-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pj6jtTqjx1eQbEV/YmYSb4NEYL3OBvZRgcz6Ll5X+Ana2JSYb1Jtzq7eaRiXvuUV 7nkndgeybY1EOoiIUyQLlQ== 0000950123-02-008693.txt : 20020905 0000950123-02-008693.hdr.sgml : 20020905 20020905172526 ACCESSION NUMBER: 0000950123-02-008693 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANAGED ASSETS TRUST CENTRAL INDEX KEY: 0000706453 IRS NUMBER: 046480345 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03568 FILM NUMBER: 02757805 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 860-277-0111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONEY MARKET PORTFOLIO/CT CENTRAL INDEX KEY: 0000355751 IRS NUMBER: 046465300 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03274 FILM NUMBER: 02757806 BUSINESS ADDRESS: STREET 1: 388 GREENWICH ST STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 860-277-0111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MONEY TRUST DATE OF NAME CHANGE: 19850806 FORMER COMPANY: FORMER CONFORMED NAME: CASH INCOME TRUST DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL APPRECIATION FUND/CT CENTRAL INDEX KEY: 0000701388 IRS NUMBER: 046475147 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03429 FILM NUMBER: 02757807 BUSINESS ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 800-451-2010 MAIL ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE STOCK TRUST DATE OF NAME CHANGE: 19860113 FORMER COMPANY: FORMER CONFORMED NAME: AGGRESSIVE STOCK TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CAPITAL APPRECIATION FUND DATE OF NAME CHANGE: 19950420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD BOND TRUST CENTRAL INDEX KEY: 0000701387 IRS NUMBER: 046475146 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03428 FILM NUMBER: 02757808 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 860-277-0111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE BOND TRUST DATE OF NAME CHANGE: 19600201 N-30D 1 y62566bnv30d.txt SEMI-ANNUAL REPORT THE TRAVELERS VARIABLE PRODUCTS FUNDS SEMI-ANNUAL REPORTS JUNE 30, 2002 [TRAVELERS ART] 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 LOGO] The Travelers Insurance Company The Travelers Life and Annuity Company One Tower Square Hartford, CT 06183 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: Enclosed herein is the semi-annual report for the Travelers Variable Products Funds -- Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio ("Fund(s)") and the Travelers Series Trust -- U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio ("Portfolio(s)")(1) for the period ended June 30, 2002. In this report, we have summarized the period's prevailing economic and market conditions and outlined investment strategies for each of the Funds or Portfolios.
Performance for the Six Months Ended June 30, 2002(2) - --------------------------------------------------------------------------- Managed Assets Trust....................................... (6.62)% High Yield Bond Trust...................................... 0.00 Capital Appreciation Fund.................................. (15.36) Money Market Portfolio..................................... 0.72 U.S. Government Securities Portfolio....................... 4.50 Social Awareness Stock Portfolio........................... (15.53) Utilities Portfolio........................................ (18.31)
MARKET SCHEDULE OF COMMENTARY INVESTMENTS ---------- ----------- Managed Assets Trust................ 2 8 High Yield Bond Trust............... 3 21 Capital Appreciation Fund........... 4 29 Money Market Portfolio.............. 5 31 U.S. Government Securities Portfolio......................... 44 49 Social Awareness Stock Portfolio.... 45 51 Utilities Portfolio................. 45 54
MARKET AND ECONOMIC OVERVIEW The first six months of 2002 were full of volatility and uncertainty for many investors. Although some fundamental economic data seemed to indicate that the country might be poised for a recovery early in the period [including strong first quarter Gross Domestic Product ("GDP")(3) growth of 5.0%], equity investors remained skittish. A series of accounting scandals and tense political situations created more uneasiness among equity investors and contributed to a significant flight to quality, as investors sought out investment alternatives that they perceived as more conservative, such as investment grade fixed income securities. Higher-yielding fixed income securities were also negatively affected by investor concerns about the timing and extent of an economic recovery. The telecommunications industry was hit particularly hard, as fundamentals for many of these companies continued to deteriorate during the period. - --------------- (1) The Funds or Portfolios are underlying investment options of various variable annuity products. A variable annuity and life product is a contract issued by an insurance company where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of securities. Upon retirement, the policyholder is paid according to accumulated units whose dollar value varies according to the performance of the securities within the sub accounts. Its objective is to preserve, through investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation. (2) The performance returns do not reflect the reduction of initial charges and expenses imposed in connection with investing in variable annuity and life contracts such as administrative fees, account charges and surrender charges, which if reflected, would reduce the performance of each Fund or Portfolio. Past performance is not indicative of future results. (3) GDP is a market value of goods and services produced by labor and property in a given country. 1 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS - -------------------------------------------------------------------------------- Short-term interest rates remained at historically low levels during the period. Although the Federal Open Market Committee ("FOMC")(4) moved to a neutral bias from a weakness bias in March, it left the federal funds rate ("fed funds rate")(5) unchanged at 1.75% throughout the first half of 2002. Inflation remained subdued during the period, leading many to believe that the FOMC will probably not raise the fed funds rate until some time later this summer or fall. MANAGED ASSETS TRUST INVESTMENT STRATEGY Managed Assets Trust ("Fund") seeks high total return by investing in a blend of common stocks, convertible and fixed income securities. FUND OVERVIEW For the six months ended June 30, 2002, the Fund returned negative 6.62%. In comparison, the Lehman Brothers Government/Corporate Bond Index ("Lehman Gov't./Corp. Index")(6) and the S&P 500 Index ("S&P 500")(7) returned 3.26% and negative 13.15%, respectively. Past performance is not indicative of future results. The Fund's performance during the first quarter of 2002 benefited from our emphasis on earnings estimate revisions. Stocks whose earnings estimates had been revised downward did, indeed, disappoint in their quarterly earnings report. Our bias toward strong earnings fundamentals also helped relative performance. As geopolitical risks and financial accounting concerns created a more bearish investing environment during the latter part of the period, the lower price-to-earnings ("P/E")(8) ratio of the Fund relative to its benchmark helped us mitigate negative market factors. Our analysis of the Fund's performance for the first quarter indicates that our stock selection yielded favorable results in the healthcare and utilities sectors, mixed results in the consumer discretionary sector and adverse results in the technology, producer durables and financial services sectors. In the healthcare sector, we benefited from our underweight position in Bristol-Myers Squibb Co., which reported disappointing trial results for its cardiovascular drug Vanlev. Our overweight positions in Tenet Healthcare Corp. and Bausch & Lomb Inc. helped performance, as earnings estimates for those stocks continued to rise. In the utilities sector, we benefited from avoiding stocks such as Calpine Corp., Nextel Communications, Inc. and Qwest Communications Inc., which declined substantially early in the first quarter. Qwest Communications Inc. steadily lost market share in the intensely competitive long distance business. Nextel Communications, Inc. struggled with its heavy debt burden in an increasingly difficult wireless industry. In the consumer discretionary sector, our position in industrial and consumer cyclical stocks performed well as hopes of an economic recovery grew. Stocks such as Alberto-Culver Co., International Flavors & Fragrances Inc., Maytag Corp. and Office Depot Inc. helped boost Fund performance. Late in the first quarter, retail stocks rose sharply on renewed hopes of a market rally after a lull in February. Unfortunately, the lift in stock prices was more pronounced for companies with poor recent earnings performance. In this situation, our underweight positions in stocks with negative earnings surprises such as CVS Corp. and The Gap, Inc. hurt our performance. In the technology sector, our small positions in Sanmina-SCI Corp. and Sun Microsystems, Inc. underperformed on profit-taking after a strong fourth quarter. In the producer durables sector, we held a small overweight position in Tyco International Ltd. whose accounting practices have come under scrutiny. Tyco International Ltd.'s share price fell by nearly 50% in January as the company defended its balance sheet strength and liquidity position. During the second quarter of 2002, our stock selection was favorable in the healthcare, consumer discretionary, financial services and utilities sectors. In the healthcare sector, we gained from our underweight position in several drug stocks such as - --------------- (4) The FOMC is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. (5) 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. (6) The Lehman Gov't./Corp. Index is a broad-based bond index composed of government and corporate debt issues that are investment grade (rated Baa or higher by Moody's or rated BBB or higher by Standard & Poor's). Please note that an investor cannot invest directly in an index. (7) 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. (8) The P/E ratio is the price of a stock divided by its earnings per share. 