N-30D 1 y51811n-30d.txt TRAVELERS SERIES TRUST -- SEMI-ANNUAL REPORT 1 THE TRAVELERS VARIABLE PRODUCTS FUNDS SEMI-ANNUAL REPORTS June 30, 2001 [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 Series Trust -- 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 Portfolio ("Portfolio(s)") for the period ended June 30, 2001. In this report, we have summarized the period's prevailing economic and market conditions and outlined the Portfolios' investment strategies. In addition, we have also included detailed comparisons showing the growth of a hypothetical $10,000 invested in each Portfolio from their respective inception dates. We hope you find this report to be useful and informative.
The Performance of the Travelers Series Trust(1) (December 31, 2000 - June 30, 2001) Managed Assets Trust........................................ (2.45)% High Yield Bond Trust....................................... 6.84 Capital Appreciation Fund................................... (15.58) Money Market Portfolio...................................... 2.41 U.S. Government Securities Portfolio........................ 1.15 Social Awareness Stock Portfolio............................ (8.52) Utilities Portfolio......................................... (4.53)
MARKET SCHEDULE OF SUBACCOUNT COMMENTARY INVESTMENTS ---------- ---------- ----------- Managed Assets Trust........................................ 2 7 High Yield Bond Trust....................................... 3 16 Capital Appreciation Fund................................... 3 24 Money Market Portfolio...................................... 4 26 U.S. Government Securities Portfolio........................ 37 42 Social Awareness Stock Portfolio............................ 37 43 Utilities Portfolio......................................... 38 46
MARKET AND ECONOMIC OVERVIEW The start of 2001 was rough for the U.S. stock market, which experienced its worst first-quarter performance in 40 years. In the midst of continued deterioration in corporate earnings and other signs of a slowing U.S. economy, the Standard & Poor's 500 Index ("S&P 500")(2) fell 6.69% for the period ended June 30, 2001. The U.S. Federal Reserve Board ("Fed") responded by aggressively lowering short-term interest rates, cutting the federal funds rate ("fed funds rate")(3) six times during the first half of the year, for a total decrease of 2.75%. In response to the Fed's rate cuts, bonds on the shorter end of the yield curve(4) experienced a rally that extended through June 2001. (Typically, as interest rates fall, the prices of existing bonds increase.) Total returns for bonds across the board were positive, with the exception of the high-yield sector, which suffered from an increase in default rates. Equity markets initially responded well to the Fed's interest rate cuts. After a brief rally, however, a wave of deteriorating economic data, negative earnings preannouncements and fears of a Japanese financial crisis overwhelmed investor confidence. At the time of this report, stock markets lay battered and well below even end-of-2000 levels, and measures of consumer and business confidence eroded significantly. It is our view that the U.S. economy is following the script of a classic boom-bust cycle, which is characterized by the excess capacity and inventory-building that often occur after periods of very strong cyclical demand. In such circumstances, lower interest rates may not provide an instant cure for the ailing stock markets. Time and patience may be required to absorb or shut down excess capacity, and to work down or write off excess inventory. --------------- (1) Please note that data represents past performance, which is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. (2) The S&P 500 is a market capitalization-weighted index of 500 widely held common stocks. Please note that an investor cannot invest directly in an index. (3) The fed funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The fed funds rate often points to the direction of U.S. interest rates. (4) The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. 1 3 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- Looking forward, we expect the economy to start to show signs of improvement once the beneficial effects of the Fed's interest rate cuts begin to materialize. Because inflation has remained in check, the Fed appears to be in a good position to further reduce interest rates if necessary. We expect the Fed to enact at least one more interest rate cut before the end of 2001. As a result, we expect to see the stock market working its way to higher levels in the months and quarters ahead. Any further reduction in interest rates between now and year-end 2001 should bolster investment returns for fixed income securities as well. 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, 2001, the Trust returned a negative 2.45%. In comparison, the Lehman Brothers Government/Corporate Bond Index(5) returned 3.51% and the S&P 500 returned negative 6.69% for the same period. (Past performance is not indicative of future results.) The guiding stock selection models produced mixed results in the first two quarters of 2001. Stocks rated well by these models based on rising earnings expectations and price momentum did not perform well and the valuation signals did produce good relative performance. The Trust's underperformance relative to its benchmark(6) was largely attributable to an incremental growth bias where earnings-related signals create a marginal overweight position in higher earnings growth stocks. Higher growth stocks underperformed early in 2001 as investors forced valuation multiples on such stocks lower. Performance attribution analysis for the Trust's first quarter indicates that stock selection was unfavorable in the technology sector, modestly below benchmark in the health care and utilities technology sectors and neutral in the other sectors. The technology sector performed poorly as the parade of earnings disappointments continued. Overweight positions in Sun Microsystems, Sanmina and Transwitch suffered in the first quarter as the steep slowdown in demand and pricing continued to lead earnings estimates lower. The Trust was helped somewhat by underweight positions in computer sciences, as the company pre-announced a negative quarter, and Yahoo, which was weak on concerns of the demise of dot.com advertising industry. In the health care sector, the Trust was negatively impacted by our overweight position in Applera Biosystems after the company warned that its earnings would be lower on delayed shipments and weaker foreign currencies. Winners from the preceding year such as Trigon Health Care fell prey to profit-taking early in the first quarter. In the utilities sector, positions in higher growth wireless companies such as Sprint PCS and Nextel Communications underperformed as investors revised their valuations downwards in the face of a weaker economy. During the second quarter of 2001, stock selection was favorable in the health care and consumer discretionary sectors but adverse in the financial services sector. In the health care sector, the Trust's positions in relatively stable growth companies such as Trigon Healthcare and Tenet Healthcare were rewarded with higher valuations. Johnson and Johnson acquired Alza, a research-based pharmaceuticals company that the managers had emphasized, in a stock swap towards the end of June. In the consumer discretionary sector, consumer cyclical stocks such as Best Buy, Circuit City and Tiffany moved higher on hopes of an economic recovery and helped portfolio performance. In the financial services sector, anticipated earnings shortfalls at J.P. Morgan, Bank of New York and Knight Trading Group hurt relative performance. Citigroup, our parent company, one of the few bright lights within the sector, might have positively affected performance, however, the Trust is restricted from owning it. The U.S. stock market continues to experience a high level of volatility as hopes of a recovery based on monetary and fiscal stimulus clash with ongoing evidence of weak corporate profits and lack of earnings visibility in the intermediate term. Adhering to its disciplined approach to stock selection, the Trust's management screens their research universe of over 1,000 large-cap securities for companies that offer improving earnings fundamentals at discounted stock valuations. The managers continue to focus on this dual theme of low valuations and improving earnings outlook as the basis for stock selection. --------------- (5) 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. Please note that an investor cannot invest directly in an index. (6) The Fund's benchmark is a blend of 60% S&P 500 and 40% Lehman Brothers Government/Corporate Bond 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 are typically 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, 2001, the Trust had a total return of 6.84%. In comparison, the Lehman Brothers Aggregate Bond Index(7) posted a total return of 3.62% for the same period. (Past performance is not indicative of future results.) During the first half of 2001, the high yield market continued to experience heightened volatility resulting from escalating concerns over the slowing U.S. economy and disappointing corporate profits. The period was marked by rising default rates: On a rolling 12-month basis through the end of June 2001, default rates increased to roughly 7.5%, with the major credit rating agencies expecting a further increase to approximately 9.5% in the second half of 2001. Overall performance in the high-yield market was anemic, with the greatest price declines occurring in telecommunications and technology issues. It is the view of management, however, that most of the negative events surrounding the telecommunications and technology sectors have been excessively discounted by the financial markets. They believe that a bottoming-out process is now underway that will probably take another six months to play out. At that time, management feels a sustainable recovery will occur. The most depressed sectors of high-yield, such as telecommunications and technology, could take longer, given the specific problems affecting them. (Of course, there can be no guarantee that our expectations will, in fact, materialize.) The Fed's aggressive interest rate reductions in the first half of 2001 may serve as a catalyst for improvement. It is generally believed that a reduction in interest rates will help stimulate economic growth by reducing the cost of borrowing for consumers and corporations. In closing, management remains focused on generating upside price performance after three difficult years, and will continue to invest in positions that they believe have the greatest upside potential. These tend to be the deeper-discount issues of better quality companies. Despite today's challenges, they remain confident of the Portfolio's ability to generate improving performance over the long term for its investors. CAPITAL APPRECIATION FUND The Capital Appreciation Fund ("Portfolio") seeks growth of capital through investment in 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, 2001, the Portfolio returned negative 15.58%. In comparison, the S&P 500 returned negative 6.69% for the same period. (Past performance is not indicative of future results.) During the first half of 2001, continued signs of economic weakness, including rising unemployment and a steady stream of profit warnings among several key companies, kept investors on the sidelines as they waited for stock valuations to reach more attractive levels. The Fed's additional interest rate cuts and strong consumer spending gave optimists hope that the economic downturn would soon end. All eyes were on the technology sector, which continues to work through excess inventory. While the Portfolio's tech exposure is limited, the Portfolio's management continues to see opportunity in this area of the market. For example, their attraction to Microsoft is due to our belief that it is a company that continues to enhance its competitive position through innovative technology. During the period, the company's stock price received a nice boost when an order to split the company in two was overturned. Another theme in the Portfolio is media. Consumers are increasingly looking for entertainment via movies, video on demand and the Internet -- a trend they believe is still in its infancy. As such, media and entertainment giants AOL Time Warner and Viacom boosted the Portfolio's overall returns. Telecommunications is yet another area in which the Portfolio has invested. Unfortunately, wireless handset maker Nokia was a disappointment. The stock came under pressure as several of the company's key markets witnessed a sharp reduction in handset sales. Management believes that the Portfolio is well positioned and will continue to employ intensive research in an attempt to uncover the market's long-term leaders. --------------- (7) 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. Please note that an investor cannot invest directly in an index. 3 5 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS -------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO The Money Market Portfolio ("Portfolio") seeks to provide shareholders with high current income from short-term money market instruments while emphasizing the preservation of capital and maintaining a high degree of liquidity. The Portfolio pursues this objective by investing in securities that mature in one year or less. For the six months ended June 30, 2001, the Money Market Portfolio returned 2.41%. The Portfolio invests in high-quality U.S. dollar denominated short-term debt securities. These may include obligations issued by U.S. and foreign banks, the U.S. government, its agencies or instrumentalities. U.S. states and municipalities and U.S. and foreign corporate issuers. The Portfolio will invest at least 25% of its assets in obligations of domestic and foreign banks. 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. U.S. economic growth was anemic during the period: In each of the last two quarters, GDP has been below 1.5%. Layoffs across many sectors of the economy pushed the unemployment rate toward 4.5%--its highest level in two and a half years. In an attempt to revitalize the U.S. economy, the Fed lowered the fed funds rate on six different occasions during the period, for a total of 275 basis points. Returns on money market securities fell considerably as a result of the Fed's rate cuts. In early January 2001, one-year money market securities were yielding approximately 6.4%. At the time of this report, yields on one- year money market securities had fallen to about 4.10%. Against the backdrop of continued weakness in the U.S. economy, inflation in the U.S. is heading lower, largely due to rising domestic slack in demand for products and services and the global economic downturn. These factors should allow the Fed to maintain an accommodative interest rate environment well into 2002, regardless of how much it reduces rates during the remainder of 2001. Any further rate reductions can be expected to place downward pressure on yields on money market funds in general. 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 12, 2001 The information provided in these commentaries represents the opinion of the manager(s) and is not intended to be a forecast of future events, a guarantee of future results or investment advice. Further, there is no assurance that certain securities will remain in or out of the Trusts or Portfolios. Please refer to pages 7 through 26 for a list and percentage breakdown of the Trusts' or Portfolios' holdings. Also, please note that any discussion of the Trusts' or Portfolios' holdings is as of June 30, 2001 and is subject to change. 4 6 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ (2.45)% Year Ended 6/30/01 (6.52) Five Years Ended 6/30/01 11.89 Ten Years Ended 6/30/01 11.52 CUMULATIVE TOTAL RETURN ------------------------ 6/30/91 through 6/30/01 197.49% + 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, 1991, assuming reinvestment of dividends, through June 30, 2001. 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. [MANAGED ASSETS TRUST LINE GRAPH]
LEHMAN BROTHERS GOVERNMENT/CORPORATE STANDARD & POOR'S MANAGED ASSETS TRUST BOND INDEX CONSUMER PRICE INDEX 500 INDEX -------------------- -------------------- -------------------- ----------------- 6/91 $ 10000 $ 10000 $ 10000 $ 10000 12/91 11334 11139 10140 11416 12/92 11917 11984 10434 12285 12/93 13029 13306 10721 13520 12/94 12736 12838 11008 13698 12/95 16190 15309 11287 16701 12/96 18421 15753 11661 20534 12/97 22347 17290 11859 27384 12/98 27139 18927 12050 35253 12/99 30998 18098 12409 42668 12/00 30497 20242 12830 38784 6/01 29749 20953 13125 36190
-------------------------------------------------------------------------------- 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 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ 6.84% Year Ended 6/30/01 6.60 Five Years Ended 6/30/01 8.51 Ten Years Ended 6/30/01 10.30 CUMULATIVE TOTAL RETURN ------------------------ 6/30/91 through 6/30/01 166.52% + 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, 1991, assuming reinvestment of dividends, through June 30, 2001. 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 Global High Yield Index is a broad-based market measure of high yield bonds, commonly known as "junk bonds." [HIGH YIELD BOND TRUST LINE GRAPH]
LEHMAN BROTHERS FIRST BOSTON GLOBAL HIGH YIELD BOND TRUST AGGREGATE BOND INDEX CONSUMER PRICE INDEX HIGH YIELD INDEX --------------------- -------------------- -------------------- ------------------- 6/91 $ 10000.00 $ 10000.00 $ 10000.00 $ 10000.00 12/91 11160.00 11104.00 10140.00 12288.00 12/92 12629.00 11925.00 10434.00 13361.00 12/93 14398.00 13088.00 10721.00 15448.00 12/94 14216.00 12706.00 11008.00 15418.00 12/95 16415.00 15053.00 11287.00 18298.00 12/96 19049.00 15600.00 11661.00 20260.00 12/97 22205.00 17105.00 11859.00 22819.00 12/98 23660.00 18591.00 12050.00 22885.00 12/99 24707.00 18439.00 12409.00 23903.00 12/00 24945.00 20584.00 12830.00 23077.00 6/01 26652.00 21329.00 13125.00 24065.00
-------------------------------------------------------------------------------- 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 reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 5 7 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ (15.58)% Year Ended 6/30/01 (33.38) Five Years Ended 6/30/01 17.76 Ten Years Ended 6/30/01 18.00 CUMULATIVE TOTAL RETURN ------------------------ 6/30/91 through 6/30/01 423.59% + 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, 1991, assuming reinvestment of dividends, through June 30, 2001. 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 on the New York Stock Exchange, American Stock Exchange and NASDAQ. The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. [CAPITAL APPRECIATION FUND LINE GRAPH]
CAPITAL APPRECIATION STANDARD & POOR'S FUND 500 INDEX RUSSELL 2000 INDEX CONSUMER PRICE INDEX -------------------- ----------------- ------------------ -------------------- 6/91 $ 10000 $ 10000 $ 10000 $ 10000 12/91 11256 11416 11439 10140 12/92 13237 12285 13544 10434 12/93 15294 13520 16101 10721 12/94 14509 13698 6681 11008 12/95 19785 16701 8582 11287 12/96 25366 20534 9998 11661 12/97 31998 27384 12234 11859 12/98 51717 35253 11924 12050 12/99 79394 42668 14457 12409 12/00 62024 38784 14020 12830 6/01 52359 36190 14994 13125
