-Davidson, Inc. ...................................... 427,350 ----------------------------------------------------------------------------------------------------- 2,234,482 ----------------------------------------------------------------------------------------------------- UTILITIES -- 4.3% 13,000 AES Corp.+.................................................. 593,125 6,669 ALLTEL Corp. ............................................... 413,061 63,388 AT&T Corp. ................................................. 2,004,650 32,414 Bell Atlantic Corp.++ ...................................... 1,647,036 24,618 BellSouth Corp. ............................................ 1,049,342 20,600 FirstEnergy Corp. .......................................... 481,525 7,025 FPL Group, Inc. ............................................ 347,738 9,573 GTE Corp.++ ................................................ 595,919 7,100 The Montana Power Co. ...................................... 250,719 13,900 PECO Energy Co. ............................................ 560,344 61,546 SBC Communications Inc. .................................... 2,661,867 7,073 The Southern Co. ........................................... 164,890
SEE NOTES TO FINANCIAL STATEMENTS. 12 14 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- UTILITIES -- 4.3% (CONTINUED) 17,906 Sprint Corp. ............................................... $ 913,206 11,723 U.S. West, Inc. ............................................ 1,005,247 50,353 WorldCom, Inc.+............................................. 2,309,921 ----------------------------------------------------------------------------------------------------- 14,998,590 ----------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $151,753,637)................... 207,411,338 ----------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK -- 1.3% ----------------------------------------------------------------------------------------------------- ENERGY -- 0.2% 5,977 El Paso Energy Capital Trust, 4.750%........................ 384,769 5,924 Newfield Financial Trust, 6.500%............................ 364,326 ----------------------------------------------------------------------------------------------------- 749,095 ----------------------------------------------------------------------------------------------------- FINANCIAL -- 0.8% 10,000 CalEnergy Capital II, 6.250%................................ 415,000 6,000 Equity Office Properties Trust, 5.250%...................... 253,500 18,564 Equity Residential Properties Trust, 7.250%................. 408,408 2,000 FINOVA Finance Trust, 5.500%................................ 48,000 12,000 General Growth Properties, Inc., 7.250%..................... 261,000 12,000 National Australia Bank Ltd., 7.875%........................ 339,750 3,220 New Plan Excel Realty Trust, 8.500%......................... 71,645 6,000 Newell Financial Trust, 5.250%.............................. 225,750 9,000 Reckson Associates Realty Corp., 7.625%..................... 199,688 5,000 Tosco Financing Trust, 5.750%............................... 238,750 2,245 Union Pacific Capital Trust, 6.250%......................... 86,713 ----------------------------------------------------------------------------------------------------- 2,548,204 ----------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.1% 4,000 Amcor Ltd., 7.250%.......................................... 148,000 4,000 Canadian National Railway Co., 5.250%....................... 180,000 ----------------------------------------------------------------------------------------------------- 328,000 ----------------------------------------------------------------------------------------------------- UTILITIES -- 0.2% 6,000 AES Trust VII, 6.000%....................................... 354,750 5,999 Calpine Capital Trust II, 5.500%............................ 434,948 ----------------------------------------------------------------------------------------------------- 789,698 ----------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $4,505,589)...... 4,414,997 -----------------------------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------------------- CORPORATE BONDS & NOTES -- 14.7% ----------------------------------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 2.9% $ 5,000,000 A+ Daimler Chrysler NA Holdings, 7.750% due 6/15/05............ 5,050,000 5,000,000 A Lowes Cos., Inc., Notes, 8.250% due 6/1/10.................. 5,118,750 ----------------------------------------------------------------------------------------------------------------- 10,168,750 ----------------------------------------------------------------------------------------------------------------- FINANCIAL -- 5.4% 5,000,000 A Bank One Corp., Notes, 5.625% due 2/17/04................... 4,712,500
SEE NOTES TO FINANCIAL STATEMENTS. 13 15 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------------------- FINANCIAL -- 5.4% (CONTINUED) Ford Motor Credit Co., Notes: $ 5,000,000 A 5.750% due 2/23/04........................................ $ 4,706,250 5,000,000 A 7.500% due 3/15/05........................................ 4,975,000 5,000,000 BBB Nationwide Health Properties, Inc., Notes, 6.900% due 10/1/37................................................... 4,412,500 ----------------------------------------------------------------------------------------------------------------- 18,806,250 ----------------------------------------------------------------------------------------------------------------- INDUSTRIAL -- 2.3% 5,000,000 A+ Caterpillar Financial Services Corp., Notes, 6.875% due 8/1/04.................................................... 4,918,750 3,000,000 BBB CSX Corp., Notes, 6.950% due 5/1/27......................... 2,958,750 ----------------------------------------------------------------------------------------------------------------- 7,877,500 ----------------------------------------------------------------------------------------------------------------- TECHNOLOGY -- 2.7% 5,000,000 BBB+ Computer Associates International, Inc., Notes, 6.375% due 4/15/05................................................... 4,687,500 5,000,000 A Xerox Corp., Notes, 6.250% due 11/15/26..................... 4,693,750 ----------------------------------------------------------------------------------------------------------------- 9,381,250 ----------------------------------------------------------------------------------------------------------------- UTILITIES -- 1.4% 5,000,000 AA- BellSouth Capital Funding Corp., Notes, 6.040% due 11/15/26.................................................. 4,912,500 ----------------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS & NOTES (Cost -- $52,056,662)......... 51,146,250 ----------------------------------------------------------------------------------------------------------------- CONVERTIBLE CORPORATE BONDS -- 1.6% ----------------------------------------------------------------------------------------------------------------- ENERGY -- 0.1% Diamond Offshore Drilling, Inc., Sub. Notes: 101,000 A- 3.750% due 2/15/07........................................ 105,293 300,000 A- Zero coupon due 6/6/20 (b)................................ 140,625 300,000 BBB+ Global Marine Inc., Debentures, zero coupon due 6/23/20 (b). 149,250 175,000 A Transocean Sedco Forex Inc., Debentures, zero coupon due 5/24/20................................................... 105,000 ----------------------------------------------------------------------------------------------------------------- 500,168 ----------------------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 0.3% 150,000 BBB- AT&T Corp. - Liberty Media Group, Debentures, 4.000% due 11/15/29.................................................. 215,625 150,000 BBB- Clear Channel Communications, Inc., Unsecured Notes, 1.500% due 12/1/02............................................... 147,000 350,000 BBB+ Cox Communications, Inc., Notes, 0.425% due 4/19/20......... 183,750 500,000 BBB- Scholastic Corp., Sub. Notes, 5.000% due 8/15/05............ 495,625 ----------------------------------------------------------------------------------------------------------------- 1,042,000 ----------------------------------------------------------------------------------------------------------------- FINANCIAL -- 0.5% Bell Atlantic Financial Services, Bonds: 297,000 A+ 5.750% due 4/1/03......................................... 289,946 345,000 A+ 4.250% due 9/15/05 (b).................................... 419,606 400,000 BBB- Elan International Finance Ltd., Company Guaranteed, zero coupon due 12/14/18.................................. 294,000 300,000 A- Hellenic Finance, 2.000% due 7/15/03........................ 280,500 300,000 Baa3* Security Capital U.S. Realty, Bonds, 2.000% due 5/22/03..... 235,500 ----------------------------------------------------------------------------------------------------------------- 1,519,552 -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 14 16 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------------------- HEALTH CARE -- 0.1% $ 146,000 BBB- Athena Neurosciences, Inc., Notes, 4.750% due 11/15/04...... $ 205,495 300,000 NR Roche Holding AG, Notes, zero coupon due 1/19/15............ 277,500 ----------------------------------------------------------------------------------------------------------------- 482,995 ----------------------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.4% 181,000 Aa2* GVC Corp. Ltd., Bonds, zero coupon due 5/21/02 (b).......... 217,200 300,000 AA- Indian Petrochemicals Corp. Ltd., Bonds, 2.500% due 3/11/02 (b)....................................................... 309,750 300,000 BB+ Interim Services Inc., Sub. Notes, 4.500% due 6/1/05........ 231,375 124,000 BBB+ Koninklijke Ahold, Sub. Notes, 3.000% due 9/30/03........... 62,102 431,000 BB+ Lennar Corp., Notes, zero coupon due 7/29/18................ 176,171 500,000 BBB Solectron Corp., Notes, zero coupon due 5/8/20.............. 317,500 100,000 BBB Thermo Electron Corp., Sub. Debentures, 4.250% due 1/1/03... 92,375 100,000 BBB+ Thermo Instrument Systems Inc., Company Guaranteed, 4.000% due 1/15/05............................................... 86,376 ----------------------------------------------------------------------------------------------------------------- 1,492,849 ----------------------------------------------------------------------------------------------------------------- UTILITIES -- 0.2% 600,000 A- Potomac Electric Power Co., Debentures, 5.000% due 9/1/02... 562,500 ----------------------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $5,326,622)...... 5,600,064 ----------------------------------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.6% 5,000,000 PP&L Transition Bond Co. LLC, 7.050% due 6/25/09......................... 4,961,625 713,398 Wilmington Trust, 9.250% due 1/2/07...................................... 714,221 ----------------------------------------------------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $5,712,937)................................................... 5,675,846 ----------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 17.5% 15,722,300 U.S. Treasury Notes, 3.625% due 1/15/08.................................. 15,250,631 10,000,000 U.S. Treasury Bonds, 11.750% due 2/15/10................................. 12,081,200 4,500,000 U.S. Treasury Bonds, 12.000% due 8/15/13................................. 6,082,020 6,279,240 U.S. Treasury Bonds, 3.625% due 4/15/28.................................. 5,990,772 21,626,850 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29.................. 21,572,783 ----------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $59,493,189).................. 60,977,406 ----------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 3.0% Federal Home Loan Mortgage Corp. (FHLMC): 58,816 8.500% due 9/1/02...................................................... 59,477 1,321,921 8.000% due 9/1/04...................................................... 1,336,792
SEE NOTES TO FINANCIAL STATEMENTS. 15 17 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MANAGED ASSETS TRUST
FACE AMOUNT SECURITY VALUE ----------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 3.0% (CONTINUED) Federal National Mortgage Association (FNMA): $ 70,030 8.500% due 3/1/05...................................................... $ 71,452 2,779,673 6.000% due 1/1/13...................................................... 2,631,128 886,956 6.500% due 12/1/27..................................................... 836,506 983,250 6.000% due 3/1/28...................................................... 899,979 159,168 6.000% due 4/1/28...................................................... 145,688 129,464 5.500% due 5/1/28...................................................... 114,210 473,141 6.000% due 5/1/28...................................................... 433,071 849,124 5.500% due 6/1/28...................................................... 749,080 404,054 6.000% due 6/1/28...................................................... 369,835 429,745 6.000% due 7/1/28...................................................... 393,351 1,085,037 5.500% due 8/1/28...................................................... 957,198 1,155,235 6.000% due 8/1/28...................................................... 1,057,397 Government National Mortgage Association (GNMA): 128,250 9.000% due 11/15/19.................................................... 132,578 77,507 9.500% due 1/15/20..................................................... 80,632 64,012 9.500% due 3/15/20..................................................... 66,592 145,215 7.500% due 5/15/23..................................................... 144,261 ----------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $11,056,389)..................... 10,479,227 ----------------------------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $289,905,025)............................. 345,705,128 ----------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 0.8% 2,934,000 Morgan Stanley Dean Witter & Co., 6.500% due 7/3/00; Proceeds at maturity -- $2,935,589; (Fully collateralized by U.S. Treasury Bonds, 8.500% due 2/15/20; Market value -- $2,993,205) (Cost -- $2,934,000)... 2,934,000 ----------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $292,839,025**)....................... $348,639,128 -----------------------------------------------------------------------------------------------------------------