2 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS - -------------------------------------------------------------------------------- Bristol-Myers Squibb Co., Eli Lilly & Co. and Schering-Plough Corp. Our earnings emphasis encouraged overweight positions in healthcare stocks such as Humana Inc., Trigon Healthcare, Inc., UnitedHealth Group Inc., and Wellpoint Health Networks Inc., which all produced strong gains. In the consumer discretionary sector, retailers such as Lowes Cos. Inc., Limited Brands, Newell Rubbermaid Inc. and Williams-Sonoma Inc. continued their strong performance on higher earnings estimates driven by robust consumer spending. Our overweight position in Pactiv Corp., a global supplier of specialty packaging and consumer products, helped performance as investors rewarded the company's low P/E ratio, defensive product mix and earnings growth rate. In the financial services sector, we were overweight in a handful of insurance companies such as CIGNA Corp., MetLife, Inc. and Washington Mutual Inc. and a select group of financial services providers such as Countrywide Credit Industries Inc., H&R Block Inc., National City Corp. and The PMI Group Inc., which produced the lone relief in an otherwise gloomy sector with periods of positive returns. We successfully avoided St. Paul Cos., which reported a major earnings disappointment. In the utilities sector, companies with energy trading operations such as Dynegy Inc., El Paso Corp. and Reliant Energy, Inc. continued to struggle in the wake of the credibility crisis triggered by the Enron Corp. collapse. We benefited from avoiding these companies along with companies with revenue shortfalls such as Qwest Communications Inc. and WorldCom Inc. Despite concerns about accounting fraud and terrorist threats during the period, a mild economic recovery appeared to be underway. We believe the resolution of these accounting problems and the return of investor confidence in corporate America could stimulate the economy and benefit stocks in the long run. HIGH YIELD BOND TRUST(9) INVESTMENT STRATEGY The High Yield Bond Trust ("Fund") seeks high current income by investing at least 80% of its assets primarily in bonds that are rated below investment-grade.(10) FUND OVERVIEW For the six months ended June 30, 2002, the Fund returned 0.00%. In comparison, the Credit Suisse First Boston Global High Yield Index ("CSFB Global High Yield Index")(11) returned 0.16%. Also, an equally weighted blend of five high yield bond indices (the J.P. Morgan U.S. Dollar Global High Yield Bond Index(12), Salomon Smith Barney High Yield Market Index(13), Merrill Lynch High Yield II Master Index(14), Credit Suisse First Boston High Yield Total Index ("CSFB High Yield Index")(15) and Bear Stearns High Yield Index(16)) returned negative 3.09% for the six-month period. Past performance is not indicative of future results. The return of the Fund was hampered by significant negative returns in the telecommunications sector (dominated by Qwest Communications Inc. and WorldCom Inc.) and the wireless and cable sectors. The cable sector came under significant pressure due to fraud charges against Adelphia Communications Corp. officials, which impacted the entire sector. The wireless sector came under significant pressure due to the capital needs of the sector, the slowing of growth and high leverage. The WorldCom Inc. collapse also contributed to significant declines in the telecommunications sector. - --------------- (9) High yield bonds involve greater credit and liquidity risks than investment grade bonds. (10) Pursuant to a recently adopted SEC rule, an investment company with a name suggesting that the company focuses on a particular type of investment must invest at least 80% of its net assets in the type of investment suggested by its name. (11) The CSFB Global High Yield Index consists of non-investment-grade corporate bonds issued by both U.S. and non-U.S. companies. Please note than an investor cannot invest directly in an index. (12) The J.P. Morgan U.S. Dollar Global High Yield Bond Index is a dollar-denominated index consisting of non-investment-grade corporate bonds, which are issued by both U.S. and non-U.S. companies. Please note than an investor cannot invest directly in an index. (13) The Salomon Smith Barney High Yield Market Index is a broad-based unmanaged index of high yield securities. Please note that an investor cannot invest directly in an index. (14) The Merrill Lynch High Yield Master II Index is an index of U.S. currency high yield bonds issued by U.S. and non-U.S. issuers with maturities of one year or more and a credit rating lower than BBB-/Baa3. Please note than an investor cannot invest directly in an index. (15) The CSFB High Yield Index is an unmanaged index of high yield debt securities. Please note than an investor cannot invest directly in an index. (16) The Bear Stearns High Yield Index comprises 1,533 securities across a wide spectrum of industries with at least one year to maturity. Please note than an investor cannot invest directly in an index. 3 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS - -------------------------------------------------------------------------------- Assets in high yield mutual funds declined during the period, as concerns about accounting scandals and corporate fraud affected the market. While the period was a difficult one from a return standpoint, we continue to believe in our high yield approach to fixed income investing and believe that the current difficulties may also present buying opportunities that will benefit investors over the long term. We remain cautiously optimistic about finding long-term value in this environment and continue to seek out and purchase investment targets that we believe have attractive yields. CAPITAL APPRECIATION FUND INVESTMENT STRATEGY Capital Appreciation Fund ("Fund") seeks growth of capital by investing in common stocks of companies in any industry and of any size. Income is not an objective. The Fund invests primarily in common stocks of small to large companies that are expected to experience wide fluctuations in price. FUND OVERVIEW For the six months ended June 30, 2002, the Fund returned negative 15.36%. In comparison, the S&P 500 returned negative 13.15% for the same period. Past performance is not indicative of future results. The financial markets continued to be challenging during the period. We believe that the effects of the ongoing war on terrorism, increasing tensions in the Middle East, the upward movement of energy prices, the Food and Drug Administration's reluctance to approve new medications, troubles in the telecommunications industry, accounting scandals and questions about corporate integrity all converged to produce one of the toughest stock-picking environments in nearly 70 years. On a more positive note, several economic stimulants remain active in the capital markets. Inflation is steady, bond yields are still relatively attractive and excess inventories in a few industries are beginning to be worked down, although end demand is still very much in question. Throughout the period, we sold or significantly trimmed our positions in our larger underperforming holdings, such as AOL Time Warner Inc., Nokia Corp., Pfizer, Inc. and QUALCOMM Inc. For example, AOL Time Warner Inc. dropped from the Fund's top holding to the sixth position during the reporting period. The company's stock price has suffered, we believe, from the misperception among some investors that the biggest portion of its business is its struggling online service. While we continue to see growth potential in the strength of its other underlying businesses, we will monitor the company's ongoing developments closely. A stock that contributed positively to performance during the period was The Coca-Cola Co., which was the Fund's largest holding at the end of the period. We continued to diversify the Fund during the period and established many new positions, including higher education lender SLM Corp., healthcare network provider UnitedHealth Group Inc. and McKesson Corp., a large distributor of pharmaceuticals and medical supplies. We also increased our position in General Dynamics Corp., which could benefit from increased U.S. defense spending as a result of escalating Middle East tensions. We also increased our holdings in the financial services sector. Historically, we believe the most effective way to increase an investor's return has been to invest in a relatively small number of stocks, with the conviction to hold them through thick and thin. But today's markets are different. In our opinion, competitive advantage is more fleeting and capital flows are much more efficient than they have been in the past. Additionally, the proliferation of nearly $1 trillion of hedge fund money has significantly changed the landscape of the financial markets. Despite these changes, we genuinely believe that our style of fundamental research will remain effective as we navigate through this new environment. Going forward, we expect to become more active in trading some of our positions. While we maintain a few holdings in the struggling technology area, we expect to keep a close eye on these positions and significantly limit our exposure until we see signs that capital spending has improved markedly. As always, when we cannot find investments that meet our criteria, we will remain patient, maintaining a cash position. We realize that the past several years have been tough ones for our investors and we are working diligently to improve the Fund's performance going forward. 