-------------------------------------------------------------------------------- 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. 6 8 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 59.7% ----------------------------------------------------------------------------------------------------- BUILDING -- 0.1% 10,200 Centex Corp. ............................................... $ 415,650 ----------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES -- 0.2% 25,500 Cendant Corp. (a)........................................... 497,250 ----------------------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 3.7% 18,600 Bed Bath & Beyond Inc. (a).................................. 558,000 8,100 Best Buy Co., Inc. (a)...................................... 514,512 7,100 CDW Computer Centers, Inc. (a).............................. 281,941 22,800 Circuit City Stores -- Circuit City Group................... 410,400 7,127 CVS Corp. .................................................. 275,102 17,300 The Gap, Inc. .............................................. 501,715 52,795 Home Depot, Inc. ........................................... 2,457,607 19,200 Kohl's Corp. (a)............................................ 1,204,416 16,900 Sears, Roebuck & Co. ....................................... 715,039 22,700 Tiffany & Co. .............................................. 822,194 18,100 Walgreen Co. ............................................... 618,115 75,860 Wal-Mart Stores, Inc. ...................................... 3,701,968 ----------------------------------------------------------------------------------------------------- 12,061,009 ----------------------------------------------------------------------------------------------------- CONSUMER STAPLES -- 4.6% 6,700 Adolph Coors Co., Class B Shares............................ 336,206 11,400 Alberto-Culver Co., Class B Shares.......................... 479,256 23,754 Anheuser-Busch Cos., Inc. .................................. 978,665 5,100 Avery Dennison Corp. ....................................... 260,355 47,105 The Coca-Cola Co. .......................................... 2,119,725 16,184 Colgate Palmolive Co. ...................................... 954,694 14,000 Federated Department Stores, Inc. (a)....................... 595,000 13,000 General Mills, Inc. ........................................ 569,140 7,700 Hershey Foods Corp. ........................................ 475,167 9,764 Kimberly-Clark Corp. ....................................... 545,808 15,600 The Kroger Co. (a).......................................... 390,000 27,280 PepsiCo, Inc. .............................................. 1,205,776 52,015 Philip Morris Cos. Inc. .................................... 2,639,761 18,032 Procter & Gamble Co. ....................................... 1,150,442 17,962 Safeway Inc. (a)............................................ 862,176 34,988 SYSCO Corp. ................................................ 949,924 14,100 Tricon Global Restaurants, Inc. (a)......................... 618,990 ----------------------------------------------------------------------------------------------------- 15,131,085 ----------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 2.3% 19,600 Carnival Corp. ............................................. 601,720 10,742 Clear Channel Communications, Inc. (a)...................... 673,523 25,300 Comcast Corp., Special Class A Shares (a)................... 1,098,020 8,311 Gannett Co., Inc. .......................................... 547,695 14,600 Harrah's Entertainment, Inc. (a)............................ 515,380 8,200 Knight-Ridder, Inc. ........................................ 486,260
SEE NOTES TO FINANCIAL STATEMENTS. 7 9 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 2.3% (CONTINUED) 10,800 The McGraw-Hill Cos., Inc. ................................. $ 714,420 5,200 Tribune Co. ................................................ 208,052 29,586 Viacom Inc., Class B Shares (a)............................. 1,531,076 36,795 The Walt Disney Co. ........................................ 1,063,008 ----------------------------------------------------------------------------------------------------- 7,439,154 ----------------------------------------------------------------------------------------------------- FINANCIAL -- 7.6% 38,649 American Express Co. ....................................... 1,499,581 24,176 Bank of America Corp. ...................................... 1,451,285 23,500 The Bank of New York Co., Inc. ............................. 1,128,000 33,221 Bank One Corp. ............................................. 1,189,312 8,200 Bear Stearns Cos. Inc. ..................................... 483,554 9,008 Capital One Financial Corp. ................................ 540,480 20,900 Charles Schwab Corp. ....................................... 319,770 19,952 Fannie Mae.................................................. 1,698,912 11,050 Fifth Third Bancorp......................................... 663,553 35,623 FleetBoston Financial Corp. ................................ 1,405,333 15,750 Freddie Mac................................................. 1,102,500 15,700 Household International, Inc. .............................. 1,047,190 40,560 J.P. Morgan Chase & Co. .................................... 1,808,976 17,400 Knight Trading Group, Inc. (a).............................. 186,006 16,462 Lehman Brothers Holdings Inc. .............................. 1,279,921 26,300 MBNA Corp. ................................................. 866,585 29,050 Merrill Lynch & Co., Inc. .................................. 1,721,213 31,682 Morgan Stanley Dean Witter & Co. ........................... 2,034,935 30,300 National City Corp. ........................................ 932,634 8,800 Providian Financial Corp. .................................. 520,960 10,896 State Street Corp. ......................................... 539,243 40,300 U.S. Bancorp................................................ 918,437 35,900 Wells Fargo & Co. .......................................... 1,666,837 ----------------------------------------------------------------------------------------------------- 25,005,217 ----------------------------------------------------------------------------------------------------- HEALTHCARE -- 7.5% 17,746 Abbott Laboratories......................................... 851,985 7,000 Allergan, Inc. ............................................. 598,500 21,813 American Home Products Corp. ............................... 1,274,752 10,800 Baxter International Inc. (a)............................... 529,200 11,900 Biomet, Inc. (a)............................................ 571,914 31,396 Bristol-Myers Squibb Co. ................................... 1,642,011 17,200 Cardinal Health, Inc. ...................................... 1,186,800 14,704 Eli Lilly & Co. ............................................ 1,088,096 10,200 Forest Laboratories, Inc. (a)............................... 724,200 18,300 HCA Inc. ................................................... 826,977 74,730 Johnson & Johnson........................................... 3,736,500 3,600 Medimmune, Inc. (a)......................................... 169,920 15,766 Medtronic, Inc. ............................................ 725,394 40,438 Merck & Co., Inc. .......................................... 2,584,393
SEE NOTES TO FINANCIAL STATEMENTS. 8 10 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- HEALTHCARE -- 7.5% (CONTINUED) 106,891 Pfizer Inc. ................................................ $ 4,280,985 22,692 Pharmacia Corp. ............................................ 1,042,697 17,768 Schering-Plough Corp. ...................................... 643,912 14,600 Tenet Healthcare Corp. ..................................... 753,214 9,400 Trigon Healthcare, Inc. (a)................................. 609,590 12,200 UnitedHealth Group Inc. .................................... 753,350 ----------------------------------------------------------------------------------------------------- 24,594,390 ----------------------------------------------------------------------------------------------------- HUMAN RESOURCES -- 0.3% 12,500 Manpower Inc. .............................................. 373,750 17,800 Paychex, Inc. .............................................. 712,000 ----------------------------------------------------------------------------------------------------- 1,085,750 ----------------------------------------------------------------------------------------------------- INSURANCE -- 2.7% 22,300 The Allstate Corp. ......................................... 980,977 9,121 Ambac Financial Group, Inc. ................................ 530,842 8,400 American General Corp. ..................................... 390,180 40,845 American International Group, Inc. ......................... 3,512,670 9,300 The Chubb Corp. ............................................ 720,099 5,000 CIGNA Corp. ................................................ 479,100 13,800 Lincoln National Corp. ..................................... 714,150 11,450 MBIA, Inc. ................................................. 637,536 12,600 MGIC Investment Corp. ...................................... 915,264 ----------------------------------------------------------------------------------------------------- 8,880,818 ----------------------------------------------------------------------------------------------------- LODGING -- 0.2% 14,700 Marriott International, Inc., Class A Shares................ 695,898 ----------------------------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 1.4% 3,600 Alcan Aluminum Ltd. ........................................ 151,272 17,640 Alcoa Inc. ................................................. 695,016 8,600 Applera Corp. -- Applied Biosystems Group................... 230,050 13,600 Barrick Gold Corp. ......................................... 206,040 15,979 The Dow Chemical Co. ....................................... 531,302 18,122 E.I. du Pont de Nemours & Co. .............................. 874,205 4,200 Eastman Chemical Co. ....................................... 200,046 6,684 Georgia-Pacific Group....................................... 226,253 14,902 International Paper Co. .................................... 532,001 5,606 The Mead Corp. ............................................. 152,147 3,000 Nucor Corp. ................................................ 146,670 4,600 Phelps Dodge Corp. ......................................... 190,900 2,900 Praxair, Inc. .............................................. 136,300 8,200 Rohm & Haas Co. ............................................ 269,780 4,035 Weyerhaeuser Co. ........................................... 221,804 ----------------------------------------------------------------------------------------------------- 4,763,786 ----------------------------------------------------------------------------------------------------- OIL/ENERGY -- 5.2% 5,700 Anadarko Petroleum Corp. ................................... 307,971 7,300 Apache Corp. ............................................... 370,475
SEE NOTES TO FINANCIAL STATEMENTS. 9 11 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- OIL/ENERGY -- 5.2% (CONTINUED) 6,000 Baker Hughes Inc. .......................................... $ 201,000 8,300 Burlington Resources Inc. .................................. 331,585 12,184 Chevron Corp. .............................................. 1,102,652 10,962 Conoco Inc., Class B Shares................................. 316,802 6,000 Dynegy Inc., Class A Shares................................. 279,000 22,788 Enron Corp. ................................................ 1,116,612 15,400 Exelon Corp. ............................................... 987,448 63,196 Exxon Mobil Corp. .......................................... 5,520,226 8,610 Halliburton Co. ............................................ 306,516 2,100 Kerr-McGee Corp. ........................................... 139,167 7,400 Occidental Petroleum Corp. ................................. 196,766 4,800 Phillips Petroleum Co. ..................................... 273,600 37,734 Royal Dutch Petroleum Co. ADR............................... 2,198,760 9,838 Schlumberger Ltd. .......................................... 517,971 9,600 Texaco Inc. ................................................ 639,360 5,000 Tosco Corp. ................................................ 220,250 5,349 Transocean Sedco Forex Inc. ................................ 220,677 17,400 TXU Corp. .................................................. 838,506 8,000 Unocal Corp. ............................................... 273,200 5,000 USX-Marathon Group Inc. .................................... 147,550 13,354 The Williams Cos., Inc. .................................... 440,014 ----------------------------------------------------------------------------------------------------- 16,946,108 ----------------------------------------------------------------------------------------------------- PRODUCER DURABLES -- 4.2% 8,800 Agilent Technologies, Inc. (a).............................. 286,000 4,600 Black & Decker Corp. ....................................... 181,516 181,702 General Electric Co. ....................................... 8,857,973 17,300 ITT Industries, Inc. ....................................... 765,525 13,865 Masco Corp. ................................................ 346,070 4,100 Minnesota Mining & Manufacturing Co. ....................... 467,810 8,200 PerkinElmer, Inc. .......................................... 225,746 10,800 Parker Hannifin Corp. ...................................... 458,352 38,646 Tyco International Ltd. .................................... 2,106,207 ----------------------------------------------------------------------------------------------------- 13,695,199 ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 15.9% 11,300 Adobe Systems Inc. ......................................... 531,100 13,700 Altera Corp. (a)............................................ 397,300 85,269 AOL Time Warner Inc. (a).................................... 4,519,257 21,440 Amgen Inc. (a).............................................. 1,300,979 14,526 Applied Materials, Inc. (a)................................. 713,227 17,800 Applied Micro Circuits Corp. (a)............................ 306,160 7,600 Automatic Data Processing, Inc. ............................ 377,720 3,100 Biogen, Inc. (a)............................................ 168,516 23,343 The Boeing Co. ............................................. 1,297,871 4,300 Broadcom Corp., Class A Shares (a).......................... 183,868 136,528 Cisco Systems, Inc. (a)..................................... 2,484,810 31,082 Compaq Computer Corp. ...................................... 481,460
SEE NOTES TO FINANCIAL STATEMENTS. 10 12 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- TECHNOLOGY -- 15.9% (CONTINUED) 13,200 Computer Associates International, Inc. .................... $ 475,200 8,200 Comverse Technology, Inc. .................................. 472,484 23,900 Corning Inc. ............................................... 399,369 39,600 Dell Computer Corp. (a)..................................... 1,027,620 15,800 Electronic Data Systems Corp. .............................. 987,500 34,816 EMC Corp. (a)............................................... 1,011,405 14,600 First Data Corp. ........................................... 938,050 12,700 Global Crossing Ltd. (a).................................... 109,728 23,300 Hewlett-Packard Co. ........................................ 666,380 14,800 Honeywell International Inc. ............................... 517,861 125,672 Intel Corp. ................................................ 3,675,906 31,788 International Business Machines Corp. ...................... 3,592,044 24,300 JDS Uniphase Corp. (a)...................................... 309,825 13,400 Lam Research Corp. (a)...................................... 397,310 9,000 Linear Technology Corp. .................................... 397,980 23,300 Lockheed Martin Corp. ...................................... 863,265 44,945 Lucent Technologies Inc. ................................... 278,659 18,500 LSI Logic Corp. ............................................ 347,800 2,800 Mercury Interactive Corp. (a)............................... 167,720 23,200 Micron Technology, Inc. (a)................................. 953,520 94,434 Microsoft Corp. (a)......................................... 6,855,908 27,000 Motorola, Inc. ............................................. 447,120 6,200 Network Appliance, Inc. (a)................................. 84,940 34,200 Nextel Communications, Inc. (a)............................. 598,500 43,300 Nortel Networks Corp. ...................................... 393,597 118,060 Oracle Corp. (a)............................................ 2,243,140 12,700 Pitney Bowes Inc. .......................................... 534,924 14,600 QUALCOMM Inc. (a)........................................... 853,808 31,872 Qwest Communications International Inc. .................... 1,015,761 20,800 Sanmina Corp. (a)........................................... 486,928 15,400 Scientific-Atlanta, Inc. ................................... 625,240 9,500 Siebel Systems, Inc. (a).................................... 445,550 37,352 Sprint PCS Group (a)........................................ 902,051 80,900 Sun Microsystems, Inc. (a).................................. 1,271,748 7,558 Tellabs, Inc. (a)........................................... 145,718 39,868 Texas Instruments Inc. ..................................... 1,255,842 23,000 TranSwitch Corp. (a)........................................ 247,250 9,222 United Technologies Corp. .................................. 675,604 5,900 VERITAS Software Corp. (a).................................. 392,527 42,693 Verizon Communications Inc. ................................ 2,284,076 5,000 Xilinx, Inc. (a)............................................ 206,200 ----------------------------------------------------------------------------------------------------- 52,318,326 ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.6% 12,200 Burlington Northern Santa Fe Corp. ......................... 368,074 28,466 Ford Motor Co. ............................................. 698,840
SEE NOTES TO FINANCIAL STATEMENTS. 11 13 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