+ Non-income producing security. ++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving company was renamed Verizon Communications. (a) All ratings are by Standard & Poor's Ratings Service, except for those which are identified by an asterisk (*), are rated by Moody's Investors Service, Inc. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 22 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 16 18 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------- CORPORATE BONDS & NOTES -- 72.7% ----------------------------------------------------------------------------------------------------- AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL -- 2.0% $ 475,000 B- Advance Stores Co., Inc., Company Guaranteed, 10.250% due 4/15/08................................................... $ 394,250 150,000 BB Federal-Mogul Corp., Notes, 7.375% due 1/15/06.............. 109,125 120,000 BB- Lear Corp., Sub. Notes, 8.250% due 2/1/02................... 118,200 ----------------------------------------------------------------------------------------------------- 621,575 ----------------------------------------------------------------------------------------------------- BUILDING - RESIDENTIAL/COMMERCIAL -- 0.2% 75,000 BB+ Lennar Corp., Sr. Notes, 9.950% due 5/1/10.................. 74,250 ----------------------------------------------------------------------------------------------------- CASINO HOTELS -- 1.4% ITT Corp., Notes: 180,000 BB+ 6.250% due 11/15/00....................................... 178,650 75,000 BB+ 6.750% due 11/15/05....................................... 67,875 Venetian Casino Resort LLC/Las Vegas Sands, Inc., Company Guaranteed: 135,000 B- 12.250% due 11/15/04...................................... 137,025 50,000 CCC+ Step bond to yield 10.000% due 11/15/05................... 47,500 ----------------------------------------------------------------------------------------------------- 431,050 ----------------------------------------------------------------------------------------------------- CHEMICALS -- 1.8% 100,000 B+ Acetex Corp., Company Guaranteed, 9.750% due 10/1/03........ 94,500 Lyondell Chemical Co.: 225,000 BB Secured, 9.875% due 5/1/07................................ 222,750 225,000 B+ Sr. Sub. Notes, 10.875% due 5/1/09........................ 224,438 ----------------------------------------------------------------------------------------------------- 541,688 ----------------------------------------------------------------------------------------------------- CONTAINERS - PAPER/PLASTIC -- 0.2% 50,000 B Huntsman Packaging Corp., 13.000% due 6/1/10#............... 51,750 ----------------------------------------------------------------------------------------------------- DISTRIBUTION/WHOLESALE -- 0.4% 225,000 B- Aviation Sales Co., Company Guaranteed, 8.125% due 2/15/08................................................... 131,625 ----------------------------------------------------------------------------------------------------- ELECTRONICS -- 1.4% 300,000 B+ Flextronics International Ltd., Sr. Sub. Notes, 8.750% due 10/15/07.................................................. 285,000 140,000 B Hadco Corp., Company Guaranteed, 9.250% due 6/15/08......... 141,750 ----------------------------------------------------------------------------------------------------- 426,750 ----------------------------------------------------------------------------------------------------- ENERGY -- 2.6% 400,000 BB Pride International, Inc., Sr. Notes, 10.000% due 6/1/09.... 414,000 135,000 BBB- PSE&G Energy Holdings, Inc., Sr. Notes, 10.000% due 10/1/09 (b)....................................................... 141,919 250,000 BBB- Tucson Electric Power Co., Collateral Trust, 7.500% due 8/1/08 (b)................................................ 231,250 ----------------------------------------------------------------------------------------------------- 787,169 ----------------------------------------------------------------------------------------------------- FOOD & DRUG -- 1.3% 175,000 B Archibald Candy Corp., Company Guaranteed, 10.250% due 7/1/04.................................................... 127,750 300,000 B- Duane Reade Inc., Company Guaranteed, 9.250% due 2/15/08.... 267,000 ----------------------------------------------------------------------------------------------------- 394,750 ----------------------------------------------------------------------------------------------------- FORESTRY -- 1.1% 350,000 B+ Millar Western Forest Products, Sr. Notes, 9.875% due 5/15/08................................................... 329,000 -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 17 19 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------- GAMING/LEISURE -- 7.3% $ 500,000 B- Bally Total Fitness Holding Corp., Sr. Sub. Notes, 9.875% due 10/15/07.............................................. $ 455,000 350,000 BB+ Harrah's Operating Co. Inc., Company Guaranteed, 7.875% due 12/15/05.................................................. 329,875 275,000 B Isle of Capri Casinos, Inc., Company Guaranteed, 8.750% due 4/15/09................................................... 255,750 Park Place Entertainment Corp., Sr. Sub. Notes: 450,000 BB+ 7.875% due 12/15/05....................................... 424,125 75,000 NR 9.375% due 2/15/07........................................ 75,188 175,000 B+ Prime Hospitality Corp., Sr. Sub. Notes, 9.750% due 4/1/07.................................................... 169,750 Station Casinos, Inc., Sr. Sub. Notes: 410,000 B+ 10.125% due 3/15/06....................................... 417,175 100,000 B+ 9.875% due 7/1/10......................................... 100,750 ----------------------------------------------------------------------------------------------------- 2,227,613 ----------------------------------------------------------------------------------------------------- HEALTH CARE -- 2.8% 225,000 BB+ HCA - The Healthcare Corp., Notes, 7.000% due 7/1/07........ 199,405 250,000 BBB- HEALTHSOUTH Corp., Sr. Sub. Notes, 9.500% due 4/1/01........ 251,250 275,000 BB+ Tenet Healthcare Corp., Sr. Notes, 9.250% due 9/1/10 (b).... 278,438 125,000 B- Unilab Corp., Sr. Sub. Notes, 12.750% due 10/1/09........... 129,375 ----------------------------------------------------------------------------------------------------- 858,468 ----------------------------------------------------------------------------------------------------- HOUSING -- 1.3% 250,000 B- Atrium Cos., Inc., Company Guaranteed, 10.500% due 5/1/09... 211,875 225,000 BB- Beazer Homes USA, Inc., Company Guaranteed, 8.875% due 4/1/08.................................................... 202,500 ----------------------------------------------------------------------------------------------------- 414,375 ----------------------------------------------------------------------------------------------------- INFORMATION/TECHNOLOGY -- 1.7% 175,000 B- Anteon Corp., 12.000% due 5/15/09........................... 158,813 Viasystems Group, Inc., Sr. Sub. Notes: 225,000 B 9.750% due 6/1/07......................................... 195,750 175,000 B Series B, 9.750% due 6/1/07............................... 152,250 ----------------------------------------------------------------------------------------------------- 506,813 ----------------------------------------------------------------------------------------------------- MANUFACTURING -- 3.7% 175,000 B+ American Axle & Manufacturing Holdings, Inc., Company Guaranteed, 9.750% due 3/1/09............................. 164,063 450,000 B BGF Industries, Inc., Sr. Sub. Notes, 10.250% due 1/15/09... 418,500 350,000 B- Cherokee International LLC, Sr. Sub. Notes, 10.500% due 5/1/09.................................................... 303,625 300,000 B- TransDigm Inc., Company Guaranteed, 10.375% due 12/1/08..... 259,500 ----------------------------------------------------------------------------------------------------- 1,145,688 ----------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 11.2% 100,000 B2* Adelphia Communications Corp., Sr. Notes, 8.125% due 7/15/03................................................... 94,750 50,900 NR AMFM Inc., Debentures, 12.625% due 10/31/06................. 59,680 75,000 B- Carmike Cinemas, Inc., Company Guaranteed, 9.375% due 2/1/09.................................................... 41,438 Chancellor Media Corp., Company Guaranteed: 400,000 B 9.000% due 10/1/08........................................ 413,000 150,000 B+ 8.000% due 11/1/08........................................ 151,313 275,000 B- Paxson Communications Corp., Sr. Sub. Notes, 11.625% due 10/1/02................................................... 282,563 500,000 CCC+ Pegasus Media & Communications, Inc., Sr. Sub. Notes, 12.500% due 7/1/05........................................ 535,000 175,000 B- Phoenix Color Corp., Company Guaranteed, 10.375% due 2/1/09.................................................... 158,375
SEE NOTES TO FINANCIAL STATEMENTS. 18 20 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 11.2% (CONTINUED) $ 250,000 CCC- Production Resource Group LLC, Sr. Sub. Notes, 11.500% due 1/15/08................................................... $ 38,125 425,000 B+ Telewest Communications PLC, Debentures, step bond to yield 11.000% due 10/1/07....................................... 404,813 Telewest Communications PLC, Sr. Discount Notes, step bond to yield: 225,000 B+ 9.250% due 4/15/09........................................ 122,063 300,000 B+ 11.375% due 2/1/10........................................ 161,250 375,000 B- T/SF Communications Corp., Company Guaranteed, 10.375% due 11/1/07................................................... 350,625 500,000 B- United International Holdings Inc., Sr. Discount Notes, step bond to yield 10.750% due 2/15/08......................... 352,500 300,000 B United Pan-Europe Communications NV, Sr. Notes, 11.250% due 2/1/10.................................................... 268,500 ----------------------------------------------------------------------------------------------------- 3,433,995 ----------------------------------------------------------------------------------------------------- METALS/MINERALS -- 2.0% 500,000 B- Diamond Holdings PLC, Company Guaranteed, 9.125% due 2/1/08.................................................... 465,000 175,000 B+ National Steel Corp., First Mortgage, 9.875% due 3/1/09..... 147,000 ----------------------------------------------------------------------------------------------------- 612,000 ----------------------------------------------------------------------------------------------------- MISCELLANEOUS MANUFACTURER -- 1.5% 100,000 B- Desa International Inc., Company Guaranteed, 9.875% due 12/15/07.................................................. 80,500 75,000 B Jostens, Inc., 12.750% due 5/1/10#.......................... 74,250 175,000 CCC+ Samsonite Corp., Sr. Sub. Notes, 10.750% due 6/15/08........ 147,000 150,000 B- Tekni-Plex, Inc., Sr. Sub. Notes, 12.750% due 6/15/10 (b)... 150,750 ----------------------------------------------------------------------------------------------------- 452,500 ----------------------------------------------------------------------------------------------------- OIL & GAS DRILLING -- 1.0% Cross Timbers Oil Co., Sr. Sub. Notes: 125,000 B 9.250% due 4/1/07......................................... 122,188 100,000 B 8.750% due 11/1/09........................................ 95,500 R&B Falcon Corp., Sr. Notes: 50,000 B+ 6.500% due 4/15/03........................................ 46,500 50,000 B+ 6.750% due 4/15/05........................................ 45,250 ----------------------------------------------------------------------------------------------------- 309,438 ----------------------------------------------------------------------------------------------------- RETAIL -- 5.4% 390,000 B Advance Glassfiber Yarns LLC, Sr. Sub. Notes, 9.875% due 1/15/09................................................... 358,800 575,000 CCC+ J. Crew Operating Corp., Sr. Sub. Notes, 10.375% due 10/15/07.................................................. 474,375 500,000 BB+ Kmart Corp., Medium Term Notes, 7.900% due 12/14/00......... 497,500 25,000 BB- Levi Strauss & Co., Notes, 7.000% due 11/1/06............... 19,125 150,000 B Pantry Inc., Company Guaranteed, 10.250% due 10/15/07....... 142,500 175,000 BB+ Saks Inc., Company Guaranteed, 8.250% due 11/15/08.......... 155,324 ----------------------------------------------------------------------------------------------------- 1,647,624 ----------------------------------------------------------------------------------------------------- SERVICES -- 3.4% 250,000 B- Advance Holding Corp., Debentures, step bond to yield 12.875% due 4/15/09....................................... 106,250 555,000 B AFC Enterprises, Sr. Sub. Notes, 10.250% due 5/15/07........ 541,123 310,896 B FRD Acquisition Co., Sr. Notes, 12.500% due 7/15/04......... 116,585 300,000 B- Williams Scotsman, Inc., Company Guaranteed, 9.875% due 6/1/07.................................................... 274,500 ----------------------------------------------------------------------------------------------------- 1,038,458 -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 19 21 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE ----------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 11.4% $ 125,000 B CapRock Communications Corp., Sr. Notes, 11.500% due 5/1/09.................................................... $ 113,125 350,000 B- Centennial Communications Corp., Sr. Sub. Notes, 10.750% due 12/15/08.................................................. 341,687 1,000,000 B+ Charter Communications Holdings LLC, Sr. Discount Notes, step bond to yield 9.920% due 4/1/11...................... 570,000 Classic Cable Inc.: 225,000 B- Company Guaranteed, 9.375% due 8/1/09..................... 197,438 175,000 NR Sr. Sub. Notes, 10.500% due 3/1/10........................ 162,313 150,000 NR Dobson Communications Corp., Sr. Notes, 10.875% due 7/1/10.................................................... 151,500 Exodus Communications, Inc., Sr. Notes: 300,000 B 10.750% due 12/15/09...................................... 291,000 100,000 B 11.625% due 7/15/10....................................... 100,750 100,000 BB Global Crossing Ltd., Company Guaranteed, 9.500% due 11/15/09.................................................. 97,000 300,000 B Level 3 Communications, Inc., Sr. Notes, 9.125% due 5/1/08.................................................... 270,750 325,000 B+ McLeodUSA Inc., Sr. Notes, 8.125% due 2/15/09............... 294,125 100,000 B Nextel Communications, Inc., Sr. Notes, 9.375% due 11/15/09.................................................. 96,000 500,000 B- NTL Inc., Sr. Notes, step bond to yield 9.750% due 4/1/08... 313,750 175,000 B- Primus Telecommunications Group, Inc., Sr. Notes, 12.750% due 10/15/09.............................................. 140,875 300,000 BBB+ Qwest Communications International Inc., Sr. Discount Notes, step bond to yield 8.290% due 2/1/08...................... 237,000 150,000 B- Viatel, Inc., Sr. Notes, 11.500% due 3/15/09................ 114,750 ----------------------------------------------------------------------------------------------------- 3,492,063 ----------------------------------------------------------------------------------------------------- TEXTILES -- 4.8% 600,000 B+ Avondale Mills, Inc., Company Guaranteed, 10.250% due 5/1/06.................................................... 567,000 175,000 B Dan River Inc., Sr. Sub. Notes, 10.125% due 12/15/03........ 170,625 125,000 B Norton Co., Company Guaranteed, 12.500% due 6/1/05.......... 112,500 215,000 B- Supreme International Corp., Company Guaranteed, 12.250% due 4/1/06.................................................... 205,325 425,000 B- Tropical Sportswear International Corp., Company Guaranteed, 11.000% due 6/15/08....................................... 410,125 ----------------------------------------------------------------------------------------------------- 1,465,575 ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 2.8% 325,000 B Atlas Air, Inc., Sr. Notes, 10.750% due 8/1/05.............. 331,905 125,000 BB- Continental Airlines, Inc., Sr. Notes, 9.500% due 12/15/01.................................................. 127,967 400,000 B- Pacer International, Inc., Company Guaranteed, 11.750% due 6/1/07.................................................... 401,000 ----------------------------------------------------------------------------------------------------- 860,872 ----------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS & NOTES (Cost -- $23,948,183)......... 22,255,089 ----------------------------------------------------------------------------------------------------- FOREIGN CORPORATE BOND -- 0.8% ----------------------------------------------------------------------------------------------------- TRANSPORTATION SERVICES -- 0.8% 250,000 B CHC Helicopter Corp., 11.750% due 7/15/07 (Cost -- $231,523)........................................ 237,254 ----------------------------------------------------------------------------------------------------- SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 0.1% ----------------------------------------------------------------------------------------------------- HOTELS & MOTELS -- 0.1% 2,250 Prime Hospitality Corp.+ (Cost -- $19,140).................. 21,234 -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 20 22 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 HIGH YIELD BOND TRUST