4 SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS - -------------------------------------------------------------------------------- MONEY MARKET PORTFOLIO INVESTMENT STRATEGY Money Market Portfolio ("Fund") seeks to provide investors with high current income from short-term money market instruments while emphasizing preservation of capital and maintaining a high degree of liquidity. The Fund pursues this objective by investing in securities maturing in 13 months or less. FUND OVERVIEW For the six months ended June 30, 2002, the Fund returned 0.72%. Assets in the Fund were primarily invested in high-quality commercial paper during the period. We believe this approach provided the Fund with safety and liquidity. At the end of the period, the Fund had total assets of $373.6 million, with an average yield of 1.79% and an average life of 23 days. Past performance is not indicative of future results. Please note that your investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Throughout the first half of 2002, U.S. economic data remained mixed. GDP increased an estimated 5.0% during the first quarter of 2002, according to the U.S. Department of Commerce's Bureau of Economic Analysis, up from 1.7% growth in the fourth quarter of 2001. Although real GDP surged, a modest slowdown is anticipated for the second half of 2002. Economists expect GDP to grow at an annual rate of roughly 2.50% to 3.50% for the remainder of 2002. The manufacturing sector also improved during the period. For example, the Institute for Supply Management Index ("ISM Index")(17) increased to 56.2% in June, from 53.9% in April. Although the survey indicates that both factory orders and industrial production could show strong growth during the coming months, the labor market continued to show signs of weakness at the end of the reporting period. In June, for example, the economy added only 36,000 jobs, well below the expected 75,000. Consequently, the unemployment rate rose to 5.9% in June, close to the high of 6.00% reported in April. The FOMC kept the fed funds rate unchanged at 1.75% during the period and maintained its neutral bias during the second quarter. Equity market weakness, slower final demand and benign inflation suggest that the FOMC will probably not raise the fed funds rate until late this summer or fall. Thank you for your investment in The Travelers Variable Products Funds -- Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio. We look forward to continuing to help you meet your investment objectives. Sincerely, /s/ HEATH B. McLENDON Heath B. McLendon Chairman July 31, 2002 The information provided in this letter represents the opinion of the managers and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities will remain in or out of the Funds. Please refer to pages 8 through 31 for a list and percentage breakdown of each Fund's holdings. Also, please note any discussion of the Funds' holdings is as of June 30, 2002 and is subject to change. - --------------- (17) The ISM's composite PMI Index (formerly the National Association of Purchasing Managers Index) is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector. 5 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ (6.62)% Year Ended 6/30/02 (9.14) Five Years Ended 6/30/02 5.59 Ten Years Ended 6/30/02 9.14 CUMULATIVE TOTAL RETURN ------------------------ 6/30/92 through 6/30/02 139.83% + 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, 1992, assuming reinvestment of dividends, through June 30, 2002. 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 S&P 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 MANAGED ASSETS TRUST BOND INDEX CONSUMER PRICE INDEX S&P 500 INDEX -------------------- -------------------- -------------------- ------------- 6/92 $10,000 $10,000 $10,000 $10,000 12/92 10,573 10,497 10,121 10,834 12/93 11,560 11,655 10,399 11,923 12/94 11,300 11,245 10,677 12,080 12/95 14,365 13,410 10,948 14,728 12/96 16,344 13,798 11,311 18,108 12/97 19,828 15,145 11,503 24,149 12/98 24,079 16,579 11,688 31,089 12/99 27,503 15,853 12,037 37,628 12/00 27,059 17,731 12,445 34,203 12/01 25,684 19,240 12,638 30,140 6/02 23,983 19,867 12,867 26,177
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. 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 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ 0.00% Year Ended 6/30/02 2.54 Five Years Ended 6/30/02 5.82 Ten Years Ended 6/30/02 8.59 CUMULATIVE TOTAL RETURN ------------------------ 6/30/92 through 6/30/02 127.91% + 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, 1992, assuming reinvestment of dividends, through June 30, 2002. 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 Credit Suisse 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]
CREDIT SUISSE FIRST LEHMAN BROTHERS BOSTON GLOBAL HIGH HIGH YIELD BOND TRUST AGGREGATE BOND INDEX CONSUMER PRICE INDEX YIELD INDEX --------------------- -------------------- -------------------- ------------------- 6/92 $10,000 $10,000 $10,000 $10,000 12/92 10,532 10,457 10,121 10,873 12/93 12,007 11,477 10,399 12,571 12/94 11,856 11,142 10,677 12,547 12/95 13,690 13,200 10,948 14,891 12/96 15,887 13,679 11,311 16,488 12/97 18,518 14,999 11,503 18,570 12/98 19,732 16,302 11,688 18,624 12/99 20,605 16,169 12,037 19,452 12/00 20,804 18,050 12,445 18,780 12/01 22,791 19,575 12,638 19,870 6/02 22,791 20,317 12,867 19,901
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 6 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ (15.36)% Year Ended 6/30/02 (25.89) Five Years Ended 6/30/02 5.53 Ten Years Ended 6/30/02 13.29 CUMULATIVE TOTAL RETURN ------------------------ 6/30/92 through 6/30/02 248.16% + 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, 1992, assuming reinvestment of dividends, through June 30, 2002. The S&P 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 FUND S&P 500 INDEX RUSSELL 2000 INDEX CONSUMER PRICE INDEX -------------------- ------------- ------------------ -------------------- 6/92 $10,000 $10,000 $10,000 $10,000 12/92 11,877 10,834 11,825 10,121 12/93 13,722 11,923 14,057 10,399 12/94 13,018 12,080 5,833 10,677 12/95 17,752 14,728 7,493 10,948 12/96 22,759 18,108 8,729 11,311 12/97 28,709 24,149 10,682 11,503 12/98 46,402 31,089 10,410 11,688 12/99 71,234 37,628 12,622 12,037 12/00 55,650 34,203 12,241 12,445 12/01 41,133 30,140 12,555 12,638 6/02 34,816 26,177 11,965 12,867
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of dividends. The returns do not reflect expenses associated with the subaccount such as administrative fees, account charges and surrender charges which, if reflected, would reduce the performance shown. 7 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 57.7% - ----------------------------------------------------------------------------------------------------- ADVERTISING -- 0.1% 5,400 Omnicom Group Inc. ......................................... $ 247,320 - ----------------------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 1.6% 21,143 The Boeing Co. ............................................. 951,435 5,100 General Dynamics Corp. ..................................... 542,385 19,300 Honeywell International Inc. ............................... 679,939 13,900 Lockheed Martin Corp. ...................................... 966,050 3,100 Northrop Grumman Corp. ..................................... 387,500 11,000 Raytheon Co. ............................................... 448,250 8,322 United Technologies Corp. .................................. 565,064 - ----------------------------------------------------------------------------------------------------- 4,540,623 - ----------------------------------------------------------------------------------------------------- AIRLINES -- 0.1% 21,100 Southwest Airlines Co. ..................................... 340,976 - ----------------------------------------------------------------------------------------------------- APPLIANCES AND TOOLS -- 0.2% 11,765 Maytag Corp. ............................................... 501,777 3,400 The Stanley Works .......................................... 139,434 - ----------------------------------------------------------------------------------------------------- 641,211 - ----------------------------------------------------------------------------------------------------- AUTOMOBILES -- 0.5% 18,494 Ford Motor Co. ............................................. 295,904 19,086 General Motors Corp. ....................................... 1,020,147 - ----------------------------------------------------------------------------------------------------- 1,316,051 - ----------------------------------------------------------------------------------------------------- BANKS -- 4.0% 34,216 Bank of America Corp. ...................................... 2,407,438 12,835 The Bank of New York Co., Inc. ............................. 433,181 30,121 Bank One Corp. ............................................. 1,159,056 5,493 Fifth Third Bancorp. ....................................... 366,108 22,616 FleetBoston Financial Corp. ................................ 731,628 6,001 Golden West Financial Corp. ................................ 412,749 29,165 National City Corp. ........................................ 969,736 4,400 Regions Financial Corp. .................................... 154,660 5,283 SunTrust Banks, Inc. ....................................... 357,765 22,200 U.S. Bancorp. .............................................. 518,370 18,130 Wachovia Corp. ............................................. 692,203 26,000 Washington Mutual, Inc. .................................... 964,860 37,724 Wells Fargo & Co. .......................................... 1,888,463 - ----------------------------------------------------------------------------------------------------- 11,056,217 - ----------------------------------------------------------------------------------------------------- BEVERAGES -- 2.2% 6,783 Adolph Coors Co., Class B Shares............................ 422,581 26,600 Anheuser-Busch Cos., Inc. .................................. 1,330,000 44,105 The Coca-Cola Co. .......................................... 2,469,880 19,800 The Pepsi Bottling Group, Inc. ............................. 609,840 24,680 PepsiCo, Inc. .............................................. 1,189,576 - ----------------------------------------------------------------------------------------------------- 6,021,877 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 8 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- BIOTECHNOLOGY -- 0.5% 19,440 Amgen Inc. (a).............................................. $ 814,147 2,800 Biogen, Inc. (a)............................................ 