SHARES SECURITY VALUE ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.6% (CONTINUED) 10,642 General Motors Corp. ....................................... $ 684,813 6,800 Union Pacific Corp. ........................................ 373,388 ----------------------------------------------------------------------------------------------------- 2,125,115 ----------------------------------------------------------------------------------------------------- UTILITIES -- 3.2% 16,600 The AES Corp. (a)........................................... 714,630 7,369 ALLTEL Corp. ............................................... 451,425 61,600 AT&T Corp. ................................................. 1,355,200 27,218 BellSouth Corp. ............................................ 1,096,069 14,300 Calpine Corp. (a)........................................... 540,540 12,300 Dominion Resources, Inc. ................................... 739,599 13,200 Entergy Corp. .............................................. 506,748 22,800 FirstEnergy Corp. .......................................... 733,248 13,425 FPL Group, Inc. ............................................ 808,319 2,812 Mirant Corp. ............................................... 96,733 7,800 The Montana Power Co. ...................................... 90,480 64,846 SBC Communications Inc. .................................... 2,597,733 7,773 The Southern Co. ........................................... 180,722 56,052 Worldcom, Inc. -- WorldCom Group (a)........................ 838,545 ----------------------------------------------------------------------------------------------------- 10,749,991 ----------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $183,786,570)................... 196,404,746 ----------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK -- 1.7% ----------------------------------------------------------------------------------------------------- FINANCIAL -- 1.2% 10,000 CalEnergy Capital II, 6.250%................................ 435,000 11,000 Equity Office Properties Trust, 5.250%...................... 533,500 21,764 Equity Residential Properties Trust, 7.250%................. 549,323 12,000 General Growth Properties, Inc., 7.250%..................... 307,800 8,000 National Australia Bank Ltd., 7.875%........................ 249,200 11,000 Newell Financial Trust, 5.250%.............................. 409,750 9,000 Reckson Associates Realty Corp., 7.625%..................... 208,350 25,000 Washington Mutual Capital, 5.375%........................... 1,334,375 ----------------------------------------------------------------------------------------------------- 4,027,298 ----------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.1% 4,000 Amcor Ltd., 7.250%.......................................... 168,200 ----------------------------------------------------------------------------------------------------- MEDIA -- 0.2% 4,500 Tribune Co., 2.000%......................................... 534,915 ----------------------------------------------------------------------------------------------------- UTILITIES -- 0.2% 4,000 AES Trust VII, 6.000%....................................... 224,000 4,000 Calpine Capital Trust II, 5.500%............................ 224,500 2,000 Calpine Capital Trust II, 5.500% (c)........................ 112,250 2,000 Mirant Trust I Pfd., 6.250%................................. 144,000 ----------------------------------------------------------------------------------------------------- 704,750 ----------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $5,297,141)...... 5,435,163 -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 12 14 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
FACE AMOUNT RATING(b) SECURITY VALUE ------------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 11.7% ------------------------------------------------------------------------------------------------------- CONSUMER CYCLICAL -- 0.3% $ 1,000,000 BBB- R.J. Reynolds Tobacco Holdings Inc., Company Guaranteed, 7.750% due 5/15/06........................................ $ 1,010,000 ------------------------------------------------------------------------------------------------------- FINANCIAL -- 1.5% 5,000,000 BBB Nationwide Health Properties, Inc., Notes, 6.900% due 10/1/37................................................... 4,756,250 ------------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.9% 3,000,000 BBB CSX Corp., Notes, 6.950% due 5/1/27......................... 3,052,500 ------------------------------------------------------------------------------------------------------- MEDIA -- 1.2% 4,000,000 BBB- Clear Channel Communications, Inc., Sr. Notes, 6.625% due 6/15/08................................................... 3,930,000 ------------------------------------------------------------------------------------------------------- TECHNOLOGY -- 4.7% 5,000,000 A- British Telecom PLC, Notes, 8.625% due 12/15/30............. 5,468,750 5,000,000 BBB+ Computer Associates International Inc., Sr. Notes, 6.375% due 4/15/05............................................... 4,743,750 5,000,000 A- Deutsche Telekom International Finance Inc., Bonds, 8.250% due 6/15/30............................................... 5,156,250 ------------------------------------------------------------------------------------------------------- 15,368,750 ------------------------------------------------------------------------------------------------------- UTILITIES -- 3.1% 5,000,000 AA- BellSouth Capital Funding Corp., Debentures, 6.040% due 11/15/26.................................................. 5,018,750 5,000,000 A- France Telecom, 8.500% due 3/1/31........................... 5,262,500 ------------------------------------------------------------------------------------------------------- 10,281,250 ------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (Cost -- $38,053,983)..................................... 38,398,750 ------------------------------------------------------------------------------------------------------- CONVERTIBLE CORPORATE BONDS -- 3.2% ------------------------------------------------------------------------------------------------------- ENERGY -- 0.3% 600,000 A Diamond Offshore Drilling, Inc., Sub. Notes: Zero coupon due 6/6/20 (c)................................ 290,250 300,000 A 1.500% 4/15/31............................................ 273,750 350,000 BBB+ Global Marine Inc., Debentures: Zero coupon due 6/23/20................................... 167,125 300,000 BBB+ Zero coupon due 6/23/20 (c)............................... 143,250 100,000 BB- Hanover Compressor Co., 4.750% due 3/15/01.................. 103,875 ------------------------------------------------------------------------------------------------------- 978,250 ------------------------------------------------------------------------------------------------------- ENTERTAINMENT/MEDIA -- 0.2% 350,000 BBB+ Cox Communications, Inc., Notes 0.425% due 4/19/20.......... 146,562 150,000 BBB- Liberty Media: 4.000% due 11/15/29....................................... 115,500 100,000 BBB- 3.500% due 1/15/31........................................ 80,750 1,050,000 BBB- Royal Carribbean, zero coupon due 2/2/21.................... 385,875 ------------------------------------------------------------------------------------------------------- 728,687 ------------------------------------------------------------------------------------------------------- FINANCIAL -- 0.7% 360,000(EUR) A- AXA SA, 2.500% due 1/1/14................................... 522,688 300,000 A- Hellenic Finance, 2.000% due 7/15/03 (c).................... 258,075 192,000(EUR) A- Hellenic Finance, 2.000% due 7/15/03 (c).................... 164,782
SEE NOTES TO FINANCIAL STATEMENTS. 13 15 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
FACE AMOUNT RATING(b) SECURITY VALUE ------------------------------------------------------------------------------------------------------- FINANCIAL -- 0.7% (CONTINUED) $ 200,000 A Hutchison Whampoa International, Notes, 2.875% due 9/15/03 (c)....................................................... $ 190,375 2,350,000 AA- Merrill Lynch, zero coupon due 5/23/31...................... 1,201,438 ------------------------------------------------------------------------------------------------------- 2,337,358 ------------------------------------------------------------------------------------------------------- HEALTHCARE -- 0.1% 300,000 NR Roche Holding AG, Notes, zero coupon due 1/19/15 (c)........ 222,750 ------------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.8% 300,000 AA- Indian Petrochemicals Corp. Ltd., Bonds, 2.500% due 3/11/02 (c)....................................................... 331,500 300,000 BB+ Interim Services Inc., Sub. Notes, 4.500% due 6/1/05........ 240,375 250,000 A Lowe's Cos., zero coupon due 2/16/21........................ 185,312 200,000 BBB+ PerkinElmer, Inc., Bonds, zero coupon due 8/7/20............ 103,750 Solectron Corp., Notes: 2,410,000 BBB Zero coupon due 5/8/20.................................... 1,205,000 440,000 BBB Zero coupon due 11/20/20.................................. 183,150 700,000 BBB+ Tyco International Group, zero coupon 2/12/21............... 505,750 ------------------------------------------------------------------------------------------------------- 2,754,837 ------------------------------------------------------------------------------------------------------- TECHNOLOGY -- 1.0% Analog Devices Inc., Notes: 450,000 BBB 4.750% due 10/1/05........................................ 413,438 300,000 BBB 4.750% due 10/1/05 (c).................................... 275,625 600,000 BB+ Anixter International Inc., zero coupon due 6/28/20......... 171,000 440,000 BBB Arrow Electronics Inc., zero coupon due 2/21/21............. 185,900 100,000 BB+ Commscope Inc., 4.000% due 12/15/06......................... 86,625 2,500,000 A Corning Inc., Bonds, zero coupon due 11/8/15................ 1,409,375 220,000 A- ST Microelectronics NV, Notes, zero coupon due 11/16/10 (c)....................................................... 147,675 700,000 A+ Verizon Global, zero coupon due 5/15/21..................... 383,250 ------------------------------------------------------------------------------------------------------- 3,072,888 ------------------------------------------------------------------------------------------------------- UTILITIES -- 0.1% 1,200,000 BBB El Paso Corp., zero coupon due 2/28/21...................... 499,500 ------------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $11,010,845)..... 10,594,270 ------------------------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.8% 5,000,000 PP&L Transition Bond Co. LLC, 7.050% due 6/25/09............ 5,252,283 632,060 Willmington Trust, 9.250% due 1/2/07........................ 633,040 ------------------------------------------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $5,631,669)............................................... 5,885,323 ------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 18.0% 22,564,920 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29..... 24,165,450 U.S. Treasury Notes: 16,401,000 3.625% due 1/15/08........................................ 16,775,107 6,552,840 3.625% due 4/15/28........................................ 6,710,501 55,200,000 U.S. Treasury Strips, 0.000% due 11/15/27................... 11,582,064 ------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $53,269,907)..... 59,233,122 -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 14 16 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MANAGED ASSETS TRUST
FACE AMOUNT SECURITY VALUE ------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 2.7% Federal Home Loan Mortgage Corp. (FHLMC): $ 478,531 8.000% due 9/1/04.................................................... $ 495,577 5,312 8.500% due 9/1/02.................................................... 5,477 Federal National Mortgage Association (FNMA): 52,146 8.500% due 3/1/05.................................................... 54,038 2,337,950 6.000% due 1/1/13 DWARF.............................................. 2,304,331 771,745 6.500% due 12/1/27................................................... 763,063 907,504 6.000% due 3/1/28.................................................... 872,339 156,368 6.000% due 4/1/28.................................................... 150,309 127,520 5.500% due 5/1/28.................................................... 118,872 465,624 6.000% due 5/1/28.................................................... 447,581 750,889 5.500% due 6/1/28.................................................... 699,964 398,618 6.000% due 6/1/28.................................................... 383,173 392,971 6.000% due 7/1/28.................................................... 377,745 1,001,371 5.500% due 8/1/28.................................................... 933,459 1,108,919 6.000% due 8/1/28.................................................... 1,065,951 Government National Mortgage Association (GNMA): 122,229 7.500% due 5/15/23................................................... 125,514 100,951 9.000% due 11/15/19.................................................. 105,935 55,977 9.500% due 1/15/20................................................... 58,934 28,603 9.500% due 3/15/20................................................... 30,114 ------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $9,119,070).................... 8,992,376 ------------------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $306,169,185)........................... 324,943,750 ------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.2% 3,867,000 Morgan Stanley Dean Witter & Co., 3.900% due 7/2/01; Proceeds at maturity -- $3,868,257; (Fully collateralized by U.S. Treasury Notes, 15.750% due 11/15/01; Market value -- $3,949,082) 3,867,000 (Cost -- $3,867,000)................................................. ------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $310,036,185**)..................... $328,810,750 -------------------------------------------------------------------------------------------------------
(a) Non-income producing security. (b) All ratings are by Standard & Poor's Ratings Service, except those identified by an (*) which are rated by Moody's Investors Service, Inc. (c) Security is exempt from registration under Rule 144 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. Currency abbreviation used in this schedule: ------------------------------------------------------------ EUR - Euro See page 23 for definitions of ratings.
SEE NOTES TO FINANCIAL STATEMENTS. 15 17 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 74.5% -------------------------------------------------------------------------------------------------- AEROSPACE/DEFENSE - EQUIPMENT -- 0.5% $ 200,000 B BE Aerospace Inc., Sr. Sub. Notes, 8.875% due 5/1/11........ $ 199,000 -------------------------------------------------------------------------------------------------- APPLIANCES -- 0.4% 175,000 B Salton Inc., Sr. Sub. Notes, 12.250% due 4/15/08 (b)........ 179,375 -------------------------------------------------------------------------------------------------- APPAREL MANUFACTURERS -- 0.3% 150,000 BBB- Tommy Hilfiger USA Inc., Company Guaranteed, 6.500% due 6/1/03.................................................... 145,500 -------------------------------------------------------------------------------------------------- AUTO/TRUCK PARTS AND EQUIPMENT - ORIGINAL -- 2.5% 375,000 B- Advance Stores Co., Inc., Company Guaranteed, Series B, 10.250% due 4/15/08....................................... 367,500 100,000 B Collins & Aikman Products, Company Guaranteed, 11.500% due 4/15/06................................................... 95,000 175,000 B- Eagle-Picher Industries, Company Guaranteed, 9.3750% due 3/1/08.................................................... 118,563 Hayes Lemmerz International Inc., Company Guaranteed: 225,000 B- 11.875% due 6/15/06....................................... 219,375 325,000 B- 9.125% due 7/15/07........................................ 247,000 35,000 BB+ Navistar Financial Corp., Sr. Sub. Notes, 9.000% due 6/1/02.................................................... 34,956 -------------------------------------------------------------------------------------------------- 1,082,394 -------------------------------------------------------------------------------------------------- BUILDING - RESIDENTIAL/COMMERCIAL -- 1.6% 400,000 BB- KB Home Inc., Sr. Sub. Notes, 9.500% due 2/15/01............ 404,000 300,000 B+ Schuler Homes, Sr. Notes, 9.375% due 7/15/09 (b)............ 301,500 -------------------------------------------------------------------------------------------------- 705,500 -------------------------------------------------------------------------------------------------- CASINO HOTELS -- 9.4% 300,000 B- Alliance Gaming Corp., Company Guaranteed, 10.000% due 8/1/07.................................................... 298,500 200,000 BB Felcon Lodging LP, Notes, 9.500% due 9/15/08................ 202,000 300,000 BB HMH Properties, Company Guaranteed, 7.875% due 8/1/05....... 295,500 400,000 BB+ Harrahs Operating Co. Inc., Company Guaranteed, 7.875% due 12/15/05.................................................. 407,500 250,000 BB Host Marriott LP, Company Guaranteed, Series G, 9.250% due 10/1/07................................................... 252,500 75,000 BBB- ITT Corp., Notes, 6.750% due 11/15/05....................... 72,937 Mandalay Resort Group,: 200,000 BB+ Sr. Notes, 9.500% due 8/1/08.............................. 210,250 100,000 BB- Sr. Sub. Notes, Series B, 6.750% due 7/15/03.............. 97,500 250,000 BB- Sr. Sub. Notes, Series B, 10.250% due 8/1/07.............. 263,125 125,000 BB- Meristar Hospitality Corp., Sr. Notes, 9.000% due 1/15/08... 126,563 400,000 BB+ MGM Mirage Inc., Company Guaranteed, 8.375% due 2/1/11...... 404,500 Park Place Entertainment, Sr. Sub Notes: 425,000 BB+ 7.875% due 12/15/05....................................... 427,125 150,000 BB+ 8.875% due 9/15/08........................................ 154,500 Prime Hospitality Corp.: 50,000 BB First Mortgage, 9.250% due 1/15/06........................ 50,750 425,000 B+ Sr. Sub. Notes, Series B, 9.750% due 4/1/07............... 435,625 Venetian Casino Resort LLC/Las Vegas Sands, Inc., Company Guaranteed: 200,000 B- 12.250% due 11/15/04...................................... 215,000 150,000 CCC+ Step bond to yield 14.250% due 11/15/05................... 159,000 -------------------------------------------------------------------------------------------------- 4,072,875 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 16 18 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- CHEMICALS -- 2.8% Georgia Gulf Corp.: $ 250,000 BB- Company Guaranteed, 10.325% due 11/1/07................... $ 256,250 50,000 BBB- Notes, 7.625% due 11/15/05................................ 50,063 50,000 B Huntsman Chemicals Inc., Company Guaranteed, 10.125% due 7/1/09.................................................... 49,500 125,000 BB- ISP Holdings Inc., Sr. Notes, 9.750% due 2/15/02............ 125,938 Lyondell Chemical Co.: 350,000 BB Secured Notes, Series B, 9.875% due 5/1/07................ 348,250 250,000 B+ Sr. Sub. Notes, 10.875% due 5/1/09........................ 246,250 100,000 BBB- Millennium America Inc., Sr. Notes, 9.250% due 6/15/08...... 100,000 75,000 CCC+ United Industries Corp., Sr. Sub. Notes, 9.875% due 4/1/09.................................................... 61,125 -------------------------------------------------------------------------------------------------- 1,237,376 -------------------------------------------------------------------------------------------------- CONSULTING SERVICES -- 0.3% 175,000 CCC+ Comdisco Inc., Sr. Notes, 9.500% due 8/15/03................ 138,250 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS - MISCELLANEOUS -- 0.2% 100,000 CCC+ Remington Product Co. LLC, Sr. Sub. Notes, Series B, 11.000% due 5/15/06............................................... 97,625 -------------------------------------------------------------------------------------------------- CONTAINERS - PAPER/ PLASTIC -- 1.3% 350,000 B Four M Corp., Sr. Notes, Series B, 12.000% due 6/1/06....... 344,750 Stone Container Corp., Sr. Notes: 150,000 B 9.250% due 2/1/08 (b)..................................... 153,188 75,000 B 9.750% due 2/1/11 (b)..................................... 76,875 -------------------------------------------------------------------------------------------------- 574,813 -------------------------------------------------------------------------------------------------- COSMETICS/TOILETRIES -- 0.2% 100,000 B American Tissue Inc., Company Guaranteed, 12.500% due 7/15/06................................................... 92,500 -------------------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING OPERATIONS -- 0.6% 150,000 B- Blount Inc., Company Guaranteed, 7.000% due 6/15/01......... 112,875 100,000 B- Prestolite Electric Inc., Company Guaranteed, 9.625% due 2/1/08.................................................... 75,500 150,000 B SCG Holding & Semiconductor Co., Company Guaranteed, 12.000% due 8/1/09................................................ 90,750 -------------------------------------------------------------------------------------------------- 279,125 -------------------------------------------------------------------------------------------------- ELECTRONICS -- 0.6% 250,000 BB- Flextronics International Ltd., Sr. Sub. Notes, Series B, 8.750% due 10/15/07....................................... 