SHARES SECURITY VALUE -------------------------------------------------------------------------------------------------- PREFERRED STOCK -- 4.0% -------------------------------------------------------------------------------------------------- ENERGY -- 0.7% 2,299 R&B Falcon Corp., 13.875%................................... $ 260,470 -------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.2% 3,500 Eagle-Picher Industries, Inc., 11.750% Exchangeable 3/1/08.................................................... 88,375 -------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 0.5% -- Paxson Communications Corp., 12.500% Exchangeable 10/31/06.................................................. 86 -------------------------------------------------------------------------------------------------- TECHNOLOGY -- 0.4% 9,367 Viasystems Group, Inc., Series B, 8.000%+................... 168,611 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 2.2% 5,500 Global Crossing Ltd., 10.500%............................... 532,125 1,850 Rural Cellular Corp., 12.250%............................... 176,213 -------------------------------------------------------------------------------------------------- 708,338 -------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost -- $1,114,943).................. 1,225,880 -------------------------------------------------------------------------------------------------- WARRANTS -- 0.3% 2,000 R&B Falcon Corp., Expire 5/1/09 (b)+ (Cost -- $18,868)...... 100,000 -------------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $25,332,657)................. 23,839,457 -------------------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 22.1% $6,767,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at maturity -- $6,770,694; (Fully collateralized by U.S. Treasury Notes, 6.250% due 1/31/02; Market value -- $6,902,898) (Cost -- $6,767,000)............ 6,767,000 -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $32,099,657**)........... $30,606,457 --------------------------------------------------------------------------------------------------
(a) All ratings are by Standard & Poor's Ratings Service, except for those which are identified by an asterisk (*), are rated by Moody's Investors Service, Inc. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. # Security has been issued with attached warrants. + Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 22 for definition of bond ratings. SUMMARY OF BONDS BY COMBINED RATINGS
STANDARD & % OF TOTAL CORPORATE MOODY'S AND/OR POOR'S BONDS & NOTES ------------------------------------------------- Baa BBB 3.9% Ba BB 15.8 B B 72.7 Caa CCC 5.6 NR NR 2.0 ------------------------------------------------- 100.0% -------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 21 23 -------------------------------------------------------------------------------- BOND RATINGS (UNAUDITED) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to "C" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories. BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as and CCC predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents a lower degree of speculation than "B", and "CCC" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C -- The rating "C" is reserved for income bonds on which no interest is being paid. D -- Bonds rated "D" are in default, and payment of interest and/or repayment of principal is in arrears.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered to be medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payment and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and may have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds rated "Caa" are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest. Ca -- Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds rated "C" are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
22 24 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------- COMMON STOCK -- 88.3% ------------------------------------------------------------------------------------------- ADVERTISING -- 1.2% 676,770 DoubleClick Inc.+........................................... $ 25,801,856 ------------------------------------------------------------------------------------------- BEVERAGE -- 1.4% 534,040 Coca-Cola Co. .............................................. 30,673,923 ------------------------------------------------------------------------------------------- COMMUNICATIONS -- 5.0% 597,710 3Com Corp.+................................................. 34,443,039 662,825 Nextel Communications, Inc.+................................ 40,556,605 519,710 Nortel Networks Corp........................................ 35,470,207 ------------------------------------------------------------------------------------------- 110,469,851 ------------------------------------------------------------------------------------------- COMPUTERS -- 4.6% 1,414,190 Apple Computer, Inc.+....................................... 74,068,201 561,730 Dell Computer Corp.+........................................ 27,700,311 ------------------------------------------------------------------------------------------- 101,768,512 ------------------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS -- 7.3% 1,491,195 General Electric Co. ....................................... 79,033,335 1,080,580 Time Warner Inc. ........................................... 82,124,080 ------------------------------------------------------------------------------------------- 161,157,415 ------------------------------------------------------------------------------------------- DRUGS & HEALTH CARE -- 5.4% 1,036,100 MedImmune, Inc.+............................................ 76,671,400 877,155 Pfizer Inc. ................................................ 42,103,440 ------------------------------------------------------------------------------------------- 118,774,840 ------------------------------------------------------------------------------------------- ELECTRONICS -- 10.5% 702,720 EMC Corp.+.................................................. 54,065,520 404,160 General Motors Corp., Class H Shares+....................... 35,465,040 2,036,520 Texas Instruments Inc. ..................................... 139,883,468 ------------------------------------------------------------------------------------------- 229,414,028 ------------------------------------------------------------------------------------------- ENTERTAINMENT -- 0.0% 84 Acclaim Entertainment, Inc.+................................ 47 ------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 8.6% 2,171,760 Charles Schwab Corp......................................... 73,025,430 1,400,000 Morgan Stanley Dean Witter & Co............................. 116,550,000 ------------------------------------------------------------------------------------------- 189,575,430 ------------------------------------------------------------------------------------------- INSURANCE -- 1.9% 355,191 American International Group, Inc........................... 41,734,972 ------------------------------------------------------------------------------------------- INTERNET -- 12.1% 1,857,200 America Online, Inc.+....................................... 97,967,300 2,032,980 Cisco Systems, Inc.+........................................ 129,221,291 309,510 Yahoo! Inc.+................................................ 38,340,551 ------------------------------------------------------------------------------------------- 265,529,142 -------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 23 25 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------- RETAIL -- 1.9% 842,957 Home Depot, Inc............................................. $ 42,095,190 ------------------------------------------------------------------------------------------- SOFTWARE -- 14.5% 445,900 Intuit Inc.+................................................ 18,449,113 476,215 Microsoft Corp.+............................................ 38,097,200 1,927,710 VERITAS Software Corp.+..................................... 217,861,350 1,029,095 Vodafone AirTouch PLC....................................... 42,643,124 ------------------------------------------------------------------------------------------- 317,050,787 ------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 13.9% 501,805 Level 3 Communications, Inc.+............................... 44,158,840 2,956,160 Nokia Oyj, Sponsored ADR.................................... 147,623,240 1,608,175 Sprint PCS Group+........................................... 95,686,412 292,205 Telefonos de Mexico SA de CV................................ 16,692,211 ------------------------------------------------------------------------------------------- 304,160,703 ------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $1,064,379,572)................. 1,938,206,696 ------------------------------------------------------------------------------------------- FOREIGN STOCK -- 0.8% ------------------------------------------------------------------------------------------- UNITED KINGDOM -- 0.8% 4,101,991 Vodafone AirTouch PLC (Cost -- $20,556,905)................. 16,642,701 ------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $1,084,936,477).............. 1,954,849,397 ------------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE ------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 10.9% $238,479,000 Morgan Stanley Dean Witter & Co., 6.500% due 7/3/00; Proceeds at maturity -- $230,608,176; (Fully collateralized by U.S. Treasury Bonds, 9.250% due 2/15/16; Market value -- $243,294,920) (Cost -- $238,479,000).................. 238,479,000 ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $1,323,415,477**)........ $2,193,328,397 -------------------------------------------------------------------------------------------
+ Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 24 26 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 MONEY MARKET PORTFOLIO
FACE ANNUALIZED AMOUNT SECURITY YIELD VALUE --------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 93.2% $4,300,000 Alcoa Inc. matures 7/18/00.................................. 6.60 % $ 4,288,265 5,000,000 American Express Credit Corp. matures 7/6/00................ 6.71 4,997,208 5,000,000 Asset Securitization Corp. matures 7/21/00.................. 6.58 4,983,675 3,300,000 Becton, Dickinson & Co. matures 8/1/00...................... 6.61 3,282,615 5,400,000 Bell Atlantic Financial Corp. matures 7/19/00............... 6.62 5,384,280 5,000,000 The Coca-Cola Co. matures 7/12/00........................... 6.60 4,991,800 5,000,000 Delaware Funding Corp. matures 7/7/00....................... 6.57 4,996,372 5,100,000 Electronic Data Systems Corp. matures 7/5/00................ 6.96 5,098,031 4,500,000 Exxon Asset Management matures 7/3/00....................... 6.90 4,500,000 5,250,000 Ford Motor Credit Co. matures 7/7/00........................ 6.58 5,246,173 3,000,000 The Gap, Inc. matures 8/15/00............................... 6.61 2,976,529 5,000,000 General Dynamics Corp. matures 7/12/00...................... 6.54 4,991,875 5,250,000 General Electric Capital Corp. matures 7/27/00.............. 6.58 5,227,110 5,000,000 General Motors Acceptance Corp. matures 7/14/00............. 6.55 4,990,054 5,370,000 Household Finance Corp. matures 7/3/00...................... 6.90 5,370,000 5,000,000 Morgan Stanley Dean Witter & Co. matures 7/25/00............ 6.62 4,979,894 5,000,000 Newell Co. matures 7/5/00................................... 6.54 4,998,192 5,000,000 Potomac Electric Power Co. matures 7/10/00.................. 6.54 4,993,681 4,600,000 Providian Master Trust matures 7/14/00...................... 6.60 4,590,765 5,300,000 Prudential Funding Co. matures 7/5/00....................... 6.60 5,298,060 3,000,000 Transamerica Finance Corp. matures 7/26/00.................. 6.64 2,987,350 5,000,000 Union Bank of Switzerland matures 7/5/00.................... 6.76 4,998,125 --------------------------------------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (Cost -- $104,170,054)............... 104,170,054 --------------------------------------------------------------------------------------------------------------- FOREIGN CORPORATE NOTE -- 4.1% 4,600,000 The Goldman Sachs Group, Inc. matures 7/10/00 6.62 (Cost -- $4,594,097)........................................ 4,594,097 --------------------------------------------------------------------------------------------------------------- MEDIUM-TERM NOTE -- 2.7% 3,000,000 Associates Corp. of North America matures 6/15/01 6.77 (Cost -- $3,000,000)........................................ 3,000,000 --------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $111,764,151**).......... $111,764,151 ---------------------------------------------------------------------------------------------------------------
** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 25 27 -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2000
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost........................... $289,905,025 $25,332,657 $1,084,936,477 $111,764,151 Repurchase agreements, at cost................. 2,934,000 6,767,000 238,479,000 -- ------------------------------------------------------------------------------------------------------------- Investments, at value.......................... $345,705,128 $23,839,457 $1,954,849,397 $111,764,151 Repurchase agreements, at value................ 2,934,000 6,767,000 238,479,000 -- Cash........................................... 286 652 986 78,077 Dividends and interest receivable.............. 2,208,803 531,895 345,758 2,987 Receivable for securities sold................. 71,700 560,048 -- -- ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS................................... 350,919,917 31,699,052 2,193,675,141 111,845,215 ------------------------------------------------------------------------------------------------------------- LIABILITIES: Investment advisory fees payable............... 142,138 12,959 1,373,294 15,389 Administration fees payable.................... 17,093 1,099 109,387 10,751 Payable for securities purchased............... -- 632,495 -- -- Dividends payable.............................. -- -- -- 326,162 Accrued expenses............................... 63,348 15,399 50,106 33,178 ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.............................. 222,579 661,952 1,532,787 385,480 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $350,697,338 $31,037,100 $2,192,142,354 $111,459,735 ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital................................ $275,828,754 $32,876,799 $1,326,725,706 $111,459,179 Undistributed net investment income (loss)..... 4,003,642 1,313,344 (387,275) 343 Accumulated net realized gain (loss) from security transactions, futures contracts and foreign currencies.......................... 15,064,839 (1,654,533) (4,117,460) 213 Net unrealized appreciation (depreciation) of investments and foreign currencies.......... 55,800,103 (1,498,510) 869,921,383 -- ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $350,697,338 $31,037,100 $2,192,142,354 $111,459,735 ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING............................... 18,732,018 3,532,587 21,096,423 111,459,179 ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE....................... $18.72 $8.79 $103.91 $1.00 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 26 28 -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest............................................ $ 3,784,296 $ 1,407,103 $ 6,262,929 $3,335,367 Dividends........................................... 1,227,744 28,875 2,267,359 -- Less: Foreign withholding tax....................... (6,164) -- (186,714) -- ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME............................. 5,005,876 1,435,978 8,343,574 3,335,367 ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fees (Note 3)................... 844,646 76,309 7,956,694 175,448 Administration fees (Note 3)........................ 101,357 9,157 636,536 32,561 Audit and legal..................................... 16,409 13,227 17,469 14,275 Shareholder communications.......................... 15,058 4,972 62,938 7,956 Custody............................................. 10,786 4,525 25,690 6,039 Shareholder and system servicing fees............... 7,603 7,636 7,450 8,010 Pricing service fees................................ 2,932 4,226 -- -- Trustees' fees...................................... 1,989 2,074 1,989 2,088 Registration fees................................... -- -- 33,800 -- Other............................................... 994 497 3,179 3,877 ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES...................................... 1,001,774 122,623 8,745,745 250,254 Less: Expense reimbursement......................... -- -- -- (35,110) ------------------------------------------------------------------------------------------------------------- NET EXPENSES........................................ 1,001,774 122,623 8,745,745 215,144 ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS).......................... 4,004,102 1,313,355 (402,171) 3,120,223 ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES (NOTES 4 AND 6): Realized Gain (Loss) From: Security transactions (excluding short-term securities*)................................... 14,231,791 (302,756) 5,957,151 213 Futures contracts................................ 621,238 -- -- -- Foreign currency transactions.................... -- -- 15,330 -- ------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS)............................ 14,853,029 (302,756) 5,972,481 213 ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments and Foreign Currencies: Beginning of period.............................. 65,550,577 (836,216) 905,748,863 -- End of period.................................... 55,800,103 (1,498,510) 869,921,383 -- ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)...................................... (9,750,474) (662,294) (35,827,480) -- ------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES.............................. 5,102,555 (965,050) (29,854,999) 213 ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS..... $ 9,106,657 $ 348,305 $(30,257,170) $3,120,436 -------------------------------------------------------------------------------------------------------------