116,004 16,700 Immunex Corp. (a)........................................... 373,078 3,300 MedImmune, Inc. (a)......................................... 87,120 - ----------------------------------------------------------------------------------------------------- 1,390,349 - ----------------------------------------------------------------------------------------------------- BROADCASTING AND CABLE TELEVISION -- 0.5% 19,300 Comcast Corp., Special Class A Shares (a)................... 460,112 54,295 The Walt Disney Co. ........................................ 1,026,175 - ----------------------------------------------------------------------------------------------------- 1,486,287 - ----------------------------------------------------------------------------------------------------- BUILDING AND CONSTRUCTION -- 0.2% 9,200 Centex Corp. ............................................... 531,668 - ----------------------------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.1% 12,565 Masco Corp. ................................................ 340,637 - ----------------------------------------------------------------------------------------------------- CASINOS AND GAMING -- 0.1% 2,087 Harrah's Entertainment, Inc. (a)............................ 92,558 5,893 MGM MIRAGE (a).............................................. 198,889 - ----------------------------------------------------------------------------------------------------- 291,447 - ----------------------------------------------------------------------------------------------------- CHEMICALS -- 0.8% 8,000 Air Products & Chemicals, Inc. ............................. 403,760 14,479 The Dow Chemical Co. ....................................... 497,788 16,422 E.I. du Pont de Nemours & Co. .............................. 729,137 3,800 Eastman Chemical Co. ....................................... 178,220 5,000 Engelhard Corp. ............................................ 141,600 1,546 International Flavors & Fragrances Inc. .................... 50,230 2,600 Praxair, Inc. .............................................. 148,122 3,500 Rohm & Haas Co. ............................................ 141,715 - ----------------------------------------------------------------------------------------------------- 2,290,572 - ----------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- 0.9% 6,900 Automatic Data Processing, Inc. ............................ 300,495 4,600 Avery Dennison Corp. ....................................... 288,650 11,700 Concord EFS, Inc. (a)....................................... 352,638 8,884 Equifax Inc. ............................................... 239,868 21,872 First Data Corp. ........................................... 813,638 11,610 Fiserv, Inc. (a)............................................ 426,203 - ----------------------------------------------------------------------------------------------------- 2,421,492 - ----------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.2% 146,572 Cisco Systems, Inc. (a)..................................... 2,044,679 22,000 JDS Uniphase Corp. (a)...................................... 58,740 40,645 Lucent Technologies Inc. (a)................................ 67,471 62,154 Motorola, Inc. ............................................. 896,261 13,857 Scientific-Atlanta, Inc. ................................... 227,948 - ----------------------------------------------------------------------------------------------------- 3,295,099 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 9 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- COMPUTER SERVICES -- 0.8% 75,538 AOL Time Warner Inc. (a).................................... $ 1,111,164 8,200 Computer Sciences Corp. (a)................................. 391,960 10,100 Electronic Data Systems Corp. .............................. 375,215 28,105 Unisys Corp. (a)............................................ 252,945 - ----------------------------------------------------------------------------------------------------- 2,131,284 - ----------------------------------------------------------------------------------------------------- COMPUTERS AND PERIPHERALS -- 1.9% 15,867 Apple Computer, Inc. (a).................................... 281,163 50,500 Dell Computer Corp. (a)..................................... 1,320,070 46,909 EMC Corp. (a)............................................... 354,163 34,521 Hewlett Packard Co. ........................................ 527,482 25,873 International Business Machines Corp. ...................... 1,862,856 8,141 Lexmark International, Inc. (a)............................. 442,870 5,819 Network Appliance, Inc. (a)................................. 72,388 73,200 Sun Microsystems, Inc. (a).................................. 366,732 - ----------------------------------------------------------------------------------------------------- 5,227,724 - ----------------------------------------------------------------------------------------------------- CONSTRUCTION AND AGRICULTURAL MACHINERY -- 0.1% 6,388 Deere & Co. ................................................ 305,985 - ----------------------------------------------------------------------------------------------------- CONSTRUCTION SUPPLIES AND FIXTURES -- 0.3% 13,623 Fortune Brands, Inc. ....................................... 762,888 - ----------------------------------------------------------------------------------------------------- CONSUMER SERVICES -- 0.2% 14,396 H&R Block, Inc. ............................................ 664,375 - ----------------------------------------------------------------------------------------------------- CONTAINERS AND PACKAGING -- 0.3% 3,858 Ball Corp. ................................................. 160,030 22,771 Pactiv Corp. (a) ........................................... 541,950 - ----------------------------------------------------------------------------------------------------- 701,980 - ----------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS -- 4.7% 33,052 American Express Co. ....................................... 1,200,449 18,900 Charles Schwab Corp. ....................................... 211,680 15,000 Countrywide Credit Industries, Inc. ........................ 723,750 23,894 Fannie Mae.................................................. 1,762,183 21,205 Freddie Mac................................................. 1,297,746 6,521 The Goldman Sachs Group, Inc. .............................. 478,315 18,543 Household International, Inc. .............................. 921,587 3,924 Investors Financial Services Corp. ......................... 131,611 29,922 J.P. Morgan Chase & Co. .................................... 1,014,954 9,547 Lehman Brothers Holdings Inc. .............................. 596,878 29,600 MBNA Corp. ................................................. 978,872 14,249 Merrill Lynch & Co., Inc. .................................. 577,084 15,032 Moody's Corp. .............................................. 747,842
SEE NOTES TO FINANCIAL STATEMENTS. 10 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS -- 4.7% (CONTINUED) 19,314 Morgan Stanley.............................................. $ 832,047 5,788 SLM Corp. .................................................. 560,857 9,896 State Street Corp. ......................................... 442,351 22,018 Union Planters Corp. ....................................... 712,723 - ----------------------------------------------------------------------------------------------------- 13,190,929 - ----------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.9% 11,369 ALLTEL Corp. ............................................... 534,343 37,450 AT&T Corp. ................................................. 400,715 35,993 BellSouth Corp. ............................................ 1,133,780 58,746 SBC Communications Inc. .................................... 1,791,753 33,576 Verizon Communications Inc. ................................ 1,348,076 - ----------------------------------------------------------------------------------------------------- 5,208,667 - ----------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.7% 12,382 Dominion Resources Inc. .................................... 819,688 16,300 Duke Energy Co. ............................................ 506,930 11,900 Entergy Corp. .............................................. 505,036 14,255 Exelon Corp. ............................................... 745,536 50,075 Mirant Corp. (a)............................................ 365,548 15,545 PG&E Corp. (a).............................................. 278,100 28,031 The Southern Co. ........................................... 768,049 4,030 TECO Energy, Inc. .......................................... 99,743 15,800 TXU Corp. .................................................. 814,490 - ----------------------------------------------------------------------------------------------------- 4,903,120 - ----------------------------------------------------------------------------------------------------- ELECTRONIC INSTRUMENTS AND CONTROLS -- 0.3% 8,000 Agilent Technologies, Inc. (a).............................. 189,200 7,839 Eaton Corp. ................................................ 570,287 - ----------------------------------------------------------------------------------------------------- 759,487 - ----------------------------------------------------------------------------------------------------- FOOD AND DRUG RETAILING -- 0.5% 23,198 SUPERVALU Inc. ............................................. 569,047 19,991 Walgreen Co. ............................................... 772,252 - ----------------------------------------------------------------------------------------------------- 1,341,299 - ----------------------------------------------------------------------------------------------------- FOOD PROCESSING -- 0.6% 7,164 Hershey Foods Corp. ........................................ 447,750 588 The J.M. Smucker Co. ....................................... 20,084 12,598 Kellogg Co. ................................................ 