242,500 -------------------------------------------------------------------------------------------------- ENERGY -- 0.9% 250,000 BBB- Tuscon Electric Power Co., Collateral Trust, Series B, 7.500% due 8/1/08......................................... 244,375 135,000 BBB- PSE&G Energy Holdings, Inc., Sr. Notes, 10.000% due 10/1/09................................................... 145,463 -------------------------------------------------------------------------------------------------- 389,838 -------------------------------------------------------------------------------------------------- FOOD AND DRUG -- 0.5% 350,000 B- Archibald Candy Corp., Company Guaranteed, 10.250% due 7/1/04.................................................... 224,000 -------------------------------------------------------------------------------------------------- FOOD - MEAT PRODUCTS -- 0.5% 200,000 BB Premium Standard Farms Inc., Sr. Notes, 9.250% due 6/15/11 (b)....................................................... 198,500 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 17 19 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- FOOD - WHOLESALE/DISTRIBUTION -- 2.9% $ 350,000 CCC+ Aurora Food Inc., Sr. Notes, 8.750% due 7/1/08.............. $ 299,250 Fleming Cos. Inc.: 150,000 B Company Guaranteed, 10.500% due 12/1/04................... 153,750 375,000 B+ Sr. Notes, 10.125% due 4/1/08 (b)......................... 386,250 125,000 CCC+ New World Pasta Co., Company Guaranteed, 9.250% due 2/15/09................................................... 79,375 325,000 B Pantry Inc., Company Guaranteed, 10.250% due 10/15/07....... 316,875 -------------------------------------------------------------------------------------------------- 1,235,500 -------------------------------------------------------------------------------------------------- FORESTRY -- 1.0% 225,000 B+ Millar Western Forest Products, Sr. Notes, 9.875% due 5/15/08................................................... 211,500 150,000 BB+ Tembec Industries Inc., Company Guaranteed, 8.500% due 2/1/11.................................................... 153,750 -------------------------------------------------------------------------------------------------- 365,250 -------------------------------------------------------------------------------------------------- GAMING/LEISURE -- 1.6% 525,000 B Isle of Capri Casinos, Inc., Company Guaranteed, 8.750% due 4/15/09................................................... 482,344 200,000 BB- Station Casinos, Inc., Sr. Notes, 8.375% due 2/15/08 (b).... 201,750 -------------------------------------------------------------------------------------------------- 684,094 -------------------------------------------------------------------------------------------------- HEALTHCARE -- 3.3% HCA Inc., Notes: 350,000 BB+ 7.000% due 7/1/07......................................... 340,375 200,000 BB+ 8.750% due 9/1/10......................................... 212,500 325,000 BB+ HEALTHSOUTH Corp., Sr. Sub. Notes, 10.750% due 10/1/08...... 351,406 Magellan Health Services: 75,000 B+ Sr. Notes, 9.375% due 2/15/08 (b)......................... 76,594 250,000 B- Sr. Sub. Notes, 9.000% due 2/15/08........................ 236,875 225,000 BB+ Tenet Healthcare Corp., Sr. Notes, 8.625% due 12/1/03....... 232,031 -------------------------------------------------------------------------------------------------- 1,449,781 -------------------------------------------------------------------------------------------------- HOUSING -- 1.0% 250,000 B- Atrium Cos., Inc., Company Guaranteed, Series B, 10.500% due 5/1/09.................................................... 226,250 225,000 BB- Beazer Homes USA, Inc., Company Guaranteed, 8.875% due 4/1/08.................................................... 226,688 -------------------------------------------------------------------------------------------------- 452,938 -------------------------------------------------------------------------------------------------- INFORMATION/TECHNOLOGY -- 0.4% Viasystems Group, Inc., Sr. Sub. Notes: 300,000 B- 9.750% due 6/1/07......................................... 148,500 50,000 B- Series B, 9.750% due 6/1/07............................... 24,750 -------------------------------------------------------------------------------------------------- 173,250 -------------------------------------------------------------------------------------------------- MACHINERY -- 0.8% 350,000 BB AGCO Corp., Sr. Sub. Notes, 9.500% due 5/1/08 (b)........... 339,500 -------------------------------------------------------------------------------------------------- MANUFACTURING -- 2.4% 150,000 B+ American Axle & Manufacturing Holdings, Inc., Company Guaranteed, 9.750% due 3/1/09............................. 151,500 475,000 B BGF Industries, Inc., Sr. Sub. Notes, Series B, 10.250% due 1/15/09................................................... 425,000 114,000 B- Cherokee International LLC, Sr. Sub. Notes, Series B, 10.500% due 5/1/09........................................ 86,640
SEE NOTES TO FINANCIAL STATEMENTS. 18 20 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- MANUFACTURING -- 2.4% (CONTINUED) $ 150,000 CCC+ Foamex LP, Company Guaranteed, 13.500% due 8/15/05.......... $ 119,250 275,000 B- Transdigm Inc., Company Guaranteed, 10.375% due 12/1/08..... 270,875 -------------------------------------------------------------------------------------------------- 1,053,265 -------------------------------------------------------------------------------------------------- MEDIA/ENTERTAINMENT -- 7.5% Adelphia Communications Corp., Sr. Notes, Series B: 100,000 B2* 8.125% due 7/15/03........................................ 99,000 550,000 B+ 8.375% due 2/1/08......................................... 506,000 350,000 CCC- AMC Entertainment Inc., Sr. Sub. Notes, 9.500% due 2/1/11... 316,750 50,900 NR AMFM Inc., Debentures, 12.625% due 10/31/06................. 56,117 250,000 BBB- Chancellor Media Corp., Company Guaranteed, 8.000% due 11/1/08................................................... 260,000 525,000 B+ Echostar DBS Corp., Sr. Notes, 9.375% due 2/1/09............ 517,125 375,000 B3* Paxson Communication Corp., Sr. Sub. Notes, 11.625% due 10/1/02................................................... 380,625 500,000 CCC+ Pegasus Media & Communications Corp., Sr. Sub. Notes, Series B, 12.500% due 7/1/05..................................... 500,000 300,000 B Telewest Communications PLC, Debentures, step bond to yield 11.000% due 10/1/07....................................... 254,250 350,000 B- T/SF Communications Corp., Company Guaranteed, Series B, 10.375% due 11/1/07....................................... 338,625 -------------------------------------------------------------------------------------------------- 3,228,492 -------------------------------------------------------------------------------------------------- MISCELLANEOUS MANUFACTURER -- 0.7% 375,000 CCC+ Samsonite Corp., Sr. Sub. Notes, 10.750% due 6/15/08........ 315,000 -------------------------------------------------------------------------------------------------- NON-HAZARDOUS WASTE DISPOSAL -- 1.2% Allied Waste North American Co., Company Guaranteed, Series B: 400,000 BB- 8.875% due 4/1/08......................................... 412,500 100,000 B+ 10.000% due 8/1/09........................................ 103,250 -------------------------------------------------------------------------------------------------- 515,750 -------------------------------------------------------------------------------------------------- OIL AND GAS DRILLING -- 4.3% 225,000 CCC- Belden & Blake Corp., Company Guaranteed, Series B, 9.875% due 6/15/07............................................... 184,500 Cross Timbers Oil Co., Sr. Sub. Notes, Series B: 50,000 B+ 9.250% due 4/1/07......................................... 52,000 275,000 B+ 8.750% due 11/1/09........................................ 282,563 325,000 BB- Key Energy Services Inc., Sr. Notes, Series B, 8.325% due 3/1/08.................................................... 329,875 300,000 BB Pride International Inc., Sr. Notes, 10.000% due 6/1/09..... 331,500 200,000 B- Range Resourses Corp., Company Guaranteed, 8.750% due 1/15/07................................................... 194,000 250,000 BB- Triton Energy Ltd., Sr. Notes, 8.875% due 10/1/07........... 257,500 250,000 BB- Vintage Petroleum, Inc., Sr. Sub. Notes, 7.875% due 5/15/11 (b)....................................................... 243,750 -------------------------------------------------------------------------------------------------- 1,875,688 -------------------------------------------------------------------------------------------------- PRINTING - COMMERCIAL -- 0.8% 200,000 B Cadmus Comm Corp., Company Guaranteed, 9.750% due 6/1/09.... 188,000 200,000 B- Phoenix Color Corp., Company Guaranteed, 10.375% due 2/1/09.................................................... 163,000 -------------------------------------------------------------------------------------------------- 351,000 -------------------------------------------------------------------------------------------------- PAPER AND RELATED PRODUCTS -- 0.1% 100,000 B Doman Industries Ltd., Sr. Notes, 8.750% due 3/15/04........ 62,000 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 19 21 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- PUBLISHING - PERIODICALS -- 0.7% $ 300,000 BB- Primedia Inc., Sr. Notes, 8.875% due 5/15/11 (b)............ $ 279,000 -------------------------------------------------------------------------------------------------- RADIO -- 1.2% 175,000 CCC+ Cumulus Media Inc., Company Guaranteed, 10.375% due 7/1/08.................................................... 175,000 200,000 B- Radio One Inc., Sr. Sub. Notes, 8.875% due 7/1/11 (b)....... 201,000 175,000 B- Spanish Broadcasting Systems, Company Guaranteed, 9.625% due 11/1/09................................................... 163,625 -------------------------------------------------------------------------------------------------- 539,625 -------------------------------------------------------------------------------------------------- RETAIL -- 3.8% 525,000 B Advance Glassfiber Yarn Inc., Sr. Sub. Notes, 9.875% due 1/15/09................................................... 448,875 325,000 CCC+ J. Crew Operating Corp., Sr. Sub. Notes, 10.375% due 10/15/07.................................................. 277,875 JC Penny Co. Inc.: 200,000 BBB- Debentures, 6.900% due 8/15/26............................ 192,750 100,000 BBB- Debentures, 7.400% due 4/1/37............................. 91,875 150,000 BBB- Notes, 7.250% due 4/1/02.................................. 150,000 100,000 BBB- Notes, 7.600% due 4/1/07.................................. 93,625 100,000 BBB- Notes, Series MTNA, 6.500% due 6/15/02.................... 99,375 200,000 BB- Levi Strauss & Co., Notes, 6.800% due 11/1/03............... 179,000 150,000 BB+ Saks Inc., Company Guaranteed, 8.250% due 11/15/08.......... 137,250 -------------------------------------------------------------------------------------------------- 1,670,625 -------------------------------------------------------------------------------------------------- RETAIL - DRUG STORE -- 0.7% 375,000 B- Rite Aid Corp., Notes, 7.125% due 1/15/07................... 315,000 -------------------------------------------------------------------------------------------------- RETAIL - RESTAURANTS -- 0.7% 300,000 BB Tricon Global Restaurants, Sr. Notes, 8.875% due 4/15/11.... 309,000 -------------------------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT -- 0.8% 350,000 BB- Amkor Technology, Inc., Sr. Notes, 9.250% due 2/15/08....... 330,750 -------------------------------------------------------------------------------------------------- SERVICES -- 2.5% 325,000 B- Advance Holding Corp., Debentures, Series B, step bond to yield 12.875% due 4/15/09................................. 232,375 450,000 B+ AFC Enterprises, Sr. Sub. Notes, 10.250% due 5/15/07........ 470,250 424,896 Caa3* FRD Acquisition Co., Sr. Notes, Series B, 12.500% due 7/15/04................................................... 53,112 125,000 BB+ Tembec Finance Corp., Sr. Notes, 9.875% due 9/30/05......... 129,688 225,000 B- Williams Scotsman, Inc., Company Guaranteed, 9.875% due 6/1/07.................................................... 214,875 -------------------------------------------------------------------------------------------------- 1,100,300 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 8.8% 325,000 B American Cellular Corp., Sr. Sub. Notes, 9.500% due 10/15/09.................................................. 307,125 199,000 B- Centennial Communications Corp., Sr. Sub. Notes, 10.750% due 12/15/08.................................................. 185,070 950,000 B+ Charter Communications Holdings LLC, Sr. Discount Notes, step bond to yield 9.920% due 4/1/11...................... 627,500 Classic Cable Inc., Company Guaranteed: 125,000 CC 10.500% due 3/1/10........................................ 36,875 275,000 CC Series B, 9.375% due 8/1/09............................... 81,125 425,000 B Dobson Communications Corp., Sr. Notes, 10.875% due 7/1/10.................................................... 427,125 200,000 BB Global Grossing Holdings Ltd., Company Guaranteed, 9.500% due 11/15/09.............................................. 157,500 275,000 CCC Horizon PCS Inc., Units, step bond to yield 14.000% due 10/1/10................................................... 108,625 100,000 CCC+ Level 3 Communications, Inc., Sr. Notes, 9.125% due 5/1/08.................................................... 42,000
SEE NOTES TO FINANCIAL STATEMENTS. 20 22 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 8.8% (CONTINUED) $ 100,000 BB+ Lucent Technologies, Inc., Notes, 7.250% due 7/15/06........ $ 75,000 McLeodUSA Inc., Sr. Notes: 175,000 B+ 11.375% due 1/1/09........................................ 111,125 200,000 B+ 11.500% due 5/1/09........................................ 123,000 475,000 B+ Mediacom LLC, Sr. Notes, 9.500% due 1/15/13................. 458,375 925,000 B Nextel Communications, Inc., Sr. Notes, 9.375% due 11/15/09.................................................. 735,375 375,000 B3* Tritel PCS Inc., Company Guaranteed, 10.375% due 1/15/11.... 345,000 -------------------------------------------------------------------------------------------------- 3,820,820 -------------------------------------------------------------------------------------------------- TELEVISION -- 0.9% 100,000 B+ Frontiervision Holdings LP, Sr. Discount Notes, step bond to yield 11.875% due 9/15/07................................. 103,000 Lin Television Corp.: 200,000 B- Company Guaranteed, 8.375% due 3/1/08..................... 189,000 150,000 B- Sr. Discount Notes, step bond to yield 10.000% due 3/1/08 (b).................................................... 108,750 -------------------------------------------------------------------------------------------------- 400,750 -------------------------------------------------------------------------------------------------- TEXTILES -- 2.2% 325,000 B+ Avondale Mills, Inc., Company Guaranteed, 10.250% due 5/1/06.................................................... 308,750 225,000 B- Supreme International Corp., Company Guaranteed, Series B, 12.250% due 4/1/06........................................ 214,875 450,000 B- Tropical Sportswear International Corp., Company Guaranteed, Series A, 11.000% due 6/15/08............................. 416,250 -------------------------------------------------------------------------------------------------- 939,875 -------------------------------------------------------------------------------------------------- TRANSPORTATION -- 1.6% 575,000 B Atlas Air Inc., Sr. Notes, 10.750% due 8/1/05............... 451,375 250,000 B- Pacer International, Inc., Company Guaranteed, 11.750% due 6/1/07.................................................... 242,619 -------------------------------------------------------------------------------------------------- 693,994 -------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (Cost -- $32,983,395)....... 32,360,418 -------------------------------------------------------------------------------------------------- CONVERTIBLE CORPORATE BONDS -- 0.4% DIVERSIFIED MANUFACTURING OPERATIONS -- 0.4% 225,000 B MascoTech, Inc., 4.500% due 12/15/03 (Cost -- $177,158)..... 183,375 -------------------------------------------------------------------------------------------------- SHARES SECURITY VALUE -------------------------------------------------------------------------------------------------- PREFERRED STOCK -- 1.2% -------------------------------------------------------------------------------------------------- TECHNOLOGY -- 0.2% 9,494 Viasystems Group, Inc., Series B, 8.000% (c)................ 71,210 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 1.0% 275 Broadwing Communications, Corp., 12.500%.................... 272,938 3,000 Global Crossing Holding Ltd., 10.500%....................... 173,250 -------------------------------------------------------------------------------------------------- 446,188 -------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost -- $716,075).................... 517,398 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 21 23 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 HIGH YIELD BOND TRUST
WARRANTS SECURITY VALUE -------------------------------------------------------------------------------------------------- WARRANTS -- 0.0% 275 Horizon PCS Inc., Expires 10/1/10 (b) (c)................... $ 5,466 125 Jostens Inc., Expires 5/1/10 (c)............................ 1,891 -------------------------------------------------------------------------------------------------- TOTAL WARRANTS (Cost -- $7,559)............................. 7,357 -------------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $33,884,187)................. 33,068,548 -------------------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 23.9% $10,350,000 CS First Boston Corp., 3.960% due 7/2/01; Proceeds at maturity -- $10,353,416; (Fully collateralized by U.S. Treasury Notes, 6.500% due 8/31/01; Market value -- $10,557,526) (Cost -- $10,350,000)............... 10,350,000 -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $44,234,187**)........... $43,418,548 --------------------------------------------------------------------------------------------------
(a) All ratings are by Standard & Poor's Ratings Service, except those identified by an astrerisk (*), which are rated by Moody's Investors Service, Inc. (b) Security is exempt from registration under 144A of the Securities Act of 1933. This security may be sold in transactions that are exempt from registration, normally to qualified institutional buyers. (c) Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. SUMMARY OF BONDS BY COMBINED RATINGS
STANDARD & % OF TOTAL CORPORATE POOR'S AND/OR MOODY'S BONDS & NOTES ------------------------------------------------- BBB Baa 5.1% BB Ba 29.9 B B 55.4 CCC Caa 9.0 CC Ca 0.4 NR NR 0.2 ------------------------------------------------- 100.0% -------------------------------------------------
See page 23 for definition of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 22 24 -------------------------------------------------------------------------------- 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", "B", "CCC" and "CC" are regarded, on CCC and balance, as predominantly speculative with respect to CC capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents the lowest degree of speculation and "CC" 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.