* Except for Money Market Portfolio where the net realized gains are only from the sale of short-term securities. SEE NOTES TO FINANCIAL STATEMENTS. 27 29 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss).................. $ 4,004,102 $ 1,313,355 $ (402,171) $ 3,120,223 Net realized gain (loss)...................... 14,853,029 (302,756) 5,972,481 213 Change in net unrealized appreciation (depreciation)............................. (9,750,474) (662,294) (35,827,480) -- ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................. 9,106,657 348,305 (30,257,170) 3,120,436 ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income......................... (6,657,840) (2,577,225) (753,152) (3,119,880) Net realized gains............................ (40,976,421) -- (76,133,308) -- ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................... (47,634,261) (2,577,225) (76,886,460) (3,119,880) ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares.............. 11,660,951 3,800,885 321,919,572 425,275,568 Net asset value of shares issued for reinvestment of dividends.................. 47,634,261 2,577,225 76,886,460 3,048,691 Cost of shares reacquired..................... (9,508,224) (3,428,682) (14,681,219) (436,834,964) ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... 49,786,988 2,949,428 384,124,813 (8,510,705) ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS............... 11,259,384 720,508 276,981,183 (8,510,149) NET ASSETS: Beginning of period........................... 339,437,954 30,316,592 1,915,161,171 119,969,884 ------------------------------------------------------------------------------------------------------------- END OF PERIOD*................................ $350,697,338 $31,037,100 $2,192,142,354 $ 111,459,735 ------------------------------------------------------------------------------------------------------------- * Includes undistributed (overdistributed) net investment income of:......................... $4,003,642 $1,313,344 $(387,275) $343 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 28 30 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1999
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income......................... $ 6,636,925 $ 2,585,031 $ 915,746 $ 3,230,152 Net realized gain (loss)...................... 40,472,567 (471,386) 66,040,552 (256) Change in net unrealized appreciation (depreciation)............................. (5,721,663) (884,302) 540,542,954 -- ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS........ 41,387,829 1,229,343 607,499,252 3,229,896 ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income......................... (5,732,184) (2,318,362) (1,059,153) (3,229,896) Net realized gains............................ (17,063,313) -- (30,268,189) -- ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................... (22,795,497) (2,318,362) (31,327,342) (3,229,896) ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares.............. 33,514,225 7,595,331 470,330,702 388,474,577 Net asset value of shares issued for reinvestment of dividends.................. 22,795,497 2,318,362 31,327,342 3,049,209 Cost of shares reacquired..................... (11,645,774) (6,596,523) (53,529,706) (313,623,231) ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS............................... 44,663,948 3,317,170 448,128,338 77,900,555 ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS.......................... 63,256,280 2,228,151 1,024,300,248 77,900,555 NET ASSETS: Beginning of year............................. 276,181,674 28,088,441 890,860,923 42,069,329 ------------------------------------------------------------------------------------------------------------- END OF YEAR*.................................. $339,437,954 $30,316,592 $1,915,161,171 $ 119,969,884 ------------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $6,657,380 $2,577,214 $752,718 -- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 29 31 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio (collectively, "Fund(s)") are each a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment companies. Shares of the Funds are offered only to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts. The significant accounting policies consistently followed by the Funds are: (a) security transactions are accounted for on trade date; (b) securities traded on national securities markets are valued at the closing prices on such markets; securities for which no sales price were reported and U.S. government and agency obligations are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from reputable brokers or other recognized sources; (c) securities for which market quotations are not available will be valued in good faith at fair value by or under the direction of the Board of Trustees; (d) securities maturing within 60 days are valued at cost plus accreted discount, or minus amortized premium, which approximates value; (e) securities, other than U.S. government agencies and obligations, that have a maturity of 60 days or more are valued at prices based on market quotations for securities of similar type, yield and maturity; (f) interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis and dividend income is recorded on the ex-dividend date; foreign dividends are recorded on the ex-dividend date or as soon as practical after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence; (g) gains or losses on the sale of securities are calculated by using the specific identification method; (h) dividends and distributions to shareholders are recorded on the ex-dividend date; (i) the accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars on the date of valuation. Purchases and sales of securities and income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Differences between income and expense amounts recorded and collected or paid are adjusted when reported by the custodian; (j) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. At December 31, 1999, reclassifications were made to the capital accounts of the Managed Assets Trust, High Yield Bond Trust and Capital Appreciation Fund to reflect permanent book/tax differences and income and gains available for distributions under income tax regulations. Accordingly, for the High Yield Bond Trust, a portion of accumulated net realized loss amounting to $748,206 was reclassified to paid-in capital. Net investment income, net realized gains and net assets were not affected by this change; (k) the Funds intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; and (l) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. 2. DIVIDENDS Money Market Portfolio declares and records a dividend of substantially all of its net investment income on each business day. Such dividends are paid or reinvested on the payable date. 3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS Travelers Asset Management International Company LLC ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager and advisor to the Managed Assets Trust ("MAT"), High Yield Bond Trust ("HYBT"), Capital Appreciation Fund ("CAF") and Money Market Portfolio ("MMP"). MAT, CAF and MMP pay TAMIC an investment management and advisory fee calculated at the annual rate of 0.50%, 0.75% and 0.3233%, respectively of its average daily net assets. HYBT pays TAMIC an investment management and advisory fee calculated at an annual rate of 0.50% on the first $50,000,000, 0.40% on the next $100,000,000, 0.30% on the next $100,000,000 and 0.25% on the amount over $250,000,000 of its average daily net assets. This fee is calculated daily and paid monthly. TAMIC has a sub-advisory agreement with The Travelers Investment Management Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary of Citigroup. Pursuant to the sub-advisory agreement, TIMCO is responsible for the day-to-day portfolio operations and investment decisions for MAT. As a result, TAMIC pays TIMCO, as sub-advisor, 0.25% of the average daily net assets of MAT. 30 32 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) TAMIC also has a sub-advisory agreement with Janus Capital Corporation ("Janus"). Pursuant to the sub-advisory agreement, Janus is responsible for the day-to-day portfolio operations and investment decisions for CAF. As a result, TAMIC pays Janus, as sub-advisor, 0.55% of the average daily net assets of CAF. Travelers Insurance Company ("Travelers Insurance") acts as administrator to the Funds. The Funds pay Travelers Insurance an administration fee calculated at an annual rate of 0.06% of its average daily net assets. Travelers Insurance has entered into a sub-administrative services agreement with SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"). Travelers Insurance pays SSBC, as sub-administrator, a fee calculated at an annual rate of 0.06% for the average daily net assets of each Fund. This fee is calculated daily and paid monthly. Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private Trust Company, another subsidiary of Citigroup, acts as the Funds transfer agent. CFTC receives account fees and asset-based fees that vary according to the size and type of account. During the six months ended June 30, 2000, MAT, HYBT, CAF and MMP each paid transfer agent fees of $2,500 to CFTC. For the six months ended June 30, 2000, Travelers Insurance reimbursed expenses of $35,110 for MMP. For the six months ended June 30, 2000, Salomon Smith Barney Inc. and its affiliates received brokerage commissions of $12,157. One Trustee and all officers of the Funds are employees of Citigroup or its subsidiaries. 4. INVESTMENTS During the six months ended June 30, 2000, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows:
MANAGED HIGH CAPITAL ASSETS YIELD BOND APPRECIATION TRUST TRUST FUND ------------------------------------------------------------------------------------------------------- Purchases................................................... $98,911,958 $11,285,838 $420,743,788 ------------------------------------------------------------------------------------------------------- Sales....................................................... 92,719,134 10,227,751 131,698,183 --------------------------------------------------------------------------------
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
MANAGED HIGH CAPITAL ASSETS YIELD BOND APPRECIATION TRUST TRUST FUND ------------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $ 66,208,499 $ 462,263 $969,493,637 Gross unrealized depreciation............................... (10,408,396) (1,955,463) (99,580,717) ------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $ 55,800,103 $(1,493,200) $869,912,920 -------------------------------------------------------------------------------------------------------
5. REPURCHASE AGREEMENTS The Funds purchase (and their custodian takes possession of) U.S. Government securities from banks and securities dealers subject to agreements to resell the securities to the sellers at a future date (generally, the next business day) at an agreed-upon higher repurchase price. The Funds require continual maintenance of the market value of the collateral in amounts at least equal to the repurchase price. 6. FUTURES CONTRACTS Initial margin deposits made upon entering into futures contracts are recognized as assets. The initial margin is segregated by the custodian and is noted in the schedule of investments. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received and recognized as assets due from or liabilities due to broker, depending upon whether unrealized gains or losses are incurred. 31 33 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) When the contract is closed, the Funds record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds' basis in the contract. The Funds enter into such contracts to hedge portions of their respective portfolios. The Funds bear the market risk that arises from changes in the value of the financial instruments and securities indices (futures contracts). At June 30, 2000, the Funds had no open futures contracts. 7. OPTIONS CONTRACTS Premiums paid when put or call options are purchased by the Funds, represent investments, which are "marked-to-market" daily. When a purchased option expires, the Funds will realize a loss in the amount of the premium paid. When the Funds enter into closing sales transactions, the Funds will realize a gain or loss depending on whether the proceeds from the closing sales transactions are greater or less than the premium paid for the option. When the Funds exercise a put option, they will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Funds exercise a call option, the cost of the security which the Funds purchase upon exercise will be increased by the premium originally paid. At June 30, 2000, the Funds had no open purchased call or put option contracts. 8. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS The Funds may trade securities on a "to-be-announced" ("TBA") basis. In a TBA transaction, the Funds commit to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in GNMA/FNMA transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Funds, normally 15 to 45 days later. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. At June 30, 2000, the Funds held no TBA securities. 9. CAPITAL LOSS CARRYFORWARD At December 31, 1999, HYBT had, for Federal income tax purposes, approximately $705,000 of capital loss carryforwards available to offset future capital gains. To the extent that these carryforward losses can be used to offset realized capital gains, it is probable that such gains will not be distributed. The amount and expiration of the carryforwards are indicated below. Expiration occurs on December 31 of the year indicated:
2000 2001 2002 2004 2007 -------------------------------------------------------------------------------------------------------- Carryforward Amounts.......................... $48,000 $135,000 $38,000 $342,000 $142,000 --------------------------------------------------------------------------------------------------------
10. FOREIGN SECURITIES Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. Government. 32 34 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 11. SHARES OF BENEFICIAL INTEREST The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest without par value. Transactions in shares of each Fund were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, 1999 --------------------------------------------------------------------------------------------------- MANAGED ASSETS TRUST Shares sold................................................. 555,076 1,654,617 Share issued on reinvestment................................ 2,556,857 1,187,265 Shares reacquired........................................... (452,845) (581,353) --------------------------------------------------------------------------------------------------- Net Increase................................................ 2,659,088 2,260,529 --------------------------------------------------------------------------------------------------- HIGH YIELD BOND TRUST Shares sold................................................. 401,899 776,247 Shares issued on reinvestment............................... 292,866 245,327 Shares reacquired........................................... (363,372) (671,120) --------------------------------------------------------------------------------------------------- Net Increase................................................ 331,393 350,454 --------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND Shares sold................................................. 2,890,263 5,582,389 Share issued on reinvestment................................ 739,364 400,399 Shares reacquired........................................... (136,118) (626,790) --------------------------------------------------------------------------------------------------- Net Increase................................................ 3,493,509 5,355,998 --------------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO Shares sold................................................. 425,275,568 388,474,577 Share issued on reinvestment................................ 3,048,691 3,049,209 Shares reacquired........................................... (436,834,964) (313,623,231) --------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (8,510,705) 77,900,555 ---------------------------------------------------------------------------------------------------