451,764 23,308 Tyson Foods, Inc., Class A Shares........................... 361,507 7,599 Unilever N.V., NY Shares.................................... 492,415 - ----------------------------------------------------------------------------------------------------- 1,773,520 - ----------------------------------------------------------------------------------------------------- FURNITURE AND FIXTURES -- 0.2% 21,571 Leggett & Platt, Inc. ...................................... 504,761 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 11 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- HEALTHCARE FACILITIES -- 0.5% 16,600 HCA Inc. ................................................... $ 788,500 10,373 Tenet Healthcare Corp. (a).................................. 742,188 - ----------------------------------------------------------------------------------------------------- 1,530,688 - ----------------------------------------------------------------------------------------------------- HOTELS AND MOTELS -- 0.1% 7,941 Hilton Hotels Corp. ........................................ 110,380 3,913 Starwood Hotels & Resorts Worldwide, Inc. .................. 128,699 - ----------------------------------------------------------------------------------------------------- 239,079 - ----------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.5% 6,875 3M Co. ..................................................... 845,625 175,735 General Electric Co. ....................................... 5,105,102 5,507 Johnson Controls, Inc. ..................................... 449,426 37,669 Tyco International Ltd. .................................... 508,908 - ----------------------------------------------------------------------------------------------------- 6,909,061 - ----------------------------------------------------------------------------------------------------- INSURANCE - ACCIDENT AND HEALTH -- 1.0% 8,919 CIGNA Corp. ................................................ 868,889 14,219 Torchmark Corp. ............................................ 543,166 11,000 UnitedHealth Group Inc. .................................... 1,007,050 6,411 WellPoint Health Networks Inc. (a).......................... 498,840 - ----------------------------------------------------------------------------------------------------- 2,917,945 - ----------------------------------------------------------------------------------------------------- INSURANCE - LIFE -- 0.2% 6,071 Lincoln National Corp. ..................................... 254,982 14,176 MetLife, Inc. .............................................. 408,269 - ----------------------------------------------------------------------------------------------------- 663,251 - ----------------------------------------------------------------------------------------------------- INSURANCE - PROPERTY AND CASUALTY -- 1.7% 20,622 The Allstate Corp. ......................................... 762,602 37,363 American International Group, Inc. ......................... 2,549,277 4,484 MBIA, Inc. ................................................. 253,481 5,878 MGIC Investment Corp. ...................................... 398,528 12,585 The PMI Group, Inc. ........................................ 480,747 4,890 The Progressive Corp. ...................................... 282,887 - ----------------------------------------------------------------------------------------------------- 4,727,522 - ----------------------------------------------------------------------------------------------------- MEDICAL EQUIPMENT AND SUPPLIES -- 1.3% 10,162 Bausch & Lomb Inc. ......................................... 343,984 9,800 Baxter International Inc. .................................. 435,610 16,150 Biomet, Inc. ............................................... 437,988 11,900 Cardinal Health, Inc. ...................................... 730,779 17,028 Caremark Rx, Inc. (a)....................................... 280,962 4,898 Guidant Corp. (a)........................................... 148,067 21,393 Medtronic, Inc. ............................................ 916,690 8,020 Varian Medical Systems, Inc. ............................... 325,211 - ----------------------------------------------------------------------------------------------------- 3,619,291 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 12 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- METALS AND MINING -- 0.4% 3,400 Alcan Aluminum Ltd. ........................................ $ 127,568 15,940 Alcoa Inc. ................................................. 528,411 12,300 Barrick Gold Corp. ......................................... 233,577 7,816 Newmont Mining Corp. ....................................... 205,795 - ----------------------------------------------------------------------------------------------------- 1,095,351 - ----------------------------------------------------------------------------------------------------- MISCELLANEOUS CAPITAL GOODS -- 0.4% 5,335 Illinois Tool Works Inc. ................................... 364,381 15,035 Ingersoll-Rand Co., Class A Shares.......................... 686,498 - ----------------------------------------------------------------------------------------------------- 1,050,879 - ----------------------------------------------------------------------------------------------------- MOTION PICTURES -- 0.5% 31,079 Viacom Inc., Class B Shares (a)............................. 1,378,975 - ----------------------------------------------------------------------------------------------------- NATURAL GAS UTILITIES -- 0.4% 12,099 Kinder Morgan, Inc. ........................................ 460,004 19,059 Questar Corp. .............................................. 470,757 5,770 Sempra Energy............................................... 127,690 - ----------------------------------------------------------------------------------------------------- 1,058,451 - ----------------------------------------------------------------------------------------------------- OIL AND GAS OPERATIONS -- 3.8% 5,200 Anadarko Petroleum Corp. ................................... 256,360 3,080 Apache Corp. ............................................... 177,038 2,300 Ashland Inc. ............................................... 93,150 7,500 Burlington Resources Inc. .................................. 285,000 18,414 ChevronTexaco Corp. ........................................ 1,629,639 9,962 Conoco Inc. ................................................ 276,944 119,802 Exxon Mobil Corp. .......................................... 4,902,298 1,900 Kerr-McGee Corp. ........................................... 101,745 4,500 Marathon Oil Corp. ......................................... 122,040 6,700 Occidental Petroleum Corp. ................................. 200,933 6,400 Phillips Petroleum Co. ..................................... 376,832 37,436 Royal Dutch Petroleum Co. .................................. 2,069,088 7,200 Unocal Corp. ............................................... 265,968 - ----------------------------------------------------------------------------------------------------- 10,757,035 - ----------------------------------------------------------------------------------------------------- OIL WELL SERVICES AND EQUIPMENT -- 0.4% 12,700 Baker Hughes Inc. .......................................... 422,783 3,864 BJ Services Co. (a)......................................... 130,912 8,938 Schlumberger Ltd. .......................................... 415,617 7,657 Transocean Inc. ............................................ 238,516 - ----------------------------------------------------------------------------------------------------- 1,207,828 - ----------------------------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 0.6% 6,300 Georgia Pacific Corp. ...................................... 154,854 13,502 International Paper Co. .................................... 588,417
SEE NOTES TO FINANCIAL STATEMENTS. 13 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 0.6% (CONTINUED) 6,656 Kimberly-Clark Corp. ....................................... $ 412,672 5,800 Temple-Inland Inc. ......................................... 335,588 3,635 Weyerhaeuser Co. ........................................... 232,095 - ----------------------------------------------------------------------------------------------------- 1,723,626 - ----------------------------------------------------------------------------------------------------- PERSONAL AND HOUSEHOLD PRODUCTS -- 1.3% 10,100 Alberto-Culver Co., Class B Shares.......................... 482,780 6,900 Gillette Co. ............................................... 233,703 14,037 Newell Rubbermaid Inc. ..................................... 492,137 26,375 The Procter & Gamble Co. ................................... 2,355,288 - ----------------------------------------------------------------------------------------------------- 3,563,908 - ----------------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 5.3% 28,118 Abbott Laboratories......................................... 1,058,643 26,424 Bristol-Myers Squibb Co. ................................... 679,097 15,504 Eli Lilly & Co. ............................................ 874,426 11,053 Forest Laboratories, Inc. (a)............................... 782,552 57,830 Johnson & Johnson........................................... 3,022,196 11,400 King Pharmaceuticals, Inc. (a).............................. 253,650 40,009 Merck & Co. Inc. ........................................... 2,026,056 110,410 Pfizer Inc. ................................................ 3,864,350 20,592 Pharmacia Corp. ............................................ 771,170 16,068 Schering-Plough Corp. ...................................... 395,273 19,713 Wyeth....................................................... 1,009,306 - ----------------------------------------------------------------------------------------------------- 14,736,719 - ----------------------------------------------------------------------------------------------------- PRINTING AND PUBLISHING -- 0.1% 3,432 Gannett Co., Inc. .......................................... 