23 25 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------- COMMON STOCK -- 72.5% ------------------------------------------------------------------------------------------- APPLICATIONS SOFTWARE -- 3.2% 660,740 Microsoft Corp. (a)......................................... $ 47,969,724 ------------------------------------------------------------------------------------------- BEVERAGE -- 2.7% 920,370 Coca-Cola Co. .............................................. 41,416,650 ------------------------------------------------------------------------------------------- COMPUTERS -- 8.6% 506,125 Sun Microsystems, Inc. ..................................... 7,956,285 1,083,510 EMC Corp. .................................................. 31,475,966 1,367,945 VERITAS Software Corp. (a).................................. 91,009,381 ------------------------------------------------------------------------------------------- 130,441,632 ------------------------------------------------------------------------------------------- CELLULAR TELECOMMUNICATIONS -- 0.4% 292,205 America Movil S.A. de C.V. ................................. 6,095,396 ------------------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS -- 5.6% 1,754,487 General Electric Co. ....................................... 85,531,241 ------------------------------------------------------------------------------------------- ELECTRIC -- 0.8% 309,700 Calpine Corp. (a) .......................................... 11,706,660 ------------------------------------------------------------------------------------------- ELECTRONICS -- 3.6% 1,404,745 Flextronics International Ltd. (a) ......................... 36,677,892 800,000 Sanmina Corp. (a) .......................................... 18,728,000 ------------------------------------------------------------------------------------------- 55,405,892 ------------------------------------------------------------------------------------------- ENTERTAINMENT -- 0.0% 84 Acclaim Entertainment, Inc. (a)............................. 67 ------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 7.0% 2,171,760 Charles Schwab Corp. ....................................... 33,227,928 435,910 Goldman Sachs Group, Inc. .................................. 37,401,078 606,255 Merrill Lynch & Co., Inc. .................................. 35,920,609 ------------------------------------------------------------------------------------------- 106,549,615 ------------------------------------------------------------------------------------------- INSURANCE -- 3.0% 532,786 American International Group, Inc. ......................... 45,819,628 ------------------------------------------------------------------------------------------- MEDIA -- 18.0% 4,207,102 AOL Time Warner Inc. (a).................................... 222,976,406 970,380 Viacom Inc., Class B Shares................................. 50,217,165 ------------------------------------------------------------------------------------------- 273,193,571 ------------------------------------------------------------------------------------------- OIL AND GAS -- 5.7% 71,420 Anadarko Petroleum Corp. ................................... 3,858,823 268,640 BP PLC, Sponsored ADR....................................... 13,391,704 385,175 Royal Dutch Petroleum Co. .................................. 22,444,147 541,395 Exxon Mobil Corp. .......................................... 47,290,853 ------------------------------------------------------------------------------------------- 86,985,527 -------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 24 26 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE ------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 3.2% 789,615 Pfizer, Inc. ............................................... $ 31,624,081 250,000 Cardinal Health, Inc. ...................................... 17,250,000 ------------------------------------------------------------------------------------------- 48,874,081 ------------------------------------------------------------------------------------------- PIPELINES -- 2.9% 907,950 Enron Corp. ................................................ 44,489,550 ------------------------------------------------------------------------------------------- RETAIL -- 1.9% 630,097 The Home Depot, Inc. ....................................... 29,331,039 ------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 5.9% 74,475 CIENA Corp. (a)............................................. 2,830,050 2,956,160 Nokia Oyj, Sponsored ADR.................................... 65,153,766 680,200 Qwest Communications International Inc. .................... 21,677,974 ------------------------------------------------------------------------------------------- 89,661,790 ------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $914,444,052)................... 1,103,472,063 ------------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE ------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 13.1% $200,000,000 Federal Home Loan Mortgage Corp. (FHLMC), Discount Note, 3.940% due 7/2/01 (Cost -- $199,951,532).................. 199,951,532 ------------------------------------------------------------------------------------------- SUB-TOTAL INVESTMENTS (Cost -- $1,114,395,584).............. 1,303,423,595 ------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- 14.4% $ 58,376,000 J.P. Morgan Chase & Co., 3.600% due 7/2/01; Proceeds at maturity -- $58,393,513; (Fully collateralized by US. Treasury Notes, 10.750% due 8/15/05; Market value -- $59,546,856).............................................. 58,376,000 160,000,000 Morgan Stanley Dean Witter & Co., 3.900% due 7/2/01; Proceeds at maturity -- $160,052,000; (Fully collateralized by US. Treasury Notes, 8.750% due 5/15/20; Market value -- $163,205,618)............................. 160,000,000 ------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS (Cost -- $218,376,000).......... 218,376,000 ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $1,332,771,584**)........ $1,521,799,595 -------------------------------------------------------------------------------------------
(a) Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 25 27 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 MONEY MARKET PORTFOLIO
FACE ANNUALIZED AMOUNT SECURITY YIELD VALUE ------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER -- 100.0% $ 820,000 Abbey National N.A. matures 9/17/01......................... 3.59% $ 8,137,035 4,000,000 Air Liquide US LLC matures 7/10/01.......................... 3.96 3,996,480 9,000,000 American Express Credit Corp. matures 7/5/01................ 3.97 8,997,030 9,000,000 Asset Securitization matures 7/6/01......................... 3.98 8,996,020 4,500,000 Bleuridfe Asset Funding Corp. matures 7/5/01................ 4.70 4,498,238 7,500,000 Boeing Capital Corp. matures 7/13/01........................ 3.87 7,491,132 8,000,000 CitiGroup Holdings Inc. matures 8/3/01...................... 3.85 7,972,623 9,000,000 Coca-Cola Corp. matures 7/30/01............................. 3.67 8,974,310 9,000,000 DE FDG Corp. matures 7/25/01................................ 3.71 8,978,668 10,000,000 Emerald CTF Program mature 7/16/01 to 8/2/01................ 3.94 to 3.88 9,975,632 9,000,000 Emerson Electronic Co. matures 7/12/01...................... 3.97 8,990,075 9,000,000 Ford Motor Credit Corp. matures 8/10/01..................... 3.62 8,964,706 10,000,000 General Electric Capital Corp. matures 7/31/01.............. 3.74 9,969,873 5,000,000 General Motos Accept. Corp. matures 12/17/01................ 4.08 5,004,439 8,000,000 Goldman Sachs matures 7/18/01............................... 4.17 7,985,174 10,000,000 Halliburton Co. matures 8/20/01............................. 3.89 9,947,052 7,000,000 Lehman Brothers Holdings Inc. matures 7/19/01............... 4.65 6,984,629 9,000,000 Marsh & McLennan Co. Inc. mature 8/8/01 to 12/3/01.......... 3.72 to 3.79 8,904,851 5,000,000 McDonald's Corp. matures 3/7/02............................. 4.81 5,000,000 5,000,000 Merck & Co. Inc. matures 2/22/02............................ 5.10 5,000,000 5,000,000 Merrill Lynch & Co. matures 9/13/01......................... 4.13 5,000,244 7,000,000 National Rural Utilities Coop Corp. matures 7/10/01......... 4.00 6,993,777 9,000,000 New Castle Corp. matures 7/23/01............................ 3.85 8,979,787 9,000,000 Preferred Receivable Funding matures 7/19/01................ 3.89 8,983,552 9,000,000 Sheffield Receivable matures 7/27/01........................ 3.78 8,976,376 9,000,000 Texaco Inc. matures 8/15/01................................. 3.67 8,959,630 9,000,000 Toyota Motor Credit Corp. matures 7/27/01................... 3.67 8,977,063 12,000,000 Verizon Global Funding mature 7/2/01 to 8/7/01.............. 3.65 to 3.85 11,967,150 10,000,000 Windmill Funding Corp. matures 7/2/01....................... 4.00 10,000,000 ------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100% (Cost -- $233,605,546**).......... $233,605,546 ------------------------------------------------------------------------------------------------------
** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 26 28 -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2001
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost........................... $306,169,185 $33,884,187 $1,114,395,584 $233,605,546 Repurchase agreements, at cost................. 3,867,000 10,350,000 218,376,000 -- ------------------------------------------------------------------------------------------------------------- Investments, at value.......................... $324,943,750 $33,068,548 $1,303,423,595 $233,605,546 Repurchase agreements, at value................ 3,867,000 10,350,000 218,376,000 -- Cash........................................... 272,189 21,530 65,678 61,218 Dividends and interest receivable.............. 1,175,977 877,491 255,877 209,400 Receivable for securities sold................. -- 411,639 1,961,797 -- ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS................................... 330,258,916 44,729,208 1,524,082,947 233,876,164 ------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased............... 498,000 520,533 -- -- Investment advisory fees payable............... 132,337 17,350 922,747 61,128 Administration fees payable.................... 15,880 2,161 73,343 12,021 Dividends payable.............................. -- -- -- 234,637 Accrued expenses............................... 66,631 35,453 186,419 25,652 ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.............................. 712,848 575,497 1,182,509 333,438 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $329,546,068 $44,153,711 $1,522,900,438 $233,542,726 ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital................................ $278,231,812 $43,624,479 $1,417,145,750 $233,542,726 Undistributed net investment income............ 13,006,834 4,661,284 16,884,516 -- Accumulated net realized gain (loss) from security transactions, futures contracts and foreign currencies.......................... 19,533,856 (3,316,413) (100,160,459) -- Net unrealized appreciation (depreciation) of investments and foreign currencies.......... 18,773,566 (815,639) 189,030,631 -- ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $329,546,068 $44,153,711 $1,522,900,438 $233,542,726 ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING............................... 18,835,859 4,711,034 21,996,932 233,542,726 ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE....................... $17.50 $9.37 $69.23 $1.00 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 27 29 -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest.......................................... $ 4,318,080 $ 1,958,884 $ 14,029,682 $5,271,368 Dividends......................................... 1,156,158 32,938 2,951,729 -- Less: Foreign withholding tax..................... (5,043) -- (168,289) -- ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME........................... 5,469,195 1,991,822 16,813,122 5,271,368 ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee (Note 3).................. 835,143 99,976 6,079,574 334,270 Administration fee (Note 3)....................... 100,217 11,997 486,366 62,036 Audit and legal................................... 14,204 10,431 27,955 9,067 Custody........................................... 11,985 5,010 43,223 7,759 Shareholder communications........................ 10,228 1,600 77,712 8,146 Shareholder and system servicing fees............. 7,358 7,966 7,792 8,428 Pricing service fees.............................. 2,959 4,685 -- -- Trustees' fees.................................... 1,973 2,004 1,973 2,546 Registration fees................................. -- -- 28,246 140 Other............................................. 972 630 6,858 2,001 ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES.................................... 985,039 144,299 6,759,699 434,393 Less: Expense reimbursement....................... -- -- -- (21,796) ------------------------------------------------------------------------------------------------------------- NET EXPENSES...................................... 985,039 144,299 6,759,699 412,597 ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME............................... 4,484,156 1,847,523 10,053,423 4,858,771 ------------------------------------------------------------------------------------------------------------- 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*)................................. 1,480,010 (1,053,361) (58,545,086) 2,787 Futures contracts.............................. (805,783) -- -- -- Foreign currency transactions.................. 27,943 (9,315) -- -- ------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS).......................... 702,170 (1,062,676) (58,545,086) 2,787 ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) From: Security transactions.......................... (13,750,591) 1,611,274 (234,078,010) -- Foreign currency transactions.................. (999) 21,891 (2,965) -- ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION).................................... (13,751,590) 1,633,165 (234,080,975) -- ------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES............................ (13,049,420) 570,489 (292,626,061) 2,787 ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... $ (8,565,264) $ 2,418,012 $(282,572,638) $4,861,558 -------------------------------------------------------------------------------------------------------------
* Except for Money Market Portfolio where the net realized losses are only from the sale of short-term securities. SEE NOTES TO FINANCIAL STATEMENTS. 28 30 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income......................... $ 4,484,156 $ 1,847,523 $ 10,053,423 $ 4,858,771 Net realized gain (loss)...................... 702,170 (1,062,676) (58,545,086) 2,787 Change in net unrealized appreciation (depreciation)............................. (13,751,590) 1,633,165 (234,080,975) -- ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................. (8,565,264) 2,418,012 (282,572,638) 4,861,558 ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income......................... -- -- -- (4,861,558) ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................... -- -- -- (4,861,558) ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares.............. 7,175,257 11,021,487 86,848,187 683,323,335 Net asset value of shares issued for reinvestment of dividends.................. -- -- -- 4,872,301 Cost of shares reacquired..................... (11,897,851) (3,963,538) (78,817,509) (601,769,985) ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... (4,722,594) 7,057,949 8,030,678 86,425,651 ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS............... (13,287,858) 9,475,961 (274,541,960) 86,425,651 NET ASSETS: Beginning of period........................... 342,833,926 34,677,750 1,797,442,398 147,117,075 ------------------------------------------------------------------------------------------------------------- END OF PERIOD*................................ $329,546,068 $44,153,711 $1,522,900,438 $ 233,542,726 ------------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $13,006,834 $4,661,284 $16,884,516 -- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 29 31 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2000
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income......................... $ 8,531,653 $ 2,784,811 $ 6,428,956 $ 7,250,728 Net realized gain (loss)...................... 18,611,361 (920,676) (31,138,192) (1,418) Change in net unrealized appreciation (depreciation)............................. (33,025,421) (1,612,588) (482,637,257) -- ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................. (5,882,407) 251,547 (507,346,493) 7,249,310 ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income......................... (6,657,915) (2,577,225) (753,754) (7,249,310) Net realized gains............................ (40,976,346) -- (76,132,705) -- ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................... (47,634,261) (2,577,225) (76,886,459) (7,249,310) ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 12): Net proceeds from sale of shares.............. 28,254,932 9,771,762 460,465,288 936,232,989 Net asset value of shares issued for reinvestment of dividends.................. 47,634,261 2,577,225 76,886,459 7,258,897 Cost of shares reacquired..................... (18,976,553) (5,662,151) (70,837,568) (916,344,695) ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS............................... 56,912,640 6,686,836 466,514,179 27,147,191 ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS............... 3,395,972 4,361,158 (117,718,773) 27,147,191 NET ASSETS: Beginning of year............................. 339,437,954 30,316,592 1,915,161,171 119,969,884 ------------------------------------------------------------------------------------------------------------- END OF YEAR*.................................. $342,833,926 $34,677,750 $1,797,442,398 $ 147,117,075 ------------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $8,531,235 $2,823,838 $6,831,093 -- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 30 32 -------------------------------------------------------------------------------- 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 accounting principles generally accepted in the United States of America. At December 31, 2000, reclassifications were made to the capital accounts of the Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio 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 $47,677 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. In addition, High Yield Bond Trust may enter into forward exchange contracts in order to hedge against foreign currency risk. These contracts are marked to market daily, by recognizing the difference between the contract exchange rate and the current forward rate as an unrealized gain or loss. Realized gains or losses are recognized when the contracts are settled. 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 adviser to 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- 31 33 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) day portfolio operations and investment decisions for MAT. As a result, TAMIC pays TIMCO, as sub-adviser, 0.25% of the average daily net assets of MAT. 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-adviser, 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 the average daily net assets. Travelers Insurance has entered into a sub-administrative services agreement with Smith Barney Fund Management LLC ("SBFM"), formerly known as SSB Citi Fund Management LLC, a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"). Travelers Insurance pays SBFM, 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"), 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. For the six months ended June 30, 2001, each Portfolio paid transfer agent fees of $2,500 to CFTC. For the six months ended June 30, 2001, Travelers Insurance reimbursed expenses of $21,796 for MMP. For the six months ended June 30, 2001, Salomon Smith Barney Inc. and its affiliates received no brokerage commissions. One Trustee and all officers of the Funds are employees of Citigroup or its affiliates. 4. INVESTMENTS During the six months ended June 30, 2001, 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................................................... $82,245,813 $26,280,718 $563,435,829 ------------------------------------------------------------------------------------------------------ Sales....................................................... 78,827,062 23,251,448 309,458,113 ------------------------------------------------------------------------------------------------------
At June 30, 2001, 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............................... $ 39,509,662 $ 777,712 $ 296,898,128 Gross unrealized depreciation............................... (20,735,097) (1,593,351) (107,870,117) -------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $ 18,774,565 (815,639) 189,028,011 --------------------------------------------------------------------------------------------------------