33 35 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, except where noted:
MANAGED ASSETS TRUST 2000(1) 1999 1998 1997 1996 1995 ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD........................... $21.12 $19.99 $17.65 $14.98 $15.50 $12.85 ----------------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS: Net investment income............ 0.21 0.39 0.41 0.48 0.46 0.49 Net realized and unrealized gain.......................... 0.34 2.30 3.27 2.70 1.50 2.83 ----------------------------------------------------------------------------------------------------------------- Total Income From Operations....... 0.55 2.69 3.68 3.18 1.96 3.32 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income............ (0.41) (0.39) (0.47) (0.12) (0.89) (0.50) Net realized gains............... (2.54) (1.17) (0.87) (0.39) (1.59) (0.17) ----------------------------------------------------------------------------------------------------------------- Total Distributions................ (2.95) (1.56) (1.34) (0.51) (2.48) (0.67) ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD..... $18.72 $21.12 $19.99 $17.65 $14.98 $15.50 ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN....................... 2.66%++ 14.22% 21.44% 21.31% 13.78% 27.12% ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S).......................... $350,697 $339,438 $276,182 $223,870 $188,610 $171,276 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)...................... 0.60%+ 0.60% 0.60% 0.63% 0.58% 0.58% Net investment income............ 2.38+ 2.17 2.30 2.91 3.51 3.49 ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............ 28% 51% 74% 90% 108% 110% -----------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND TRUST 2000(1)(4) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD........................... $9.47 $9.85 $9.89 $8.49 $9.00 $8.49 ------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............ 0.36 0.81 0.77 0.76 0.91 0.80 Net realized and unrealized gain (loss)........................ (0.25) (0.38) (0.13) 0.65 0.41 0.41 ------------------------------------------------------------------------------------------------------------------- Total Income From Operations....... 0.11 0.43 0.64 1.41 1.32 1.21 ------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income............ (0.79) (0.81) (0.68) (0.01) (1.83) (0.70) ------------------------------------------------------------------------------------------------------------------- Total Distributions................ (0.79) (0.81) (0.68) (0.01) (1.83) (0.70) ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD..... $8.79 $9.47 $9.85 $9.89 $8.49 $9.00 ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN....................... 1.20%++ 4.42% 6.56% 16.56% 16.05% 15.47% ------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S).......................... $31,037 $30,317 $28,088 $25,272 $17,291 $12,902 ------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)(5)................... 0.81%+ 0.81% 0.82% 0.84% 0.97% 1.25% Net investment income............ 8.63+ 8.85 8.42 9.04 11.01 9.37 ------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............ 45% 112% 147% 137% 84% 222% -------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2000 (unaudited). (2) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (3) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. (4) Per share amounts have been calculated using the monthly average shares method. (5) The ratio of expenses to average net assets reflects an expense reimbursement by Travelers Insurance in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.28% for the year ended December 31, 1995. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 34 36 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, except where noted:
CAPITAL APPRECIATION FUND 2000(1) 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD........................ $108.80 $72.74 $46.32 $36.72 $33.18 $24.50 --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income (loss)..................... (0.03) 0.04 0.06 0.19 0.23 0.24 Net realized and unrealized gain (loss)................ (1.07) 38.08 28.07 9.41 8.49 8.61 --------------------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations.................... (1.10) 38.12 28.13 9.60 8.72 8.85 --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(2): Net investment income......... (0.04) (0.07) (0.18) -- (0.41) (0.17) Net realized gains............ (3.75) (1.99) (1.53) (0.00)* (4.77) -- --------------------------------------------------------------------------------------------------------------------------------- Total Distributions............. (3.79) (2.06) (1.71) (0.00)* (5.18) (0.17) --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........................ $103.91 $108.80 $72.74 $46.32 $36.72 $33.18 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN.................... (1.02)%++ 53.52% 61.63% 26.14% 28.21% 36.37% --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (MILLIONS).................... $2,192 $1,915 $891 $408 $224 $122 --------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)................... 0.83%+ 0.83% 0.85% 0.84% 0.83% 0.85% Net investment income (loss)..................... (0.04)+ 0.07 0.18 0.54 0.69 0.84 --------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE......... 7% 37% 53% 89% 84% 124% ---------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 2000(1) 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------------------------------------------------------- Net investment income(4)........ 0.029 0.049 0.049 0.049 0.0412 0.0417 Distributions from net investment income............. (0.029) (0.049) (0.049) (0.049) (0.0412) (0.0417) --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN.................... 2.89%++ 4.96% 5.08% 5.03% 4.20% 4.17% --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)....................... $111,460 $119,970 $42,069 $13,494 $3,543 $1,417 --------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3)(4)(5)............. 0.40%+ 0.37% 0.65% 0.57% 0.78% 1.25% Net investment income......... 5.83+ 4.96 5.37 5.03 3.72 -- ---------------------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2000 (unaudited). (2) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (3) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25% and 0.40% for Capital Appreciation Fund and Money Market Portfolio, respectively. (4) Travelers Insurance reimbursed Money Market Portfolio for $35,110, $85,612, $31,300 and $43,376 in expenses for the six months ended June 30, 2000, the years ended December 31, 1999, 1997, and 1996, respectively. If expenses were not reimbursed, the per share decreases of net investment income would have been $0.001, $0.001, $0.002 and $0.02, respectively, and the actual expense ratios would have been 0.47%, 0.50%, 1.39% and 1.71%, respectively. (5) The ratio of expenses to average net assets for 1995 reflects an expense reimbursement by Travelers Insurance in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 7.37% for the year ended December 31, 1995. * Amount represents less than $0.01 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 35 37 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO The U.S. Government Securities Portfolio ("Portfolio") seeks to select investments from the point of view of an investor who is primarily concerned with the highest credit quality, current income and total return. The assets of the Portfolio will be invested in direct obligations of the United States, its agencies and instrumentalities. For the six months ended June 30, 2000, the Portfolio returned 5.16%. In comparison, the Lehman Brothers Government Bond Index(12) returned 4.97% for the same period. (Past performance is not indicative of future results.) The Fed only had one tightening in the second quarter but it was for 50 basis points. (A basis point is 0.01% or one one-hundredth of a percent.) The Fed has now tightened by 175 basis points since it began raising the federal funds rate on June 30, 1999. The short-end of the U.S. Treasury yield curve moved as if the Fed was done tightening. The 5-year Treasury rallied by 70 basis points after the Fed tightening. The 5-year Treasury ended the quarter at a yield 15 basis points lower than when it started. Moreover, the Treasury yield curve flattened during the quarter. The rally in the 30-year was more muted than the rally in the 5-year note. Thus, the yield curve ended the quarter inverted by 28 basis points. The yield curve had started the quarter 48 basis points inverted (An inverted yield curve is an unusual situation where short-term interest rates are longer than long-term rates.) The cumulative Fed action appears to have taken its toll on the economy. While the first quarter Gross Domestic Product ("GDP")(13) annual economic growth rate was 5.5%, the second quarter may be substantially slower. Consumer spending increased only 0.2% in both May and April. Lending indicators were also weak during the reporting period, and they were unchanged in April and down 1% in May. Going forward the Portfolio is nearly even to its benchmark's duration. (Duration is a common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates.) As of June 30, 2000, the Portfolio remained overweighted in spread product and was relatively neutral to the yield curve. SOCIAL AWARENESS STOCK PORTFOLIO The Social Awareness Stock Portfolio ("Portfolio") seeks long-term capital appreciation by selecting investments, primarily common stocks, that meet the social criteria established for the Portfolio. The Portfolio's social criteria currently excludes companies that derive a significant portion of their revenues from the production of tobacco, tobacco products, alcohol, military defense related services or gambling services. For the six months ended June 30, 2000, the Portfolio returned a negative 1.25%. In comparison, the S&P 500 returned a negative 0.43% for the same period. (Past performance is not indicative of future results.) The Portfolio underperformed the benchmark because of the under emphasis the Portfolio had in technology stocks. The manager believed technology stocks looked too expensive in his valuation models. The Portfolio's overweight position in big name retail stocks also contributed to the underperformance of the Portfolio. In the latter instance, the stocks were surprisingly weak in price apparently reacting more to the rising trend of interest rates rather than a continued strong presence by consumers in the first half of the year. The manager was fairly active from a portfolio management perspective, initiating almost 100 individual trades, with the emphasis on the buy side as the manager continued to employ new cash inflows. The relatively modest decline in values for both the S&P 500 and the Portfolio masked the very volatile nature of the stock market. It was common to see stocks up or down 25% to 50% in price, and the Portfolio had its fair share of both. As the first half of 2000, the manager retained a lighter than market exposure to the technology sector because the valuations accorded many individual stocks exceeded the acceptable boundaries of the manager's valuation models. The Portfolio remained slightly less than fully invested with between 6% and 7% in cash. On balance, the manager is comfortable with the Portfolio, feeling that it conforms well to all elements of its investment discipline. --------------- 12 The Lehman Brothers Government Bond Index is a broad-based index of all public debt obligations of the U.S. government and its agencies that has an average maturity of roughly nine years. An investor cannot invest directly in an index. 13 GDP is the market value of the goods and services produced by labor in the U.S. 36 38 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST -------------------------------------------------------------------------------- UTILITIES PORTFOLIO The Utilities Portfolio ("Portfolio") seeks to provide current income by investing in equity and debt securities of companies in the utility industries. For the six months ended June 30, 2000, the Portfolio returned 6.29%. In comparison, the S&P 500 returned negative 0.43% for the same period. In a difficult market for both utilities stocks and bonds, the Portfolio continued to generate competitive performance. (Past performance is not indicative of future results.) The first half of the year produced two tales for this Portfolio. The Portfolio recorded strong absolute investment returns in an otherwise negatively biased stock market, but the broad diversification across all aspects of the utility sector hurt the relative performance of the Portfolio. In the long run, the manager believes investors should have a strong representation in the telecommunications sector; however, in the most recent period, those stocks negatively impacted the final results of the Portfolio. At or near the bottom of the Portfolio's performance roster were stocks such as WorldCom, Sprint, AT&T and NEXTLINK. At the top of the list were companies in natural gas and restructuring electric sectors. In the long-term the manager remains committed to diversification, especially in today's world where fiber optics is intruding into the gas pipeline universe. Moreover, traditional electric companies are transforming themselves into energy movers and shakers and these are, in the views of the manager, solid investment opportunities. Thank you for your investment in The Travelers Series Trust. We look forward to continuing to help you pursue your financial goals in the new century. Sincerely, /s/ HEATH B. MCLENDON Heath B. McLendon Chairman July 27, 2000 37 39 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 6/30/00 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/00+ 5.16% Year Ended 6/30/00 4.79% Five Years Ended 6/30/00 6.49% 1/24/92* through 6/30/00 6.92% CUMULATIVE TOTAL RETURN ---------------------------------------------- 1/24/92* through 6/30/00 75.88% + Total return is not annualized, as it may not be representative of the total return for the year. * Commencement of operations
This chart assumes an initial investment of $10,000 made on January 24, 1992, assuming reinvestment of dividends, through June 30, 2000. The Lehman Brothers Government Bond Index is a broad-based index of all public debt obligations of the U.S. Government and its agencies and has an average maturity of nine years. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. [U.S GOVERNMENT SECURITIES PORTFOLIO GRAPH]
U.S. GOVERNMENT SECURITIES LEHMAN BROTHERS PERIOD END PORTFOLIO GOVERNMENT BOND INDEX CONSUMER PRICE INDEX ---------- -------------------------- --------------------- -------------------- 1/24/92 $ 10,000.00 $ 10,000.00 $ 10,000.00 12/92 10,790.00 10,723.00 10,275.00 12/93 11,813.00 11,866.00 10,557.00 12/94 11,147.00 11,464.00 10,640.00 12/95 13,869.00 13,567.00 11,115.00 12/96 14,071.00 13,943.00 11,484.00 12/97 15,846.00 15,280.00 11,579.00 12/98 17,463.00 16,785.00 11,866.00 12/99 16,724.00 16,411.00 12,220.00 6/30/00 17,588.00 17,226.00 12,511.00