260,489 - ----------------------------------------------------------------------------------------------------- RAILROADS -- 0.1% 6,200 Union Pacific Corp. ........................................ 392,336 - ----------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 0.1% 8,403 Equity Office Properties Trust.............................. 252,930 6,066 Equity Residential Properties Trust......................... 174,397 - ----------------------------------------------------------------------------------------------------- 427,327 - ----------------------------------------------------------------------------------------------------- RECREATIONAL PRODUCTS -- 0.1% 18,400 Mattel, Inc. ............................................... 387,872 - ----------------------------------------------------------------------------------------------------- RESTAURANTS -- 0.2% 2,566 McDonald's Corp. ........................................... 73,003 15,142 Yum! Brands, Inc. (a)....................................... 442,904 - ----------------------------------------------------------------------------------------------------- 515,907 - ----------------------------------------------------------------------------------------------------- RETAIL - APPAREL -- 0.2% 26,441 Limited Brands.............................................. 563,193 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 14 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- RETAIL - DEPARTMENT AND DISCOUNT -- 2.4% 10,561 Kohl's Corp. (a)............................................ $ 740,115 15,300 Sears, Roebuck & Co. ....................................... 830,790 7,552 Target Corp. ............................................... 287,731 87,614 Wal-Mart Stores, Inc. ...................................... 4,819,646 - ----------------------------------------------------------------------------------------------------- 6,678,282 - ----------------------------------------------------------------------------------------------------- RETAIL - HOME IMPROVEMENT -- 1.0% 39,761 The Home Depot, Inc. ....................................... 1,460,422 27,955 Lowes Cos., Inc. ........................................... 1,269,157 - ----------------------------------------------------------------------------------------------------- 2,729,579 - ----------------------------------------------------------------------------------------------------- RETAIL - SPECIALTY -- 0.8% 6,858 AutoZone, Inc. (a).......................................... 530,123 14,120 Bed Bath & Beyond Inc. (a).................................. 532,889 37,903 Staples, Inc. (a)........................................... 746,689 11,066 Williams-Sonoma, Inc. (a)................................... 339,284 - ----------------------------------------------------------------------------------------------------- 2,148,985 - ----------------------------------------------------------------------------------------------------- SCHOOLS -- 0.2% 15,282 Apollo Group, Inc., Class A Shares (a)...................... 602,416 - ----------------------------------------------------------------------------------------------------- SEMICONDUCTORS -- 2.0% 31,052 Applied Materials, Inc. (a)................................. 590,609 3,900 Broadcom Corp., Class A Shares (a).......................... 68,406 39,548 Conexant Systems, Inc. (a).................................. 64,068 118,384 Intel Corp. ................................................ 2,162,876 3,456 KLA-Tencor Corp. (a)........................................ 152,029 21,000 Micron Technology, Inc. (a)................................. 424,620 15,244 National Semiconductor Corp. (a)............................ 444,667 3,781 Novellus Systems, Inc. (a).................................. 128,554 13,881 Skyworks Solutions, Inc. (a)................................ 77,041 2,998 Teradyne, Inc. (a).......................................... 70,453 44,021 Texas Instruments Inc. ..................................... 1,043,298 10,542 Xilinx, Inc. (a)............................................ 236,457 - ----------------------------------------------------------------------------------------------------- 5,463,078 - ----------------------------------------------------------------------------------------------------- SOFTWARE -- 2.4% 14,853 Adobe Systems Inc. ......................................... 423,311 95,726 Microsoft Corp. (a)......................................... 5,236,212 2,842 NVIDIA Corp. (a)............................................ 48,826 80,900 Oracle Corp. (a)............................................ 766,123 15,767 Siebel Systems, Inc. (a).................................... 224,207 - ----------------------------------------------------------------------------------------------------- 6,698,679 - ----------------------------------------------------------------------------------------------------- STEEL -- 0.0% 2,270 Nucor Corp. ................................................ 147,641 - ----------------------------------------------------------------------------------------------------- TEXTILES AND APPAREL MANUFACTURING -- 0.1% 9,137 V.F. Corp. ................................................. 358,262 - -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 15 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
SHARES SECURITY VALUE - ----------------------------------------------------------------------------------------------------- TOBACCO -- 0.6% 37,191 Philip Morris Cos., Inc. ................................... $ 1,624,503 - ----------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.3% 15,237 FedEx Corp. ................................................ 813,656 - ----------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 58,014 AT&T Wireless Services Inc. (a)............................. 339,382 21,880 Sprint Corp. -- PCS Group (a)............................... 97,804 - ----------------------------------------------------------------------------------------------------- 437,186 - ----------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $177,460,376)................... 161,116,845 ===================================================================================================== CONVERTIBLE PREFERRED STOCK -- 3.4% ===================================================================================================== AUTOMOBILES -- 0.8% 20,000 Ford Motor Co., Capital Trust II, 6.500%, Cumulative........ 1,125,000 40,000 General Motors Corp., Series B, 5.250%...................... 1,050,800 - ----------------------------------------------------------------------------------------------------- 2,175,800 - ----------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 0.6% 10,000 CalEnergy Capital Trust II, 6.250%, Cumulative.............. 413,500 Calpine Capital Trust III: 24,000 5.000%.................................................... 714,000 2,000 5.000% (b)................................................ 59,500 17,000 Mirant Trust I, 6.250%, Cumulative.......................... 503,880 - ----------------------------------------------------------------------------------------------------- 1,690,880 - ----------------------------------------------------------------------------------------------------- FINANCIAL -- 0.9% 21,000 Newell Financial Trust I, 5.250%, Cumulative................ 976,500 25,000 Washington Mutual Capital Trust I, 5.375%, Cumulative (b)(c).................................................... 1,315,625 3,000 Washington Mutual Inc., 5.375%, Cumulative (c).............. 158,250 - ----------------------------------------------------------------------------------------------------- 2,450,375 - ----------------------------------------------------------------------------------------------------- INDUSTRIAL -- 0.1% 4,000 Amcor Ltd., 7.250%.......................................... 201,480 - ----------------------------------------------------------------------------------------------------- NATURAL GAS UTILITIES -- 0.2% 15,200 El Paso Energy Capital Trust I, 4.750%...................... 559,360 - ----------------------------------------------------------------------------------------------------- PRINTING AND PUBLISHING -- 0.3% 17,000 Tribune Co., 2.000% due 5/15/29............................. 1,109,250 - ----------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 0.5% 11,000 Equity Office Properties Trust, Series B, 5.250%, Cumulative................................................ 501,600 21,764 Equity Residential Properties Trust, Series G, 7.250%, Cumulative................................................ 545,188 6,000 General Growth Properties, Inc., 7.250%, Cumulative......... 191,400 9,000 Reckson Associates Realty Corp., Series A, 7.625%, Cumulative................................................ 215,550 - ----------------------------------------------------------------------------------------------------- 1,453,738 - ----------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $10,493,344)..... 9,640,883 =====================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 16 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