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 (plus accrued interest) of the collateral in amounts at least equal to the repurchase price. 32 34 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 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. 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, 2001, the Funds did not hold any futures contracts. 7. OPTION 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, 2001, the Funds did not hold any 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, 2001, the Funds did not hold any TBA securities. 9. CAPITAL LOSS CARRYFORWARD At December 31, 2000, HYBT, CAF and MMP had, for Federal income tax purposes, approximately $1,854,000, $41,615,000 and $1,358, respectively, of 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, 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:
FUND 2001 2002 2004 2005 2006 2007 2008 -------------------------------------------------------------------------------------------------------------- High Yield Bond Trust................... $134,500 $37,500 $343,000 -- -- $142,000 $ 1,197,000 Capital Appreciation Fund............... -- -- -- -- -- -- 41,615,000 Money Market Portfolio.................. -- -- -- $72 $215 256 815 --------------------------------------------------------------------------------------------------------------
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. 33 35 -------------------------------------------------------------------------------- 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, 2001 DECEMBER 31, 2000 -------------------------------------------------------------------------------------------------- MANAGED ASSETS TRUST Shares sold................................................. 404,030 1,445,154 Shares issued on reinvestment............................... -- 2,556,858 Shares reacquired........................................... (679,053) (964,060) -------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (275,023) 3,037,952 -------------------------------------------------------------------------------------------------- HIGH YIELD BOND TRUST Shares sold................................................. 1,181,185 1,076,429 Shares issued on reinvestment............................... -- 292,866 Shares reacquired........................................... (423,924) (616,716) -------------------------------------------------------------------------------------------------- Net Increase................................................ 757,261 752,579 -------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND Shares sold................................................. 1,165,394 4,294,198 Shares issued on reinvestment............................... -- 739,364 Shares reacquired........................................... (1,086,383) (718,555) -------------------------------------------------------------------------------------------------- Net Increase................................................ 79,011 4,315,007 -------------------------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO Shares sold................................................. 683,323,335 936,232,989 Shares issued on reinvestment............................... 4,872,301 7,258,897 Shares reacquired........................................... (601,769,985) (916,344,695) -------------------------------------------------------------------------------------------------- Net Increase................................................ 86,425,651 27,147,191 --------------------------------------------------------------------------------------------------
34 36 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
MANAGED ASSETS TRUST 2001(1) 2000(2) 1999 1998 1997 1996 -------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.............................. $17.94 $21.12 $19.99 $17.65 $14.98 $15.50 -------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............... 0.24 0.48 0.39 0.41 0.48 0.46 Net realized and unrealized gain (loss)........................... (0.68) (0.71) 2.30 3.27 2.70 1.50 -------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations... (0.44) (0.23) 2.69 3.68 3.18 1.96 -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income............... -- (0.41) (0.39) (0.47) (0.12) (0.89) Net realized gains.................. -- (2.54) (1.17) (0.87) (0.39) (1.59) -------------------------------------------------------------------------------------------------------- Total Distributions................... -- (2.95) (1.56) (1.34) (0.51) (2.48) -------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........ $17.50 $17.94 $21.12 $19.99 $17.65 $14.98 -------------------------------------------------------------------------------------------------------- TOTAL RETURN.......................... (2.45)%++ (1.62)% 14.22% 21.44% 21.31% 13.78% -------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)..... $329,546 $342,834 $339,438 $276,182 $223,870 $188,610 -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)......................... 0.60%+ 0.59% 0.60% 0.60% 0.63% 0.58% Net investment income............... 2.72+ 2.47 2.17 2.30 2.91 3.51 -------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............... 24% 56% 51% 74% 90% 108% --------------------------------------------------------------------------------------------------------
HIGH YIELD BOND TRUST 2001(1)(2) 2000(2) 1999 1998 1997 1996 ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.............................. $8.77 $9.47 $9.85 $9.89 $8.49 $9.00 ---------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............... 0.43 0.79 0.81 0.77 0.76 0.91 Net realized and unrealized gain (loss)........................... 0.17 (0.70) (0.38) (0.13) 0.65 0.41 ---------------------------------------------------------------------------------------------------------- Total Income From Operations.......... 0.60 0.09 0.43 0.64 1.41 1.32 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income............... -- (0.79) (0.81) (0.68) (0.01) (1.83) ---------------------------------------------------------------------------------------------------------- Total Distributions................... -- (0.79) (0.81) (0.68) (0.01) (1.83) ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........ $9.37 $8.77 $9.47 $9.85 $9.89 $8.49 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN.......................... 6.84%++ 0.97% 4.42% 6.56% 16.56% 16.05% ---------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)..... $44,154 $34,678 $30,317 $28,088 $25,272 $17,291 ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)......................... 0.73%+ 0.83% 0.81% 0.82% 0.84% 0.97% Net investment income............... 9.31+ 8.74 8.85 8.42 9.04 11.01 ---------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............... 68% 80% 112% 147% 137% 84% ----------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2001 (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. (4) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 35 37 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
CAPITAL APPRECIATION FUND 2001(1) 2000 1999 1998 1997 1996 --------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD......................... $82.01 $108.80 $72.74 $46.32 $36.72 $33.18 --------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income.......... 0.46 0.29 0.04 0.06 0.19 0.23 Net realized and unrealized gain (loss)................. (13.24) (23.29) 38.08 28.07 9.41 8.49 --------------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations..................... (12.78) (23.00) 38.12 28.13 9.60 8.72 --------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(2) Net investment income.......... -- (0.04) (0.07) (0.18) -- (0.41) 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) --------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD... $69.23 $82.01 $108.80 $72.74 $46.32 $36.72 --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN..................... (15.58)%++ (21.88)% 53.52% 61.63% 26.14% 28.21% --------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (MILLIONS)..................... $1,523 $1,797 $1,915 $891 $408 $224 --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(3).................... 0.85%+ 0.83% 0.83% 0.85% 0.84% 0.83% Net investment income.......... 1.26+ 0.30 0.07 0.18 0.54 0.69 --------------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE.......... 29% 30% 37% 53% 89% 84% ---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 2001(1) 2000 1999 1998 1997 1996 --------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------------------------------------------------- Net investment income(4)......... 0.024 0.060 0.049 0.049 0.049 0.0412 Distributions from net investment income......................... (0.024) (0.060) (0.049) (0.049) (0.049) (0.0412) --------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN..................... 2.41%++ 6.18% 4.96% 5.08% 5.03% 4.20% --------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)........................ $233,543 $147,117 $119,970 $42,069 $13,494 $3,543 --------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)(5)................. 0.40%+ 0.40% 0.37% 0.65% 0.57% 0.78% Net investment income.......... 4.75+ 6.04 4.96 5.37 5.03 3.72 ---------------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2001 (unaudited). (2) Distributions from realized gains include both net realized short-term and long-term capital gains. (3) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 1.25%. (4) Travelers Insurance reimbursed Money Market Portfolio for $21,796, $47,023, $85,612, $31,300 and $43,376 in expenses for the six months ended June 30, 2001, the years ended December 31, 2000, 1999, 1997, and 1996, respectively. If expenses were not reimbursed, the per share decreases to net investment income would have been $0.000**, $0.000**, $0.001, $0.002 and $0.02, respectively, and the actual expense ratios would have been 0.42%, 0.44%, 0.50%, 1.39% and 1.71%, respectively. (5) For the six months ended June 30, 2001, the years ended December 31, 2000 and 1999, there was a voluntary expense limitation. As a result of the voluntary expense limitation, the ratio of expenses to average net assets will not exceed 0.40%. * Amount represents less than $0.01 per share. ** Amount represents less than $0.001 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 36 38 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO The U.S. Government Securities Portfolio ("Portfolio") seeks to invest in securities of the highest credit ratings that have high levels of current income and the potential for above average total returns. The assets of the Portfolio will be invested in direct obligations of the U.S., its agencies and instrumentalities. For the six months ended June 30, 2001, the Portfolio returned 1.15%. In comparison, the Lehman Brothers Government Bond Index(1) returned 2.27% for the same period. (Past performance is not indicative of future results.) During the first half of 2001, the Fed aggressively lowered short-term interest rates in an effort to address continued deterioration in corporate earnings and other signs of a slowing U.S. economy. In response to the Fed's rate cuts, bonds across the yield curve experienced a rally that extended through June 2001. In the U.S. Government sector of the bond market, securities with maturities of two years or less were the strongest total return performers. Yields on two-year Treasury notes remained unchanged at approximately 4.22%, while yields on 30-year Treasury bonds increased from about 5.49% to 5.75%. (Changes in the price of fixed income securities are inversely related to changes in interest rates.) It is the belief of Portfolio management, that the underperformance of the 30-year Treasury bond was caused by fear of inflation from a potentially overly aggressive Fed. Looking forward, the Fed's 25 basis point rate cut in the last week of June 2001 represented a notable departure from its five preceding 50-basis-point cuts, possibly signaling the tail end of the easing cycle. Some recent encouraging economic signs supporting this view include positive housing and auto sector statistics, continued strength in consumer spending, and growth in the U.S. money supply. As good as the case for an economic rebound is, however, it remains speculative. Forecasts of corporate earnings continue to edge lower, unemployment claims are creeping higher, consumer confidence is on the decline and core capital goods orders(2) appear to be falling at a 25% annual rate, suggesting that the slowing pace of business investment will remain a significant drag on the economy for the second half of 2001. The Portfolio's management team believes the Fed will most likely continue to lower rates, albeit at a slower pace. They expect to see at least one more rate reduction in the second half of 2001. Any further reduction in interest rates between now and year-end 2001 should bolster investment returns for fixed income securities. 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 exclude 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, 2001, the Portfolio returned negative 8.52%. In comparison, the Standard & Poor's 500 Index ("S&P 500")(3) returned negative 6.69% for the same period. (Past performance is not indicative of future results.) Early in 2001, management began shifting the Portfolio's holdings toward growth(4) stocks as opportunities presented themselves, while being careful not to completely abandon the value(5) stocks that contributed to the Portfolio's performance over the past year. They expect to continue to pursue this shift as we see signs that an economic recovery is underway. The shift toward growth stocks detracted from the Portfolio's performance relative to the S&P 500, as value stocks outperformed growth stocks for most of the period. They have increased the Portfolio's weighting in technology stocks such as Dell Computer Corp., Intel Corp., Microsoft Corp. and Oracle Corporation as they expect these franchise technology names to perform well as the economy recovers and corporations start to spend on technology again. They also increased our weighting in healthcare stocks such as Medtronic Inc. and Pfizer Inc. Both companies are high quality growth companies that have sold off significantly, presenting potentially excellent long-term investment opportunities. --------------- (1) 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. Please note that an investor cannot invest directly in an index. (2) Includes non-defense goods, net of aircraft and parts. (3) The S&P 500 is a market capitalization-weighted index of 500 widely held common stocks. Please note that an investor cannot invest directly in an index. (4) Growth stocks are shares of companies believed to exhibit the potential for faster-than-average growth within their industries. (5) Value stocks are shares that are considered to be inexpensive relative to their asset values or earning power. 37 39 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST -------------------------------------------------------------------------------- As portfolio managers specializing in large-cap companies, they will seek companies whose management quality, business strategy and environmental culture will position them to potentially generate sustainable growth over the long term. In addition to traditional fundamental analysis of these companies, they will continue to draw on studies and data from the companies themselves, government agencies and regulatory authorities, as well as leading environmental, human rights and consumer interest organizations. Management believes the integration of fundamental and environmental data will not only add value to our assessment of risk and return potential, but also help ensure that the holdings added to the Portfolio are consistent with the investors' guidelines. UTILITIES PORTFOLIO The Utilities Portfolio ("Portfolio") seeks to provide current income by investing in the equity and debt securities of companies in the utility industry. For the six months ended June 30, 2001, the Portfolio returned negative 4.53%. In comparison, the S&P 500 returned negative 6.69% for the same period. In a difficult market for both utilities stocks and bonds, the Portfolio continued to generate competitive performance. Investor uncertainty regarding the state of the economy has been fueled by conflicting economic data and speculation that the Fed's interest rate cuts may not be enough to prevent the U.S. from slipping into a prolonged recession. Given the volatility that this type of uncertainty creates, it is important for investors to be forward looking in determining the appropriate investment strategy. By remaining focused on our long-term outlook for the economy, the Portfolio's management team views periods of increased volatility and declining stock prices as opportunities to buy attractive companies at bargain prices. After a positive performance in 2000, investors sold utility stocks during the period due to concerns about this year's milder summer weather and potential negative effects from the energy crisis in California. More traditional utilities contributed to the Portfolio's performance, offsetting the negative results from telecommunications companies, independent power producers and energy merchant companies. After a brief rally in the first quarter of 2001, questions still linger in many investors minds about the profitability of many telecommunications companies. Management believes it will take some time to resolve the excess capacity issues confronting certain segments of the telecommunications sector, and therefore sold XO Communications Inc. during the period. They also took advantage of the stock market sell-off to increase the Portfolio's positions in AES Corp., Enron Corp., El Paso Corp. and Mirant Corp. They believe that these are excellent companies that are playing major roles in the transformation of the electric utility industry in the U.S. and around the world. Management expects utility stocks to start to perform better once the California issue is resolved. The California energy crisis seems to have become a heated political issue that has escalated further than necessary. They have started to see progress, however, towards its resolution. An eventual resolution should lift the cloud overhanging the utilities sector. Looking forward, management expects that news regarding corporate earnings could become worse before getting better. But while economic indicators continue to be mixed, there are clearly signs of improvement. Lower interest rates, slowly declining energy prices and tax rebates are starting to work together to benefit the economy. Due largely to lower mortgage rates, sales of both new and existing homes remain strong. Consumer confidence is starting to increase after dropping to its lowest level in four years. Reflecting this improved confidence, retail sales have bounced back from their April lows. In the manufacturing sector, durable goods orders rose across the board in May 2001, and the National Association of Purchasing Manager Index, a proxy for manufacturers' sentiment, hit its highest level since November 2000. Unemployment continues to deteriorate, but at a slower pace and with recent signs of stabilization. Finally, the Index of Leading Economic Indicators has started to turn more positive. The U.S. economy is large, and so it takes time to turn it around. Trends such as these may indicate that a turnaround has started. As the economy starts to improve, corporate profits are likely to rebound. In the opinion of management, the rebound may be stronger than the Wall Street consensus currently predicts, as cost-cutting measures by companies will boost earnings leverage on any increase in sales. In addition to an improving economic environment, stocks still look attractively priced relative to bonds and investors' cash levels remain high by historical standards. At the same time, yields on money market fund returns are falling. This suggests that there may be a great deal of equity purchasing power potentially available to support stock prices. (Of course there can be no guarantee that these expectations will, in fact, come true.) The managers believe these indicators bode well for the stock market going forward. 38 40 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST -------------------------------------------------------------------------------- Thank you for your investment in The Travelers Series Trust. Sincerely, /s/ HEATH B. McLENDON Heath B. McLendon Chairman July 12, 2001 The information provided in these commentaries represents the opinion of the manager(s) and is not intended to be a forecast of future events, a guarantee of future results or investment advice. Further, there is no assurance that certain securities will remain in or out of the Portfolios. Please refer to pages 42 through 47 for a list and percentage breakdown of the Portfolios' holdings. Also, please note that any discussion of the Portfolios' holdings is as of June 30, 2001 and is subject to change. 39 41 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ 1.15% Year Ended 6/30/01 10.16 Five Years Ended 6/30/01 7.91 1/24/92* through 6/30/01 7.26 CUMULATIVE TOTAL RETURN ----------------------- 1/24/92* through 6/30/01 93.75% + 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, 2001. 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. [SECURITIES PORTFOLIO LINE GRAPH]