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- SOCIAL AWARENESS STOCK PORTFOLIO AS OF 6/30/00 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/00+ (1.25)% Year Ended 6/30/00 1.55% Five Years Ended 6/30/00 20.81% 5/1/92* through 6/30/00 16.70% CUMULATIVE TOTAL RETURN ---------------------------------------------- 5/1/92* through 6/30/00 253.18% + Total return is not annualized, as it may not be representative of the total return for the year. * Commencement of operations
This chart assumes an initial investment of $10,000 made on May 1, 1992, assuming reinvestment of dividends, through June 30, 2000. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the over-the-counter market. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. [SOCIAL AWARENESS STOCK PORTFOLIO GRAPH]
SOCIAL AWARENESS STOCK STANDARD & POOR'S 500 PERIOD END PORTFOLIO INDEX CONSUMER PRICE INDEX ---------- ---------------------- --------------------- -------------------- 5/1/92 $ 10,000.00 $ 10,000.00 $ 10,000.00 12/92 10,950.00 10,673.00 10,157.00 12/93 11,777.00 11,745.00 10,436.00 12/94 11,461.00 11,900.00 10,716.00 12/95 15,285.00 14,509.00 10,988.00 12/96 18,339.00 17,838.00 11,353.00 12/97 23,343.00 23,789.00 11,545.00 12/98 30,875.00 30,626.00 11,731.00 12/99 35,765.00 37,067.00 12,080.00 6/30/00 35,318.00 38,908.00 12,368.00
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 38 40 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 6/30/00 (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS ---------------------------------------------- Six Months Ended 6/30/00+ 6.29% Year Ended 6/30/00 1.81% Five Years Ended 6/30/00 15.18% 2/4/94* through 6/30/00 13.90% CUMULATIVE TOTAL RETURN ---------------------------------------------- 2/4/94* through 6/30/00 130.24% + Total return is not annualized, as it may not be representative of the total return for the year. * Commencement of operations
This chart assumes an initial investment of $10,000 made on February 4, 1994, assuming reinvestment of dividends, through June 30, 2000. The Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter market. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. [UTILITIES PORTFOLIO GRAPH]
STANDARD & POOR'S PERIOD END UTILITIES PORTFOLIO 500 INDEX CONSUMER PRICE INDEX ---------- ------------------- ----------------- -------------------- 2/4/94 $ 10,000.00 $ 10,000.00 $ 10,000.00 12/94 10,170.00 10,072.00 10,205.00 12/95 13,149.00 13,852.00 10,464.00 12/96 14,638.00 17,031.00 10,811.00 12/97 18,340.00 22,712.00 10,995.00 12/98 21,880.00 29,240.00 11,171.00 12/99 21,662.00 35,390.00 11,504.00 6/30/00 23,024.00 35,237.00 11,778.00
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 39 41 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000 U.S. GOVERNMENT SECURITIES PORTFOLIO
FACE AMOUNT SECURITY VALUE -------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 39.8% U.S. Treasury Notes: $1,000,000 8.000% due 11/15/21......................................... $ 1,207,180 3,000,000 5.250% due 2/15/29.......................................... 2,662,500 3,000,000 6.125% due 8/15/29.......................................... 3,034,500 4,000,000 6.250% due 5/15/30.......................................... 4,200,000 U.S. Treasury Bonds: 2,000,000 12.000% due 8/15/13......................................... 2,703,120 6,500,000 9.250% due 2/15/16.......................................... 8,423,545 1,000,000 6.125% due 11/15/27......................................... 997,180 9,000,000 U.S. REFCO Strips, zero coupon due 10/15/13................. 3,750,030 1,041,320 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29..... 1,038,717 -------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $27,867,805)..... 28,016,772 -------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 53.4% 3,000,000 Federal Home Loan Bank (FHLB) Certificates, 5.705% due 3/2/09...................................................... 2,720,370 Federal Home Loan Mortgage Corp. (FHLMC) Certificates: 2,668,875 8.500% due 6/15/21.......................................... 2,724,084 2,843,050 8.000% due 3/1/27+.......................................... 2,859,028 6,336,454 6.500% due 3/15/28++........................................ 5,910,712 Federal National Mortgage Association (FNMA) Certificates: 1,844,000 8.000% due 7/1/27+.......................................... 1,852,630 2,660,868 6.500% due 12/1/27.......................................... 2,509,518 3,904,997 7.500% due 11/1/29.......................................... 3,851,304 2,000,000 8.500% due 6/1/30........................................... 2,037,500 Government National Mortgage Association (GNMA) Certificates: 1,455,740 9.000% due 9/15/09++........................................ 1,504,867 591,165 8.500% due 7/15/18++........................................ 606,128 1,363,282 7.000% due 3/15/28++........................................ 1,326,638 6,498,426 6.000% due 2/20/29++........................................ 5,057,758 2,914,728 7.500% due 9/15/29.......................................... 2,895,579 2,000,000 Tennessee Valley Authority Debentures, 6.250% due 12/15/17.................................................... 1,801,680 -------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $39,146,870)........ 37,657,796 -------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 6.8% 4,772,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at maturity -- $4,774,602; (Fully collateralized by U.S. Treasury Notes, 6.250% due 1/31/02; Market value -- $4,868,123) (Cost -- $4,772,000)......................... 4,772,000 -------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $71,786,675**)........... $70,446,568 --------------------------------------------------------------------------------------
+ Security is traded on a "to-be-announced" basis (See Note 7). ++ Date shown represents the last in range of maturity dates of mortgage certificates owned. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 40 42 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------- COMMON STOCK -- 93.5% ----------------------------------------------------------------------------------------- AUTOMOTIVE -- 0.5% 8,000 Ford Motor Co. ............................................. $ 344,000 ----------------------------------------------------------------------------------------- BASIC MATERIALS -- 4.3% 44,600 Alcoa Inc. ................................................. 1,293,400 25,000 Engelhard Corp. ............................................ 426,563 20,000 Nucor Corp. ................................................ 663,750 16,000 Praxair, Inc. .............................................. 599,000 ----------------------------------------------------------------------------------------- 2,982,713 ----------------------------------------------------------------------------------------- CAPITAL GOODS -- 2.9% 24,500 Anixter International Inc.+................................. 649,250 25,500 Deere & Co. ................................................ 943,500 9,800 Pitney Bowes Inc. .......................................... 392,000 1,047 Visteon Corp. .............................................. 12,701 ----------------------------------------------------------------------------------------- 1,997,451 ----------------------------------------------------------------------------------------- COMMUNICATION -- 3.9% 10,000 AT&T Wireless Group......................................... 278,750 24,100 Bell Atlantic Corp.++ ...................................... 1,224,581 6,250 Time Warner Telecom Inc.+................................... 402,344 17,754 WorldCom, Inc.+............................................. 814,465 ----------------------------------------------------------------------------------------- 2,720,140 ----------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 17.6% 26,100 Black & Decker Corp. ....................................... 1,026,056 11,400 Convergys Corp. ............................................ 591,375 35,600 Home Depot, Inc. ........................................... 1,777,775 50,000 Interface, Inc. ............................................ 190,625 31,000 Kaufman & Broad Home Corp. ................................. 614,187 16,928 Koninklijke Philips Electronics N.V. ADR.................... 804,080 27,500 Liz Claiborne, Inc. ........................................ 969,375 25,200 Lowe's Cos., Inc. .......................................... 1,034,775 33,000 Office Depot, Inc.+......................................... 206,250 31,200 Reader's Digest Association, Inc. .......................... 1,240,200 37,600 Staples, Inc.+.............................................. 578,100 22,200 Tribune Co. ................................................ 777,000 29,200 Tyco International Ltd. .................................... 1,383,350 19,500 Wal-Mart Stores, Inc. ...................................... 1,123,687 ----------------------------------------------------------------------------------------- 12,316,835 ----------------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.9% 18,000 Brinker International, Inc.+................................ 526,500 18,000 Kimberly-Clark Corp. ....................................... 1,032,750 27,400 Kroger Co.+................................................. 604,512 14,800 Newell Rubbermaid Inc. ..................................... 381,100 25,000 Pepsi Bottling Group, Inc. ................................. 729,688 4,800 PepsiCo, Inc. .............................................. 213,300 15,400 Sara Lee Corp. ............................................. 297,412
SEE NOTES TO FINANCIAL STATEMENTS. 41 43 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.9% (CONTINUED) 29,700 SYSCO Corp. ................................................ $ 1,251,113 27,700 Wendy's International, Inc. ................................ 493,406 ----------------------------------------------------------------------------------------- 5,529,781 ----------------------------------------------------------------------------------------- ENERGY -- 5.0% 6,600 Anadarko Petroleum Corp. ................................... 325,463 28,626 BP Amoco PLC ADR............................................ 1,619,158 10,600 Coastal Corp. .............................................. 645,275 14,800 Royal Dutch Petroleum Co. ADR............................... 911,125 ----------------------------------------------------------------------------------------- 3,501,021 ----------------------------------------------------------------------------------------- FINANCIALS -- 10.0% 24,600 American Express Co. ....................................... 1,282,275 7,640 American International Group, Inc. ......................... 897,700 14,400 Associates First Capital Corp. ............................. 321,300 12,300 Bank of New York Co., Inc. ................................. 571,950 30,450 Chase Manhattan Corp. ...................................... 1,402,603 5,400 Freddie Mac................................................. 218,700 10,000 Hartford Financial Services Group, Inc. .................... 559,375 7,000 Marsh & McLennan Cos., Inc. ................................ 731,063 11,100 PNC Financial Services Group................................ 520,313 13,300 St. Paul Cos., Inc. ........................................ 453,862 ----------------------------------------------------------------------------------------- 6,959,141 ----------------------------------------------------------------------------------------- HEALTH CARE -- 10.1% 28,000 Amgen Inc.+................................................. 1,967,000 6,600 C.R. Bard, Inc. ............................................ 317,625 12,700 Johnson & Johnson........................................... 1,293,813 14,100 Medtronic, Inc. ............................................ 702,356 11,600 Merck & Co., Inc. .......................................... 888,850 23,100 Schering-Plough Corp. ...................................... 1,166,550 25,900 Tenet Healthcare Corp. ..................................... 699,300 ----------------------------------------------------------------------------------------- 7,035,494 ----------------------------------------------------------------------------------------- PUBLISHING -- 0.9% 11,900 Harcourt General, Inc. ..................................... 647,063 ----------------------------------------------------------------------------------------- TECHNOLOGY -- 21.5% 24,000 America Online, Inc.+....................................... 1,266,000 20,000 Automatic Data Processing, Inc. ............................ 1,071,250 19,500 Cisco Systems, Inc.+........................................ 1,239,469 10,000 Compaq Computer Corp. ...................................... 255,625 15,000 Electronic Data Systems Corp. .............................. 618,750 38,200 EMC Corp.+.................................................. 2,939,012 10,500 Genuity Inc. ............................................... 96,141 500 Infineon Technologies AG ADR................................ 39,625 10,400 Intel Corp. ................................................ 1,390,350 18,500 International Business Machines Corp. ...................... 2,026,906 7,700 Microsoft Corp.+............................................ 616,000
SEE NOTES TO FINANCIAL STATEMENTS. 42 44 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------- TECHNOLOGY -- 21.5% (CONTINUED) 10,000 N2H2, Inc.+................................................. $ 50,000 15,000 Oracle Corp.+............................................... 1,260,937 11,500 Solectron Corp. ............................................ 481,562 12,400 Sun Microsystems, Inc.+..................................... 1,127,625 27,100 Xerox Corp. ................................................ 562,325 ----------------------------------------------------------------------------------------- 15,041,577 ----------------------------------------------------------------------------------------- TRANSPORTATION -- 2.7% 26,187 Southwest Airlines Co. ..................................... 495,916 16,800 United Parcel Service, Inc., Class B Shares................. 991,200 15,200 USFreightways Corp. ........................................ 373,350 ----------------------------------------------------------------------------------------- 1,860,466 ----------------------------------------------------------------------------------------- UTILITIES -- 6.2% 44,200 AES Corp.+.................................................. 2,016,625 17,300 Enron Corp. ................................................ 1,115,850 28,200 The Williams Cos., Inc. .................................... 1,175,588 ----------------------------------------------------------------------------------------- 4,308,063 ----------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $48,479,791).................... 65,243,745 -----------------------------------------------------------------------------------------
FACE AMOUNT SECURITY VALUE ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 6.5% $4,500,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at maturity -- $4,502,456; (Fully collateralized by U.S. Treasury Notes, 6.250% due 1/31/02; Market value -- $4,590,003) (Cost -- $4,500,000)......................... 4,500,000 ----------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $52,979,791**)........... $69,743,745 -----------------------------------------------------------------------------------------
+ Non-income producing security. ++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving company was renamed Verizon Communications. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 43 45 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 UTILITIES PORTFOLIO