FACE AMOUNT(d) SECURITY VALUE - ------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 21.3% U.S. Treasury Notes: 4,447,600 3.625% due 1/15/08........................................ $ 4,657,473 16,513,760 3.500% due 1/15/11........................................ 17,094,334 $25,000,000 5.000% due 8/15/11........................................ 25,355,050 55,200,000 U.S. Treasury Strips, zero coupon due 11/15/27.............. 12,408,850 - ------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $58,485,541)..... 59,515,707 ======================================================================================================= U.S. GOVERNMENT AGENCIES -- 2.6% 231 Federal Home Loan Mortgage Corp. (FHLMC), 8.000% due 9/1/04.................................................... 232 Federal National Mortgage Association (FNMA): 18,189 8.500% due 3/1/05......................................... 19,201 1,935,228 6.000% due 1/1/13......................................... 1,999,610 634,238 6.500% due 12/1/27........................................ 650,439 789,613 6.000% due 3/1/28......................................... 794,717 153,972 6.000% due 4/1/28......................................... 155,172 110,909 5.500% due 5/1/28......................................... 108,590 393,002 6.000% due 5/1/28......................................... 395,543 669,822 5.500% due 6/1/28......................................... 655,818 310,573 6.000% due 6/1/28......................................... 312,581 351,448 6.000% due 7/1/28......................................... 353,721 850,361 5.500% due 8/1/28......................................... 832,583 901,817 6.000% due 8/1/28......................................... 907,647 Government National Mortgage Association (GNMA): 78,702 9.000% due 11/15/19....................................... 86,987 7,711 9.500% due 1/15/20........................................ 8,651 8,865 9.500% due 3/15/20........................................ 9,944 86,657 7.500% due 5/15/23........................................ 92,222 - ------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $7,174,933)......... 7,383,658 =======================================================================================================
FACE AMOUNT(d) RATING(e) SECURITY VALUE - ------------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 5.7% - ------------------------------------------------------------------------------------------------------- BROADCASTING AND CABLE TELEVISION -- 1.5% 4,000,000 BBB- Clear Channel Communications, Inc., Sr. Notes, 6.625% due 6/15/08................................................... 3,987,968 - ------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7% 5,000,000 BBB+ France Telecom SA, Notes, 8.500% due 3/1/31................. 4,434,230 2,000,000 CC WorldCom Inc., 8.250% due 5/15/31........................... 310,000 - ------------------------------------------------------------------------------------------------------- 4,744,230 - ------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 0.7% 3,000,000 B+ Calpine Corp., Sr. Notes, 8.500% due 2/15/11................ 2,025,000 - -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 17 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
FACE AMOUNT(d) RATING(e) SECURITY VALUE - ------------------------------------------------------------------------------------------------------- FINANCIAL -- 1.8% 5,000,000 BBB- Nationwide Health Properties, Inc., Medium-Term Notes, Series C, 6.900% due 10/1/37........................................ $ 5,081,485 - ------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (Cost -- $17,400,618)....................................... 15,838,683 ======================================================================================================= CONVERTIBLE CORPORATE BONDS -- 3.5% ======================================================================================================= ADVERTISING -- 0.1% 400,000 BBB+ The Interpublic Group Cos., zero coupon due 12/14/21 (b).... 324,000 - ------------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 0.2% 1,000,000 BB+ Lear Corp., zero coupon due 2/20/22 (b)..................... 447,500 - ------------------------------------------------------------------------------------------------------- BROADCASTING AND CABLE TELEVISION -- 0.1% 350,000 BBB- Cox Communications, Inc., Notes, 0.425% due 4/19/20......... 142,625 - ------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES -- 0.1% 300,000 Ba3* Interim Services Inc., 4.500% due 6/1/05.................... 264,000 - ------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.6% 2,500,000 BBB Corning, Inc., Bonds, zero coupon due 11/8/16............... 1,262,500 800,000 BB- Nortel Networks Corp., 4.250% due 9/1/08 (b)................ 367,000 - ------------------------------------------------------------------------------------------------------- 1,629,500 - ------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.5% 360,000(EUR) A- Axa SA, 4.125% due 1/1/14................................... 535,144 1,662,000 AA- Merrill Lynch & Co. Inc., zero coupon due 5/23/31........... 822,690 - ------------------------------------------------------------------------------------------------------- 1,357,834 - ------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 0.0% 200,000 B+ Calpine Corp., 4.000% due 12/26/06 (b)...................... 149,750 - ------------------------------------------------------------------------------------------------------- ELECTRONIC INSTRUMENTS AND CONTROLS -- 0.3% 1,951,000 BB+ Anixter International Inc., zero coupon due 6/28/20......... 556,035 440,000 BBB Arrow Electronics Inc., zero coupon due 2/21/21............. 197,450 - ------------------------------------------------------------------------------------------------------- 753,485 - ------------------------------------------------------------------------------------------------------- ENERGY -- 0.6% Diamond Offshore Drilling, Inc.: 190,000 A 1.500% due 4/15/31........................................ 173,138 300,000 A 1.500% due 4/15/31 (b).................................... 273,375 665,000 A Zero coupon due 6/6/20.................................... 350,787 600,000 A Zero coupon due 6/6/20 (b)................................ 316,500 Global Marine Corp.: 1,000,000 A- Zero coupon due 6/23/20................................... 517,500 300,000 A- Zero coupon due 6/23/20 (b)............................... 155,250 - ------------------------------------------------------------------------------------------------------- 1,786,550 - -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 18 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
FACE AMOUNT(d) RATING(e) SECURITY VALUE - ------------------------------------------------------------------------------------------------------- MEDIA -- 0.3% Liberty Media Corp.: 650,000 BBB- 4.000% due 11/15/29....................................... $ 324,188 650,000 BBB- 3.500% due 1/15/31........................................ 482,625 100,000 BBB- 3.500% due 1/15/31 (b).................................... 74,250 - ------------------------------------------------------------------------------------------------------- 881,063 - ------------------------------------------------------------------------------------------------------- NATURAL GAS UTILITIES -- 0.1% 818,000 BBB El Paso Corp., zero coupon due 2/28/21...................... 337,425 - ------------------------------------------------------------------------------------------------------- OIL AND GAS SERVICES -- 0.0% 100,000 BB- Hanover Compress Co., 4.750% due 3/15/08.................... 80,750 - ------------------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.1% 300,000 NR Roche Holdings AG, zero coupon 1/19/15 (b).................. 211,125 - ------------------------------------------------------------------------------------------------------- RECREATIONAL ACTIVITIES -- 0.1% 1,050,000 BB+ Royal Caribbean Cruises Ltd., zero coupon due 2/2/21........ 381,938 - ------------------------------------------------------------------------------------------------------- RETAIL -- 0.4% 200,000 BB+ Best Buy Inc., 2.250% due 1/15/22 (b)....................... 177,500 J.C. Penney Inc.: 300,000 BB+ 5.000% due 10/15/08....................................... 300,375 650,000 BB+ 5.000% due 10/15/08 (b)................................... 650,812 - ------------------------------------------------------------------------------------------------------- 1,128,687 - ------------------------------------------------------------------------------------------------------- TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $11,191,303)..... 9,876,232 ======================================================================================================= COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.2% 5,000,000 PP&L Transition Bond Co. LLC, 7.050% due 6/25/09............ 5,513,033 542,835 Wilmington Trust Corp., 9.250% due 1/2/07................... 543,378 - ------------------------------------------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $5,542,512)............................................... 6,056,411 ======================================================================================================= SUB-TOTAL INVESTMENTS (Cost -- $287,748,627)................ 269,428,419 ======================================================================================================= SHORT-TERM INVESTMENTS -- 3.6% U.S. TREASURY BILLS -- 0.1% 300,000 U.S. Treasury Bills, due 9/12/02 (Cost -- $298,978)......... 298,978 =======================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 19 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MANAGED ASSETS TRUST
FACE AMOUNT+ SECURITY VALUE - ------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS (CONTINUED) REPURCHASE AGREEMENT -- 3.5% 9,759,000 State Street Bank & Trust Co., 1.880% due 7/1/02; Proceeds at maturity -- $9,760,529; (Fully collateralized by U.S. Treasury Bonds, 6.250% due 8/15/23; Market value -- $9,957,656) (Cost -- $9,759,000)................. 9,759,000 ======================================================================================================= TOTAL SHORT-TERM INVESTMENTS (Cost -- $10,057,978)....................................... 10,057,978 ======================================================================================================= TOTAL INVESTMENTS -- 100% (Cost -- $297,806,605**).................................... $279,486,397 =======================================================================================================
(a) Non-income producing security. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. (c) Security issued with attached warrants. (d) Face amount denominated in U.S. dollars unless otherwise indicated. (e) All ratings are by Standard & Poor's Ratings Service, except for those which are identified by an asterisk (*), are rated by Moody's Investors Service, Inc. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 32 for definitions of ratings. Currency abbreviation used in this schedule: EUR -- Euro.