U.S. GOVERNMENT SECURITIES LEHMAN BROTHERS PORTFOLIO GOVERNMENT BOND INDEX CONSUMER PRICE INDEX -------------------------- --------------------- -------------------- 1/24/92 10000 10000 10000 12/92 10790 10723 10275 12/93 11813 11866 10557 12/94 11147 11464 10840 12/95 13869 13567 11115 12/96 14071 13943 11484 12/97 15846 15280 11679 12/98 17463 16785 11866 12/99 16724 16411 12220 12/00 19155 18584 12635 6/30/01 19375 19006 12925
-------------------------------------------------------------------------------- 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 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ (8.52)% Year Ended 6/30/01 (7.81) Five Years Ended 6/30/01 14.34 5/1/92* through 6/30/01 13.75 CUMULATIVE TOTAL RETURN ----------------------- 5/1/92* through 6/30/01 225.58% + 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, 2001. 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. [STOCK PORTFOLIO LINE GRAPH]
SOCIAL AWARENESS STOCK STANDARD & POOR'S 500 PORTFOLIO INDEX CONSUMER PRICE INDEX ---------------------- --------------------- -------------------- 5/1/92 10000 10000 10000 12/92 10950 10673 10157 12/93 11777 11745 10436 12/94 11461 11900 10716 12/95 15285 14509 10988 12/96 18339 17838 11353 12/97 23343 23789 11545 12/98 30875 30626 11731 12/99 35765 37067 12080 12/00 35590 33693 12490 6/30/01 32558 31439 12778
-------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 40 42 -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 6/30/01 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/01+ (4.53)% Year Ended 6/30/01 11.62 Five Years Ended 6/30/01 13.31 2/4/94* through 6/30/01 13.60 CUMULATIVE TOTAL RETURN ----------------------- 2/4/94* through 6/30/01 156.99% + 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, 2001. 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 LINE GRAPH]
STANDARD & POOR'S 500 UTILITIES PORTFOLIO INDEX CONSUMER PRICE INDEX ------------------- --------------------- -------------------- 2/4/94 10000 10000 10000 12/94 10170 10072 10205 12/95 13149 13852 10464 12/96 14638 17031 10811 12/97 18340 22712 10995 12/98 21680 29240 11171 12/99 21662 35390 11504 12/00 26917 32168 11895 6/30/01 25699 30016 12168
-------------------------------------------------------------------------------- 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. 41 43 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2001 U.S. GOVERNMENT SECURITIES PORTFOLIO
FACE AMOUNT SECURITY VALUE ---------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 28.0% U.S. Treasury Bonds: $ 2,000,000 12.000% due 8/15/13 (a)................................... $ 2,769,520 2,000,000 8.750% due 5/15/20........................................ 2,643,520 6,000,000 7.250% due 8/15/22........................................ 6,958,740 4,000,000 7.625% due 11/15/22....................................... 4,825,440 7,000,000 7.125% due 2/15/23........................................ 8,026,760 1,000,000 6.875% due 8/15/25........................................ 1,123,330 15,000,000 U.S. FICO Strips, zero coupon due 8/3/18.................... 4,840,050 ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $31,402,186)..... 31,187,360 ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 52.3% 3,000,000 Federal Home Loan Bank Certificates, 5.705% due 3/2/09 (a)....................................................... 2,948,820 Federal Home Loan Mortgage Corp. (FHLMC) Certificates: 2,160,656 8.500% due 6/15/21........................................ 2,255,173 3,186,000 7.500% due 10/1/30........................................ 3,252,683 5,000,000 7.000% due 7/1/31 (b)..................................... 5,026,550 4,995,982 6.500% due 5/1/31......................................... 4,927,287 20,000,000 Federal National Mortgage Association Bank Certificates, zero coupon due 10/9/19................................... 5,967,000 Federal National Mortgage Association (FNMA) Certificates: 3,248,676 6.000% due 4/1/16......................................... 3,200,953 6,844,234 5.500% due 6/1/16+........................................ 6,613,242 2,315,236 6.500% due 12/1/27........................................ 2,289,190 5,911,856 7.500% due 11/1/29+....................................... 6,062,353 Government National Mortgage Association (GNMA) Certificates: 1,129,922 9.000% due 9/15/09+....................................... 1,185,706 433,877 8.500% due 7/15/18+....................................... 453,402 6,816,712 7.500% due 10/15/30+...................................... 6,997,764 2,077,445 7.000% due 12/15/30+...................................... 2,098,220 5,000,000 Tennessee Valley Authority Debentures, 6.750% due 11/1/25... 5,118,750 ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $58,364,424)........ 58,397,093 ---------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.1% 2,573,772 FHLMC Series 2276, Class ZA, 7.000% due 1/15/31............. 2,470,131 5,000,000 FNMA Series 2000-46, Class PB, 7.500% due 3/25/29........... 5,068,329 6,899,242 GNMA Series 1994-4, Class ZB, 6.000% due 2/20/29............ 6,001,875 ---------------------------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $13,690,820)..................................... 13,540,335 ---------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 7.6% 8,470,000 CS First Boston Corp., 3.960% due 7/2/01; Proceeds at maturity -- $8,472,793; (Fully collateralized by U.S. Treasury Notes, 6.500% due 8/31/01; Market value -- $8,639,654) (Cost -- $8,470,000)................. 8,470,000 ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $111,927,430**).......... $111,594,788 ----------------------------------------------------------------------------------------
(a) All or a portion of this security is segregated for "to-be-announced" trades. (b) Security is traded on a "to-be-announced" basis (See Note 7). + Date shown represents the last in range of maturity dates. ** Aggregate cost for Federal income tax purpose is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 42 44 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE -------------------------------------------------------------------------------------- COMMON STOCK -- 95.0% -------------------------------------------------------------------------------------- AUTOMOTIVE -- 0.7% 24,985 Ford Motor Co. ............................................. $ 613,382 -------------------------------------------------------------------------------------- BASIC MATERIALS -- 6.9% 19,900 Air Products & Chemicals, Inc. ............................. 910,425 56,500 Alcoa Inc. ................................................. 2,226,100 24,900 E. I. du Pont de Nemours & Co. ............................. 1,201,176 28,200 Engelhard Corp. ............................................ 727,278 18,000 Praxair, Inc. .............................................. 846,000 -------------------------------------------------------------------------------------- 5,910,979 -------------------------------------------------------------------------------------- CAPITAL GOODS -- 1.0% 26,423 Anixter International Inc. (a).............................. 811,186 1,047 Visteon Corp. .............................................. 19,244 -------------------------------------------------------------------------------------- 830,430 -------------------------------------------------------------------------------------- COMMUNICATION -- 5.0% 7,000 Amdocs Ltd. (a)............................................. 376,950 31,100 AOL Time Warner Inc. (a).................................... 1,648,300 17,100 AT&T Wireless Group......................................... 279,585 8,875 Avici Systems Inc. (a)...................................... 76,059 350 Inrange Technologies Corp., Class B Shares (a).............. 5,373 17,800 JDS Uniphase Corp. (a)...................................... 226,950 9,700 Nortel Networks Corp. ...................................... 88,173 21,750 Time Warner Telecom Inc., Class A Shares (a)................ 729,060 9,025 TyCom, Ltd. (a)............................................. 155,230 9,000 Univision Communications Inc., Class A Shares (a)........... 385,020 29,524 Williams Communications Group, Inc. (a)..................... 87,096 614 WorldCom, Inc. -- MCI Group (a)............................. 9,885 15,364 WorldCom, Inc. -- WorldCom Group (a)........................ 229,845 -------------------------------------------------------------------------------------- 4,297,526 -------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 18.1% 34,900 Black & Decker Corp. ....................................... 1,377,154 13,200 Convergys Corp. (a)......................................... 399,300 25,000 The Gap, Inc. .............................................. 725,000 47,300 Home Depot, Inc. ........................................... 2,201,815 6,500 Illinois Tool Works Inc. ................................... 411,450 32,217 Kaufman & Broad Home Corp. ................................. 971,987 20,821 Koninklijke Philips Electronics NV ADR...................... 550,299 24,000 Liz Claiborne, Inc. ........................................ 1,210,800 21,600 Lowe's Cos., Inc. .......................................... 1,567,080 38,300 Reader's Digest Association, Inc. .......................... 1,101,125 4,000 SPX Corp. (a)............................................... 500,720 10,900 The Stanley Works........................................... 456,492 16,739 Tribune Co. ................................................ 669,727
SEE NOTES TO FINANCIAL STATEMENTS. 43 45 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE -------------------------------------------------------------------------------------- CONSUMER CYCLICALS -- 18.1% (CONTINUED) 37,700 Tyco International Ltd. .................................... $ 2,054,650 25,300 Wal-Mart Stores, Inc. ...................................... 1,234,640 -------------------------------------------------------------------------------------- 15,432,239 -------------------------------------------------------------------------------------- CONSUMER NON-CYCLICALS -- 0.7% 8,200 Eli Lilly & Co. ............................................ 606,800 -------------------------------------------------------------------------------------- CONSUMER STAPLES -- 8.5% 41,550 Brinker International, Inc. (a)............................. 1,074,067 23,600 Kimberly-Clark Corp. ....................................... 1,319,240 52,700 The Kroger Co. (a).......................................... 1,317,500 56,500 Sara Lee Corp. ............................................. 1,070,110 58,100 SYSCO Corp. ................................................ 1,577,415 34,700 Wendy's International, Inc. ................................ 886,238 -------------------------------------------------------------------------------------- 7,244,570 -------------------------------------------------------------------------------------- ENERGY -- 5.4% 12,200 Active Power, Inc. (a)...................................... 203,496 14,300 Anadarko Petroleum Corp. ................................... 772,629 38,026 BP Amoco PLC ADR............................................ 1,895,596 11,800 Capstone Turbine Corp. (a).................................. 265,382 24,800 Royal Dutch Petroleum Co. ADR............................... 1,445,096 -------------------------------------------------------------------------------------- 4,582,199 -------------------------------------------------------------------------------------- FINANCIALS -- 13.6% 10,000 AMBAC Financial Group, Inc. ................................ 582,000 32,900 American Express Co. ....................................... 1,276,520 14,860 American International Group, Inc. ......................... 1,277,960 25,500 Bank of New York Co., Inc. ................................. 1,224,000 31,500 Bank One Corp. ............................................. 1,127,700 7,100 Freddie Mac................................................. 497,000 9,315 Hartford Financial Services Group, Inc. .................... 637,146 38,650 JP Morgan Chase & Co. ...................................... 1,723,790 40,000 KeyCorp..................................................... 1,042,000 6,831 Marsh & Mclennan Cos., Inc. ................................ 689,931 9,900 PNC Financial Services Group................................ 651,321 9,200 St. Paul Cos., Inc. ........................................ 466,348 4,000 XL Capital Ltd., Class A Shares............................. 328,400 -------------------------------------------------------------------------------------- 11,524,116 -------------------------------------------------------------------------------------- HEALTHCARE -- 9.6% 24,500 Amgen Inc. (a).............................................. 1,486,660 8,400 C.R. Bard, Inc. ............................................ 478,380 29,000 Johnson & Johnson........................................... 1,450,000 18,400 Medtronic, Inc. ............................................ 846,584 18,300 Merck & Co., Inc. .......................................... 1,169,553 12,000 Pfizer Inc. ................................................ 480,600
SEE NOTES TO FINANCIAL STATEMENTS. 44 46 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE -------------------------------------------------------------------------------------- HEALTHCARE -- 9.6% (CONTINUED) 14,150 Schering-Plough Corp. ...................................... $ 512,796 3,200 Sepracor Inc. (a)........................................... 127,360 31,200 Tenet Healthcare Corp. (a).................................. 1,609,608 -------------------------------------------------------------------------------------- 8,161,541 -------------------------------------------------------------------------------------- TECHNOLOGY -- 15.9% 25,100 Automatic Data Processing, Inc. ............................ 1,247,470 63,700 Cisco Systems, Inc. (a)..................................... 1,159,340 34,000 Compaq Computer Corp. ...................................... 526,660 18,500 Computer Associates International, Inc. .................... 666,000 20,000 Dell Computer Corp. (a)..................................... 519,000 18,300 Electronic Data Systems Corp. .............................. 1,143,750 48,400 EMC Corp. (a)............................................... 1,406,020 700 Infineon Technologies AG ADR................................ 16,415 27,700 Intel Corp. ................................................ 810,225 24,600 International Business Machines Corp. ...................... 2,779,800 3,711 McData Corp., Class A Shares (a)............................ 65,128 9,900 Microsoft Corp. (a)......................................... 718,740 64,900 Oracle Corp. (a)............................................ 1,233,100 39,900 Solectron Corp. (a)......................................... 730,170 31,700 Sun Microsystems, Inc. (a).................................. 498,324 -------------------------------------------------------------------------------------- 13,520,142 -------------------------------------------------------------------------------------- TRANSPORTATION -- 2.4% 45,230 Southwest Airlines Co. ..................................... 836,303 20,200 United Parcel Service, Inc., Class B Shares................. 1,167,560 -------------------------------------------------------------------------------------- 2,003,863 -------------------------------------------------------------------------------------- UTILITIES -- 7.2% 37,100 The AES Corp. (a)........................................... 1,597,155 19,983 El Paso Corp. .............................................. 1,049,907 21,200 Enron Corp. ................................................ 1,038,800 35,800 Mirant Corp. (a)............................................ 1,231,520 35,900 The Williams Cos., Inc. .................................... 1,182,905 -------------------------------------------------------------------------------------- 6,100,287 -------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $69,031,742).................... 80,828,074 -------------------------------------------------------------------------------------- FACE AMOUNT SECURITY VALUE -------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 5.0% $4,219,000 CS First Boston Corp., 3.960% due 7/2/01; Proceeds at maturity -- $4,220,392; (Fully collateralized by U.S. Treasury Notes, 6.500% due 8/30/01; Market value -- $4,303,418) (Cost -- $4,219,000)................. 4,219,000 -------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $73,250,742**)........... $85,047,074 --------------------------------------------------------------------------------------
(a) Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 45 47 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 UTILITIES PORTFOLIO
SHARES SECURITY VALUE -------------------------------------------------------------------------------------- COMMON STOCK -- 90.2% -------------------------------------------------------------------------------------- ELECTRIC - UTILITY -- 59.8% 12,600 Active Power, Inc. (a)...................................... $ 210,168 36,000 AES Corp. (a)............................................... 1,549,800 20,000 Allegheny Energy, Inc. ..................................... 965,000 10,000 Arch Coal Inc. ............................................. 258,700 60,000 Calpine Corp. (a)........................................... 2,268,000 10,000 Capstone Turbine Corp. (a).................................. 224,900 25,000 Cinergy Corp. .............................................. 873,750 15,306 Dominion Resources, Inc. ................................... 920,372 30,000 DQE, Inc. .................................................. 675,000 13,095 DTE Energy Co. ............................................. 608,132 52,800 Duke Energy Corp. .......................................... 2,059,728 35,000 Energy East Corp. .......................................... 731,850 17,600 Enron Corp. ................................................ 862,400 47,250 Exelon Corp. ............................................... 3,029,670 43,000 FirstEnergy Corp. .......................................... 1,382,880 12,600 FPL Group, Inc. ............................................ 758,646 20,000 GPU, Inc. .................................................. 703,000 37,900 Mirant Corp. (a)............................................ 1,303,760 20,000 Montana Power Co. .......................................... 232,000 53,000 Niagara Mohawk Holdings Inc. (a)............................ 937,570 30,000 NiSource Inc. .............................................. 819,900 30,000 Northeast Utilities......................................... 622,500 14,766 NSTAR....................................................... 628,441 6,100 Peabody Energy Corp. (a).................................... 199,775 25,000 Pinnacle West Capital Corp. ................................ 1,185,000 24,000 PPL Corp. .................................................. 1,320,000 25,300 Public Service Enterprise Group, Inc. ...................... 1,237,170 30,000 SCANA Corp. ................................................ 852,000 45,500 Sierra Pacific Resources.................................... 727,545 25,300 TXU Corp. .................................................. 1,219,207 65,750 Xcel Energy, Inc. .......................................... 1,870,588 -------------------------------------------------------------------------------------- 31,237,452 -------------------------------------------------------------------------------------- NATURAL GAS -- 18.8% 37,900 Dynegy Inc., Class A Shares................................. 1,762,350 27,800 Energen Corp. .............................................. 767,280 27,880 El Paso Corp. .............................................. 1,464,815 12,000 KeySpan Corp. .............................................. 437,760 21,000 National Fuel Gas Co. ...................................... 1,091,790 45,000 NRG Energy, Inc. (a)........................................ 993,600 50,600 Sempra Energy............................................... 1,383,404 44,200 Southwest Gas Corp. ........................................ 1,046,656 26,000 The Williams Cos., Inc. .................................... 856,700 -------------------------------------------------------------------------------------- 9,804,355 --------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 46 48 -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2001 UTILITIES PORTFOLIO
SHARES SECURITY VALUE -------------------------------------------------------------------------------------- TELEPHONE -- 11.6% 27,359 AT&T Corp. ................................................. $ 601,910 31,600 AT&T Wireless Group (a)..................................... 516,660 17,000 Qwest Communications International Inc. .................... 541,790 25,000 SBC Communications Inc. .................................... 1,001,500 24,000 Sprint Corp. ............................................... 512,640 15,000 Time Warner Telecom Inc. -- Class A Shares (a).............. 502,800 28,100 Verizon Communications Inc. ................................ 1,503,350 21,382 Williams Communications Group, Inc. (a)..................... 63,078 2,024 Worldcom, Inc. -- MCI Group................................. 32,586 50,600 Worldcom, Inc. -- Worldcom Group (a)........................ 756,975 -------------------------------------------------------------------------------------- 6,033,289 -------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $39,385,323).................... 47,075,096 --------------------------------------------------------------------------------------