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------------------ COMMON STOCK -- 91.7% ------------------------------------------------------------------------------------------------------ ELECTRIC - UTILITY -- 53.9% 20,000 Allegheny Energy, Inc. .................................................. $ 547,500 30,000 Calpine Corp.+........................................................... 1,972,500 15,000 Cinergy Corp. ........................................................... 381,563 12,106 Dominion Resources, Inc. ................................................ 519,061 30,000 DQE, Inc. ............................................................... 1,185,000 11,000 Duke Energy Corp. ....................................................... 620,125 21,800 Edison International..................................................... 446,900 20,000 Energy East Corp. ....................................................... 381,250 29,000 FirstEnergy Corp. ....................................................... 677,875 20,000 Florida Progress Corp. .................................................. 937,500 10,000 FPL Group, Inc. ......................................................... 495,000 20,000 GPU, Inc. ............................................................... 541,250 20,000 Montana Power Co. ....................................................... 706,250 11,000 New Century Energies, Inc. .............................................. 330,000 53,000 Niagara Mohawk Holdings Inc.+............................................ 738,687 20,000 Nisource Inc. ........................................................... 372,500 30,000 Northeast Utilities...................................................... 652,500 20,000 Northern States Power Co. ............................................... 403,750 14,766 NSTAR.................................................................... 600,792 21,000 PECO Energy Co. ......................................................... 846,562 25,000 Pinnacle West Capital Corp. ............................................. 846,875 10,000 Public Service Enterprise Group Inc. .................................... 346,250 15,000 SCANA Corp. ............................................................. 361,875 36,000 Sierra Pacific Resources................................................. 452,250 10,000 Texas Utilities Co. ..................................................... 295,000 30,000 Unicom Corp. ............................................................ 1,160,625 ------------------------------------------------------------------------------------------------------ 16,819,440 ------------------------------------------------------------------------------------------------------ NATURAL GAS -- 17.0% 16,000 Coastal Corp. ........................................................... 974,000 15,000 Dynegy Inc. ............................................................. 1,024,688 22,000 Energen Corp. ........................................................... 479,875 15,000 MCN Energy Group Inc. ................................................... 320,625 15,000 National Fuel Gas Co. ................................................... 731,250 20,000 Sempra Energy............................................................ 340,000 20,000 Southwest Gas Corp. ..................................................... 350,000 26,000 The Williams Cos., Inc. ................................................. 1,083,875 ------------------------------------------------------------------------------------------------------ 5,304,313 ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 44 46 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000 UTILITIES PORTFOLIO
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------------------ TELEPHONE -- 20.8% 28,450 AT&T Corp. .............................................................. $ 899,731 5,000 AT&T Wireless Group+..................................................... 139,375 10,000 Bell Atlantic Corp.++ ................................................... 508,125 6,975 Covad Communications Group, Inc.+........................................ 112,472 10,000 GTE Corp.++ ............................................................. 622,500 17,000 NEXTLINK Communications, Inc.+........................................... 644,938 12,000 Qwest Communications International Inc.+................................. 596,250 20,000 SBC Communications Inc. ................................................. 865,000 14,000 Sprint Corp. ............................................................ 714,000 30,000 WorldCom, Inc.+.......................................................... 1,376,250 ------------------------------------------------------------------------------------------------------ 6,478,641 ------------------------------------------------------------------------------------------------------ TOTAL COMMON STOCK (Cost -- $23,030,645)................................. 28,602,394 ------------------------------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ------------------------------------------------------------------------------------------------------ CORPORATE BONDS -- 1.3% ------------------------------------------------------------------------------------------------------ ELECTRIC - UTILITY -- 0.6% $200,000 A- Arizona Public Service Co., 7.250% due 8/1/23............... 178,250 ------------------------------------------------------------------------------------------------------ TELEPHONE -- 0.7% 230,000 A- MCI Communications Corp., 7.750% due 3/23/25................ 216,487 ------------------------------------------------------------------------------------------------------ TOTAL CORPORATE BONDS (Cost -- $405,157).................... 394,737 ------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT -- 7.0% 2,193,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at maturity -- $2,194,197; (Fully collateralized by U.S. Treasury Notes, 6.250% due 1/31/02; Market value -- $2,237,230) (Cost -- $2,193,000)......... 2,193,000 ------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100% (Cost -- $25,628,802**)........... $31,190,131 ------------------------------------------------------------------------------------------------------
+ Non-income producing security. ++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving company was renamed Verizon Communications. (a) All ratings are by Standard & Poor's Ratings Service, except for those which are identified by an asterisk (*), are rated by Moody's Investors Service, Inc. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 46 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 45 47 -------------------------------------------------------------------------------- BOND RATINGS (UNAUDITED) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to "C" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories. BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as and CCC predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents a lower degree of speculation than "B", and "CCC" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C -- The rating "C" is reserved for income bonds on which no interest is being paid. D -- Bonds rated "D" are in default, and payment of interest and/or repayment of principal is in arrears.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered to be medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payment and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and may have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds rated "Caa" are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest. Ca -- Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds rated "C" are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
46 48 -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2000
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $71,786,675, $52,979,791 and $25,628,802, respectively)........ $70,446,568 $69,743,745 $31,190,131 Cash................................................. 923 166,200 22 Dividends and interest receivable.................... 802,988 37,978 75,833 ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS......................................... 71,250,479 69,947,923 31,265,986 ------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased..................... 4,713,272 -- -- Investment advisory fees payable..................... 17,640 35,665 16,524 Administration fees payable.......................... 3,205 3,399 1,581 Accrued expenses..................................... 10,820 33,726 28,621 ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.................................... 4,744,937 72,790 46,726 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $66,505,542 $69,875,133 $31,219,260 ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital...................................... $69,547,663 $51,484,154 $23,529,163 Undistributed net investment income.................. 2,109,636 138,726 358,044 Accumulated net realized gain (loss) from security transactions...................................... (3,811,650) 1,488,299 1,770,724 Net unrealized appreciation (depreciation) of investments....................................... (1,340,107) 16,763,954 5,561,329 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $66,505,542 $69,875,133 $31,219,260 ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING..................................... 5,928,225 2,448,287 1,899,371 ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE............................. $11.22 $28.54 $16.44 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 47 49 -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................ $ 2,267,425 $ 93,179 $ 36,634 Dividends............................................... -- 306,367 458,725 Less: Foreign withholding tax........................... -- (4,355) -- ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME................................. 2,267,425 395,191 495,359 ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fees (Note 2)....................... 103,803 207,825 99,922 Administration fees (Note 2)............................ 19,122 19,952 9,224 Audit and legal......................................... 16,123 13,310 14,407 Shareholder and system servicing fees................... 7,466 7,343 7,484 Shareholder communications.............................. 2,983 2,935 1,508 Custody................................................. 2,139 2,382 1,631 Trustees' fees.......................................... 1,989 2,006 1,989 Pricing service fees.................................... 417 -- 249 Other................................................... 3,270 589 572 ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES.......................................... 157,312 256,342 136,986 ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME..................................... 2,110,113 138,849 358,373 ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized Gain (Loss) From Security Transactions (excluding short-term securities): Proceeds from sales.................................. 49,950,601 12,584,116 4,541,839 Cost of securities sold.............................. 50,785,513 11,008,478 2,687,182 ------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS)................................ (834,912) 1,575,638 1,854,657 ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments: Beginning of period.................................. (3,259,091) 19,320,275 5,942,842 End of period........................................ (1,340,107) 16,763,954 5,561,329 ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION).... 1,918,984 (2,556,321) (381,513) ------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS............................ 1,084,072 (980,683) 1,473,144 ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... $ 3,194,185 $ (841,834) $1,831,517 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 48 50 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 2,110,113 $ 138,849 $ 358,373 Net realized gain (loss)......................... (834,912) 1,575,638 1,854,657 Change in net unrealized appreciation (depreciation)................................ 1,918,984 (2,556,321) (381,513) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................................... 3,194,185 (841,834) 1,831,517 ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................ (3,702,666) (378,165) (823,875) Net realized gains............................... -- (844,042) (53,040) ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.................................. (3,702,666) (1,222,207) (876,915) ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................. 12,429,574 6,216,688 3,110,319 Net asset value of shares issued for reinvestment of dividends.................................. 3,702,666 1,222,207 876,915 Cost of shares reacquired........................ (10,740,908) (3,738,438) (5,135,656) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS....................... 5,391,332 3,700,457 (1,148,422) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS.................. 4,882,851 1,636,416 (193,820) NET ASSETS: Beginning of period.............................. 61,622,691 68,238,717 31,413,080 ------------------------------------------------------------------------------------------------------- END OF PERIOD*................................... $ 66,505,542 $69,875,133 $31,219,260 ------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $2,109,636 $138,726 $358,044 -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 49 51 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1999
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 3,766,648 $ 379,966 $ 823,725 Net realized gain (loss)......................... (2,696,924) 765,721 (30,893) Change in net unrealized appreciation (depreciation)................................ (3,730,793) 6,847,079 (754,466) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................................... (2,661,069) 7,992,766 38,366 ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................ (5,416) (185,510) (791,288) Net realized gains............................... -- (952,059) (1,799,094) ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.................................. (5,416) (1,137,569) (2,590,382) ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................. 14,321,630 22,265,700 6,945,662 Net asset value of shares issued for reinvestment of dividends.................................. 5,416 1,137,569 2,590,382 Cost of shares reacquired........................ (16,491,880) (1,502,002) (8,479,998) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS....................... (2,164,834) 21,901,267 1,056,046 ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS.................. (4,831,319) 28,756,464 (1,495,970) NET ASSETS: Beginning of year................................ 66,454,010 39,482,253 32,909,050 ------------------------------------------------------------------------------------------------------- END OF YEAR*..................................... $ 61,622,691 $68,238,717 $31,413,080 ------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $3,702,189 $378,042 $823,546 -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 50 52 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The U.S. Government Securities, Social Awareness Stock and Utilities Portfolios (collectively, "Portfolio(s)") are separate investment portfolios of The Travelers Series Trust ("Trust"). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company and consists of these portfolios and 17 other separate investment portfolios: Travelers Quality Bond, Lazard International Stock, MFS Emerging Growth, Federated High Yield, Federated Stock, Large Cap, Equity Income, Disciplined Mid Cap Stock, Convertible Bond, Strategic Stock, Disciplined Small Cap Stock, MFS Mid Cap Growth, MFS Research, NWQ Large Cap, Jurika & Voyles Core Equity, Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005 Portfolios. Shares of the Trust are offered only to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts. The financial statements and financial highlights for the other portfolios are presented in separate shareholder reports. The significant accounting policies consistently followed by the Portfolios are: (a) security transactions are accounted for on trade date; (b) securities traded on national securities markets are valued at the closing prices on such markets; securities for which no sales prices were reported and U.S. Government and Agency obligations are valued at the mean between the last reported bid and asked prices or on the basis of quotations received from reputable brokers or other recognized sources; (c) securities for which market quotations are not available will be valued in good faith at fair value by or under the direction of the Board of Trustees; (d) securities maturing within 60 days are valued at cost plus accreted discount, or minus amortized premium, which approximates value; (e) securities, other than U.S. government agencies and obligations, that have a maturity of 60 days or more are valued at prices based on market quotations for securities of similar type, yield and maturity; (f) interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis and dividend income is recorded on the ex-dividend date; (g) gains or losses on the sale of securities are calculated by using the specific identification method; (h) dividends and distributions to shareholders are recorded on the ex-dividend date; (i) the Portfolios intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; (j) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. At December 31, 1999, reclassifications were made to the capital accounts of the U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio to reflect permanent book/tax differences and income and gains available for distribution under income tax regulations. Accordingly, for the Utilities Portfolio, a portion of undistributed net investment income amounting to $173 and accumulated net realized losses amounting to $3 was reclassified to paid-in capital. In addition, for the U.S. Government Securities a portion of undistributed net investment income amounting to $58 was reclassed to paid in capital. Net investment income, net realized gains and net assets for each Portfolio were not affected by these changes; and (k) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS Travelers Asset Management International Company LLC ("TAMIC"), an indirect wholly owned subsidiary of Citigroup Inc., ("Citigroup"), acts as investment manager and advisor to the U.S. Government Securities Portfolio ("USGS"). USGS pays TAMIC an investment management and advisory fee calculated at the annual rate of 0.3257% of its average daily net assets. This fee is calculated daily and paid monthly. SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") and an indirect wholly owned subsidiary of Citigroup, acts as investment manager and advisor to the Social Awareness Stock ("SAS") and Utilities ("Utilities") Portfolios. SAS pays SSBC an investment management and advisory fee calculated at an annual rate of: 0.65% on the first $50 million, 0.55% on the next $50 million, 0.45% on the next $100 million and 0.40% on amounts over $200 million of the average daily net assets. Utilities pays SSBC investment management and advisory fees calculated at an annual rate of 0.65% of the average daily net assets. These fees are calculated daily and paid monthly. 51 53 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Travelers Insurance Company ("Travelers Insurance") acts as administrator to the Portfolios. The Portfolios pay Travelers Insurance an administration fee calculated at an annual rate of 0.06% of the average daily net assets. Travelers Insurance has entered into a sub-administrative services agreement with SSBC. Travelers Insurance pays SSBC, as sub-administrator, a fee calculated at an annual rate of 0.06% of the average daily net assets of each Portfolio. This fee is calculated daily and paid monthly. Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private Trust Company, another subsidiary of Citigroup, acts as the Portfolios transfer agent. CFTC receives account fees and asset-based fees that vary according to the size and type of account. During the six months ended June 30, 2000, USGS, SAS, and Utilities, each paid transfer agent fees of $2,500 to CFTC. One Trustee and all officers of the Trust are employees of Citigroup or its subsidiaries. 3. INVESTMENTS During the six months ended June 30, 2000, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows:
USGS SAS UTILITIES ---------------------------------------------------------------------------------------------------- Purchases................................................... $56,992,072 $15,510,805 $ 687,644 ---------------------------------------------------------------------------------------------------- Sales....................................................... 49,950,601 12,584,116 4,541,839 --------------------------------------------------------------------------------
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
USGS SAS UTILITIES ----------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $ 761,541 $20,179,434 $ 7,671,565 Gross unrealized depreciation............................... (2,101,648) (3,415,480) (2,110,236) ----------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $(1,340,107) $16,763,954 $ 5,561,329 -----------------------------------------------------------------------------------------------------
4. REPURCHASE AGREEMENTS The Portfolios purchase (and their custodian takes possession of) U.S. Government securities from banks and securities dealers subject to agreements to resell the securities to the sellers at a future date (generally, the next business day) at an agreed-upon higher repurchase price. The Portfolios require continual maintenance of the market value of the collateral in amounts at least equal to the repurchase price. 5. FUTURES CONTRACTS Initial margin deposits made upon entering into futures contracts are recognized as assets. The initial margin is segregated by the custodian and is noted in the schedule of investments. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received and recognized as assets due from or liabilities due to broker, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Portfolios record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Portfolios' basis in the contract. The Portfolios enter into such contracts to hedge portions of their respective portfolios. The Portfolios bear the market risk that arises from changes in the value of the financial instruments and securities indices (futures contracts). At June 30, 2000, the Portfolios had no open futures contracts. 52 54 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. OPTIONS CONTRACTS Premiums paid when put or call options are purchased by the Portfolios, represent investments, which are "marked-to-market" daily. When a purchased option expires, the Portfolios will realize a loss in the amount of the premium paid. When the Portfolios enter into closing sales transactions, the Portfolios will realize a gain or loss depending on whether the proceeds from the closing sales transactions are greater or less than the premium paid for the option. When the Portfolios exercise a put option, they will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Portfolios exercise a call option, the cost of the security which the Portfolios purchase upon exercise will be increased by the premium originally paid. At June 30, 2000, the Portfolios had no open purchased call or put option contracts. 7. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS The Portfolios may trade securities on a "to-be-announced" ("TBA") basis. In a TBA transaction, the Portfolios commit to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in GNMA/FNMA transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Portfolios, normally 15 to 45 days later. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. As of June 30, 2000, USGS had purchased TBA securities with a total cost of $4,696,599. 8. SHARES OF BENEFICIAL INTEREST The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest without par value. Transactions in shares of each Portfolio were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, 1999 ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO Shares sold................................................. 1,083,995 1,246,566 Shares issued on reinvestment............................... 330,595 484 Shares reacquired........................................... (937,763) (1,427,742) ------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... 476,827 (180,692) ------------------------------------------------------------------------------------------------- SOCIAL AWARENESS STOCK PORTFOLIO Shares sold................................................. 216,985 808,161 Shares issued on reinvestment............................... 43,051 40,998 Shares reacquired........................................... (130,852) (53,531) ------------------------------------------------------------------------------------------------- Net Increase................................................ 129,184 795,628 ------------------------------------------------------------------------------------------------- UTILITIES PORTFOLIO Shares sold................................................. 184,358 414,864 Shares issued on reinvestment............................... 52,890 154,823 Shares reacquired........................................... (312,340) (510,525) ------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (75,092) 59,162 -------------------------------------------------------------------------------------------------
9. CAPITAL LOSS CARRYFORWARDS At December 31, 1999, the USGS had, for Federal income tax purposes, capital loss carryforwards available to offset future realized gains. To the extent that these carryforward losses can be used to offset net realized capital gains, such gains, if any, will not be distributed. The amount of $2,847,000 expires December 31, 2007. 53 55 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, except where noted:
U.S. GOVERNMENT SECURITIES PORTFOLIO 2000(1)(2) 1999(2) 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.... $11.30 $11.80 $11.65 $10.86 $12.43 $10.58 -------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income................. 0.34 0.68 0.49 0.58 0.68 0.65 Net realized and unrealized gain (loss)............................. 0.24 (1.18) 0.70 0.79 (0.52) 1.80 -------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations..... 0.58 (0.50) 1.19 1.37 0.16 2.45 -------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(3): Net investment income................. (0.66) (0.00)* (0.50) (0.58) (1.55) (0.60) Net realized gains.................... -- -- (0.54) -- (0.18) -- -------------------------------------------------------------------------------------------------------------------- Total Distributions..................... (0.66) (0.00)* (1.04) (0.58) (1.73) (0.60) -------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD.......... $11.22 $11.30 $11.80 $11.65 $10.86 $12.43 -------------------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 5.16%++ (4.23)% 10.20% 12.62% 1.46% 24.42% -------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)....... $66,506 $61,623 $66,454 $35,279 $26,009 $28,192 -------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)........................... 0.50%+ 0.48% 0.45% 0.49% 0.62% 0.56% Net investment income................. 6.64+ 5.97 5.31 6.10 5.68 5.80 -------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE................. 80% 164% 349% 208% 501% 214% --------------------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO 2000(1)(2) 1999(2) 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.... $29.42 $25.92 $20.06 $15.76 $14.32 $11.05 -------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income(5).............. 0.06 0.13 0.10 0.15 0.31 0.12 Net realized and unrealized gain (loss)............................. (0.43) 3.93 6.30 4.15 2.42 3.47 -------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations..... (0.37) 4.06 6.40 4.30 2.73 3.59 -------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(3): Net investment income................. (0.16) (0.09) (0.12) -- (0.43) (0.14) Net realized gains.................... (0.35) (0.47) (0.42) -- (0.86) (0.18) -------------------------------------------------------------------------------------------------------------------- Total Distributions..................... (0.51) (0.56) (0.54) -- (1.29) (0.32) -------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD.......... $28.54 $29.42 $25.92 $20.06 $15.76 $14.32 -------------------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ (1.25)%++ 15.84% 32.27% 27.28% 19.98% 33.37% -------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)....... $69,875 $68,239 $39,482 $21,013 $11,040 $7,055 -------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(5)(6)........................ 0.77%+ 0.80% 0.84% 0.98% 1.25% 1.25% Net investment income................. 0.42+ 0.69 0.63 0.97 0.43 0.99 -------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE................. 20% 12% 14% 19% 26% 73% --------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2000 (unaudited). (2) Per share amounts have been calculated using the monthly average shares method. (3) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (4) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. (5) For the year ended December 31, 1996, The Travelers reimbursed the Social Awareness Stock Portfolio for $25,093 in expenses. If such fees were not waived and expenses not reimbursed, the per share decrease of net investment income would have been $0.06 and the actual expense ratio would have been 1.69%. (6) The ratio of expenses to average net assets for the year ended December 31, 1995 reflects an expense reimbursement by Travelers Insurance in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.75%. * Amount represents less than $0.01 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 54 56 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, except where noted:
UTILITIES PORTFOLIO 2000(1) 1999(2) 1998 1997 1996 1995 ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD..... $15.91 $17.18 $15.29 $12.22 $12.85 $10.17 ---------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income.................. 0.22 0.41 0.37 0.46 0.47 0.48 Net realized and unrealized gain (loss).............................. 0.79 (0.36) 2.33 2.63 0.47 2.44 ---------------------------------------------------------------------------------------------------------------------- Total Income From Operations............. 1.01 0.05 2.70 3.09 0.94 2.92 ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM(3): Net investment income.................. (0.45) (0.40) (0.42) (0.01) (0.84) (0.24) Net realized gains..................... (0.03) (0.92) (0.39) (0.01) (0.73) -- ---------------------------------------------------------------------------------------------------------------------- Total Distributions...................... (0.48) (1.32) (0.81) (0.02) (1.57) (0.24) ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........... $16.44 $15.91 $17.18 $15.29 $12.22 $12.85 ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN............................. 6.29%++ (0.08)% 18.21% 25.29% 7.47% 29.29% ---------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)........ $31,219 $31,413 $32,909 $21,413 $18,214 $15,340 ---------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)............................ 0.89%+ 0.88% 0.80% 1.06% 1.07% 1.25% Net investment income.................. 2.34+ 2.41 3.06 3.58 3.88 4.29 ---------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE.................. 2% 10% 51% 68% 39% 25% ----------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2000 (unaudited). (2) Per share amounts have been calculated using the monthly average shares method. (3) Distributions from realized gains include both net realized short-term and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions from net investment income. (4) The ratio of expenses to average net assets for the year ended December 31, 1995 reflects expense reimbursements by Travelers Insurance in connection with voluntary expense limitations. Without the expense reimbursement, the ratio of expenses to average net assets would have been 1.27%. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 55 57 Investment Advisers -------------------- MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CAPITAL APPRECIATION FUND, MONEY MARKET PORTFOLIO AND THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC Hartford, Connecticut THE TRAVELERS SERIES TRUST: SOCIAL AWARENESS STOCK PORTFOLIO AND UTILITIES PORTFOLIO SSB CITI FUND MANAGEMENT LLC New York, New York Independent Auditors --------------------- KPMG LLP New York, New York Custodian ---------- PFPC TRUST COMPANY This report is prepared for the general information of contract owners and is not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio, The Travelers Series Trust: U.S. Government Securities Portfolio, Social Awareness Stock Portfolio or Utilities Portfolio. It should not be used in connection with any offer except in conjunction with the Prospectuses for the Variable Annuity and Variable Universal Life Insurance products offered by The Travelers Insurance Company or Travelers Life & Annuity Company and the Prospectuses for the underlying funds, which collectively contain all pertinent information, including the applicable sales commissions. Printed in U.S.A. VG-181 (Semi-Annual)(8-00)