FACE AMOUNT RATING(b) SECURITY VALUE --------------------------------------------------------------------------------------------------- CORPORATE BONDS -- 0.8% --------------------------------------------------------------------------------------------------- UTILITY - ELECTRIC -- 0.4% $ 200,000 A- Arizona Public Service Co., 7.250% due 8/1/23............... 184,250 --------------------------------------------------------------------------------------------------- TELEPHONE -- 0.4% 230,000 A- MCI Communication Corp., 7.750% due 3/23/25................. 211,313 --------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS (Cost -- $405,527).................... 395,563 --------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 9.0% 4,745,000 CS First Boston Corp., 3.960% due 7/2/01; Proceeds at maturity -- $4,746,566; (Fully collateralized by U.S. Treasury Notes, 6.500% due 8/31/01; Market value -- $4,840,832) (Cost -- $4,745,000).......... 4,745,000 --------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $44,535,850**)........... $52,215,659 ---------------------------------------------------------------------------------------------------
(a) Non-income producing security. (b) All ratings are by Standard and Poor's Ratings Service except those identified by an asterisk (*) which are rated by Moody's Investors Service, Inc. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 48 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 47 49 -------------------------------------------------------------------------------- BOND RATINGS (UNAUDITED) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to "C" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories. BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as and CCC predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" represents a lower degree of speculation than "B", and "CCC" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C -- The rating "C" is reserved for income bonds on which no interest is being paid. D -- Bonds rated "D" are in default, and payment of interest and/or repayment of principal is in arrears.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered to be medium grade obligations; that is, they are neither highly protected nor poorly secured. Interest payment and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and may have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds rated "Caa" are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest. Ca -- Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds rated "C" are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
48 50 -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2001
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost................................. $111,927,430 $73,250,742 $44,535,850 ------------------------------------------------------------------------------------------------------------- Investments, at value................................ $111,594,788 $85,047,074 $52,215,659 Dividends and interest receivable.................... 931,458 59,205 90,738 Cash................................................. 498 587 236 ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS......................................... 112,526,744 85,106,866 52,306,633 ------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased..................... 5,046,875 -- -- Investment advisory fees payable..................... 27,947 41,718 26,677 Administration fees payable.......................... 5,154 4,074 2,517 Accrued expenses..................................... 23,143 31,567 25,694 ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.................................... 5,103,119 77,359 54,888 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $107,423,625 $85,029,507 $52,251,745 ------------------------------------------------------------------------------------------------------------- NET ASSETS: Paid-in capital...................................... $102,926,763 $73,616,934 $41,148,601 Undistributed net investment income.................. 7,397,328 565,575 1,403,483 Accumulated net realized gain (loss) from security transactions...................................... (2,567,824) (949,334) 2,019,852 Net unrealized appreciation (depreciation) of investments....................................... (332,642) 11,796,332 7,679,809 ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $107,423,625 $85,029,507 $52,251,745 ------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING..................................... 8,693,007 3,231,646 2,847,733 ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE............................. $12.36 $26.31 $18.35 -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 49 51 -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest............................................... $ 3,266,110 $ 146,299 $ 176,952 Dividends.............................................. -- 379,958 573,899 Less: Foreign withholding tax.......................... -- (6,650) -- ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME................................ 3,266,110 519,607 750,851 ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee (Note 2)....................... 168,015 250,540 164,932 Administration fee (Note 2)............................ 30,952 24,612 15,224 Audit and legal........................................ 11,697 9,867 9,703 Shareholder and system servicing fees.................. 7,891 7,770 7,398 Custody................................................ 2,317 2,578 1,474 Shareholder communications............................. 1,973 1,813 1,035 Trustees' fees......................................... 1,973 1,967 1,973 Pricing service fees................................... 938 -- 99 Other.................................................. 1,902 521 501 ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES......................................... 227,658 299,668 202,339 ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME.................................... 3,038,452 219,939 548,512 ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 3): Realized Gain (Loss) From Security Transactions (excluding short-term securities): Proceeds from sales................................. 167,270,339 3,700,231 1,353,158 Cost of securities sold............................. 167,652,138 3,798,598 1,507,520 ------------------------------------------------------------------------------------------------------------- NET REALIZED LOSS...................................... (381,799) (98,367) (154,362) ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments: Beginning of period................................. 1,301,929 19,228,383 10,468,870 End of period....................................... (332,642) 11,796,332 7,679,809 ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)... (1,634,571) (7,432,051) (2,789,061) ------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS.................................. (2,016,370) (7,530,418) (2,943,423) ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........ $ 1,022,082 $(7,310,479) $(2,394,911) -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 50 52 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2001
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income............................ $ 3,038,452 $ 219,939 $ 548,512 Net realized loss................................ (381,799) (98,367) (154,362) Change in net unrealized depreciation............ (1,634,571) (7,432,051) (2,789,061) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................................... 1,022,082 (7,310,479) (2,394,911) ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................. 30,273,125 13,116,476 10,214,590 Cost of shares reacquired........................ (14,841,539) (1,960,335) (4,024,309) ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS....................... 15,431,586 11,156,141 6,190,281 ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................. 16,453,668 3,845,662 3,795,370 NET ASSETS: Beginning of period.............................. 90,969,957 81,183,845 48,456,375 ------------------------------------------------------------------------------------------------------- END OF PERIOD*................................... $107,423,625 $85,029,507 $52,251,745 ------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:........................................... $7,397,328 $565,575 $1,403,483 -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 51 53 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2000
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income.............................. $ 4,461,898 $ 345,825 $ 855,300 Net realized gain (loss)........................... 688,169 (763,694) 2,258,147 Change in net unrealized appreciation (depreciation).................................. 4,561,020 (91,892) 4,526,028 -------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS...................................... 9,711,087 (509,761) 7,639,475 -------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income.............................. (3,702,667) (378,231) (823,875) Net realized gains................................. -- (843,976) (53,040) -------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................... (3,702,667) (1,222,207) (876,915) -------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................... 37,854,892 18,903,761 16,435,486 Net asset value of shares issued for reinvestment of dividends....................... 3,702,667 1,222,207 876,915 Cost of shares reacquired.......................... (18,218,713) (5,448,872) (7,031,666) -------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... 23,338,846 14,677,096 10,280,735 -------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................... 29,347,266 12,945,128 17,043,295 NET ASSETS: Beginning of year.................................. 61,622,691 68,238,717 31,413,080 -------------------------------------------------------------------------------------------------------- END OF YEAR*....................................... $ 90,969,957 $81,183,845 $48,456,375 -------------------------------------------------------------------------------------------------------- * Includes undistributed net investment income of:... $4,358,876 $345,636 $854,971 --------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 52 54 -------------------------------------------------------------------------------- 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 16 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, MFS Value, formerly known as NWQ Large Cap, Jurika & Voyles Core Equity 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 accounting principles generally accepted in the United States of America. At December 31, 2000, reclassifications were made to the capital accounts of the U.S. Government Securities Portfolio to reflect permanent book/tax differences and income and gains available for distribution under income tax regulations. 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 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. Smith Barney Fund Management LLC ("SBFM"), formerly known as SSB Citi Fund Management LLC, 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 SBFM 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 SBFM investment management and advisory fees calculated at an annual rate of 0.65% of the average daily net assets. These fees are calculated daily and paid monthly. 53 55 -------------------------------------------------------------------------------- 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 SBFM. Travelers Insurance pays SBFM, 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"), 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. For the six months ended June 30, 2001, each Portfolio paid transfer agent fees of $2,500 to CFTC. For the six months ended June 30, 2001, Salomon Smith Barney Inc. and its affiliates received brokerage commissions of $1,585. One Trustee and all officers of the Trust are employees of Citigroup or its affiliates. 3. INVESTMENTS During the six months ended June 30, 2001, 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................................................... $190,692,174 $16,340,701 $11,143,608 ------------------------------------------------------------------------------------------------------ Sales....................................................... 167,270,339 3,700,231 1,353,158 ------------------------------------------------------------------------------------------------------
At June 30, 2001, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
USGS SAS UTILITIES --------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $ 497,607 $16,194,010 $10,771,798 Gross unrealized depreciation............................... (830,249) (4,397,678) (3,091,989) --------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $(332,642) $11,796,332 $ 7,679,809 ---------------------------------------------------------------------------------------------------
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 (plus accrued interest) 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, 2001, the Portfolios did not hold any futures contracts. 54 56 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. OPTION 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, 2001, the Portfolios did not hold any 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. At June 30, 2001, USGS held TBA securities with a total cost of $5,046,875. 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, 2001 DECEMBER 31, 2000 ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO Shares sold................................................. 2,449,967 3,246,763 Shares issued on reinvestment............................... -- 330,595 Shares reacquired........................................... (1,200,577) (1,585,139) ------------------------------------------------------------------------------------------------- Net Increase................................................ 1,249,390 1,992,219 ------------------------------------------------------------------------------------------------- SOCIAL AWARENESS STOCK PORTFOLIO Shares sold................................................. 480,761 649,867 Shares issued on reinvestment............................... -- 43,051 Shares reacquired........................................... (72,274) (188,862) ------------------------------------------------------------------------------------------------- Net Increase................................................ 408,487 504,056 ------------------------------------------------------------------------------------------------- UTILITIES PORTFOLIO Shares sold................................................. 545,277 912,236 Shares issued on reinvestment............................... -- 52,890 Shares reacquired........................................... (219,136) (417,997) ------------------------------------------------------------------------------------------------- Net Increase................................................ 326,141 547,129 -------------------------------------------------------------------------------------------------
55 57 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 9. CAPITAL LOSS CARRYFORWARD At December 31, 2000, USGS and SAS had, for Federal income tax purposes approximately $1,979,000 and $774,000, respectively, of 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, 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:
PORTFOLIO 2007 2008 ---------------------------------------------------------------------------------- U.S. Government Securities Portfolio........................ $1,979,000 -- Social Awareness Stock Portfolio............................ -- $774,000 ----------------------------------------------------------------------------------
56 58 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
U.S. GOVERNMENT SECURITIES PORTFOLIO 2001(1)(2) 2000(2) 1999(2) 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD... $12.22 $ 11.30 $11.80 $11.65 $10.86 $12.43 ----------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income................ 0.36 0.74 0.68 0.49 0.58 0.68 Net realized and unrealized gain (loss)............................ (0.22) 0.84 (1.18) 0.70 0.79 (0.52) ----------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations.... 0.14 1.58 (0.50) 1.19 1.37 0.16 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income................ -- (0.66) (0.00)* (0.50) (0.58) (1.55) Net realized gains................... -- -- -- (0.54) -- (0.18) ----------------------------------------------------------------------------------------------------------------- Total Distributions.................... -- (0.66) (0.00)* (1.04) (0.58) (1.73) ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD......... $12.36 $12.22 $11.30 $11.80 $11.65 $10.86 ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................... 1.15%++ 14.53% (4.23)% 10.20% 12.62% 1.46% ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)...... $107,424 $90,970 $61,623 $66,454 $35,279 $26,009 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4).......................... 0.45%+ 0.48% 0.48% 0.45% 0.49% 0.62% Net investment income................ 5.94+ 6.46 5.97 5.31 6.10 5.68 ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE................ 168% 289% 164% 349% 208% 501% -----------------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO 2001(1)(2) 2000(2) 1999(2) 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.............................. $28.76 $29.42 $25.92 $20.06 $15.76 $14.32 ----------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income(5)............ 0.07 0.14 0.13 0.10 0.15 0.31 Net realized and unrealized gain (loss)........................... (2.52) (0.29) 3.93 6.30 4.15 2.42 ----------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations... (2.45) (0.15) 4.06 6.40 4.30 2.73 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income............... -- (0.16) (0.09) (0.12) -- (0.43) Net realized gains.................. -- (0.35) (0.47) (0.42) -- (0.86) ----------------------------------------------------------------------------------------------------------------- Total Distributions................... -- (0.51) (0.56) (0.54) -- (1.29) ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........ $26.31 $28.76 $29.42 $25.92 $20.06 $15.76 ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN.......................... (8.52)%++ (0.49)% 15.84% 32.27% 27.28% 19.98% ----------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)..... $85,030 $81,184 $68,239 $39,482 $21,013 $11,040 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(5)......................... 0.74%+ 0.75% 0.80% 0.84% 0.98% 1.25% Net investment income............... 0.54+ 0.48 0.69 0.63 0.97 0.43 ----------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............... 5% 33% 12% 14% 19% 26% -----------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2001 (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. (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, Travelers Insurance 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%. * 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. 57 59 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
UTILITIES PORTFOLIO 2001(1)(2) 2000(2) 1999(2) 1998 1997 1996 --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.... $19.22 $15.91 $17.18 $15.29 $12.22 $12.85 --------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income................. 0.20 0.43 0.41 0.37 0.46 0.47 Net realized and unrealized gain (loss)............................. (1.07) 3.36 (0.36) 2.33 2.63 0.47 --------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations..... (0.87) 3.79 0.05 2.70 3.09 0.94 --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income................. -- (0.45) (0.40) (0.42) (0.01) (0.84) 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) --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD.......... $18.35 $19.22 $15.91 $17.18 $15.29 $12.22 --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ (4.53)%++ 24.26% (0.08)% 18.21% 25.29% 7.47% --------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)....... $52,252 $48,456 $31,413 $32,909 $21,413 $18,214 --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses.............................. 0.81%+ 0.84% 0.88% 0.80% 1.06% 1.07% Net investment income................. 2.18+ 2.47 2.41 3.06 3.58 3.88 --------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE................. 3% 22% 10% 51% 68% 39% ---------------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2001 (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. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 58 60 (This page intentionally left blank.) 61 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 SMITH BARNEY 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 and 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)(8-01)