SEE NOTES TO FINANCIAL STATEMENTS. 20 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 76.8% - -------------------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 2.4% $ 600,000 B BE Aerospace, Inc., Sr. Sub. Notes, Series B, 8.875% due 5/1/11.................................................... $ 561,000 300,000 CCC+ Hexcel Corp., Sr. Sub. Notes, 9.750% due 1/15/09............ 232,500 TransDigm Inc., Guaranteed Sr. Sub. Notes: 525,000 B- 10.375% due 12/1/08....................................... 540,750 50,000 B- 10.375% due 12/1/08 (b)................................... 51,500 - -------------------------------------------------------------------------------------------------- 1,385,750 - -------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 2.7% Collins & Aikman Products Co., Guaranteed Sr. Sub. Notes: 250,000 B 11.500% due 4/15/06....................................... 238,125 100,000 B 10.750% due 12/31/11 (b).................................. 101,000 225,000 BB Dana Credit Corp., Medium-Term Notes, 7.250% due 12/16/02 (b)....................................................... 223,031 200,000 B- Eagle-Picher Industries, Inc., Guaranteed Sr. Sub. Notes, 9.375% due 3/1/08......................................... 166,000 Hayes Lemmerz International, Inc.: 200,000 NR Guaranteed Sr. Notes, 11.875% due 6/15/06 (b)(c).......... 158,500 175,000 NR Guaranteed Sr. Sub. Notes, 9.125% due 7/15/07 (c)......... 18,375 175,000 B+ Intermet Corp., Sr. Notes, 9.750% due 6/15/09 (b)........... 176,313 200,000 B MascoTech, Inc., Convertible Sub. Debentures, 4.500% due 12/15/03.................................................. 191,000 225,000 B Metaldyne Corp., Guaranteed Sr. Sub. Notes, 11.000% due 6/15/12 (b)............................................... 220,500 100,000 CCC+ Tenneco Automotive Inc., Guaranteed Sr. Sub. Notes, 11.625% due 10/15/09.............................................. 84,000 - -------------------------------------------------------------------------------------------------- 1,576,844 - -------------------------------------------------------------------------------------------------- BROADCASTING -- 4.3% 625,000 BBB- Chancellor Media Corp., Guaranteed Sr. Notes, 8.000% due 11/1/08................................................... 620,313 225,000 CCC+ Cumulus Media Inc., Guaranteed Sr. Sub. Notes, 10.375% due 7/1/08.................................................... 239,625 275,000 B- Emmis Communications Corp., Guaranteed Sr. Sub. Notes, Series B, 8.125% due 3/15/09........................................ 269,500 150,000 B- Lin Holdings Corp., Sr. Discount Notes, step bond to yield 14.703% due 3/1/08........................................ 138,750 450,000 B- Lin Television Corp., Guaranteed Sr. Sub. Notes, 8.375% due 3/1/08.................................................... 448,875 Sinclair Broadcast Group Inc., Guaranteed Sr. Sub. Notes: 225,000 B 9.000% due 7/15/07........................................ 226,125 150,000 B 8.000% due 3/15/12........................................ 148,500 Young Broadcasting Inc., Guaranteed Sr. Sub. Notes: 200,000 B- 10.000% due 3/1/11........................................ 178,000 225,000 B- Series B, 8.750% due 6/15/07.............................. 201,375 - -------------------------------------------------------------------------------------------------- 2,471,063 - -------------------------------------------------------------------------------------------------- BUILDING/CONSTRUCTION -- 3.0% 150,000.... BB Beazer Homes USA, Inc., Guaranteed Sr. Notes, 8.875% due 4/1/08...................................................... 153,000 KB Home, Sr. Sub. Notes: 75,000 BB- 8.625% due 12/15/08....................................... 76,125 475,000 BB- 9.500% due 2/15/11........................................ 490,437 475,000 BB Schuler Homes, Inc., Guaranteed Sr. Notes, 9.375% due 7/15/09 (b)............................................... 486,875
SEE NOTES TO FINANCIAL STATEMENTS. 21 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- BUILDING/CONSTRUCTION -- 3.0% (CONTINUED) WCI Communities, Inc., Guaranteed Sr. Sub. Notes: $ 275,000 B 10.625% due 2/15/11....................................... $ 288,750 200,000 B 9.125% due 5/1/12......................................... 199,500 - -------------------------------------------------------------------------------------------------- 1,694,687 - -------------------------------------------------------------------------------------------------- BUSINESS SERVICES -- 0.4% 225,000 B- Williams Scotsman, Inc., Guaranteed Sr. Notes, 9.875% due 6/1/07.................................................... 216,000 - -------------------------------------------------------------------------------------------------- CABLE -- 4.0% Adelphia Communications Corp., Sr. Notes: 300,000 D 10.250% due 6/15/11 (c)................................... 124,500 Series B: 250,000 Caa2* 8.125% due 7/15/03 (c)................................. 100,000 725,000 D 8.375% due 2/1/08 (c)....................................... 293,625 Charter Communications Holdings, LLC, Sr. Discount Notes: 650,000 B+ Step bond to yield 10.611% due 4/1/11..................... 313,625 575,000 B+ Step bond to yield 13.645% due 5/15/11.................... 204,125 Classic Cable Inc.: 275,000 NR Guaranteed Sr. Sub. Notes, Series B, 9.375% due 8/1/09 (c)....................................................... 62,219 125,000 NR Guaranteed Sub. Notes, Series B, 10.500% due 3/1/10 (c)... 28,281 325,000 BB+ CSC Holdings Inc., Sr. Notes, Series B, 7.625% due 4/11/11................................................... 261,876 550,000 B+ EchoStar DBS Corp., Sr. Notes, 9.375% due 2/1/09............ 511,500 100,000 D Frontiervision Holdings LP, Sr. Discount Notes, 11.875% due 9/15/07 (c)............................................... 67,500 375,000 B+ Mediacom LLC/Mediacom Capital Corp., Sr. Notes, 9.500% due 1/15/13................................................... 326,250 - -------------------------------------------------------------------------------------------------- 2,293,501 - -------------------------------------------------------------------------------------------------- CHEMICALS -- 4.0% Equistar Chemical, LP: 125,000 BB+ Guaranteed Sr. Notes, 10.125% due 9/1/08 (b).............. 120,000 200,000 BB+ Notes, 8.500% due 2/15/04................................. 194,980 325,000 BBB- Georgia Gulf Corp., Notes, 7.625% due 11/15/05.............. 338,982 175,000 B Huntsman International LLC, Sr. Notes, 9.875% due 3/1/09 (b)....................................................... 176,313 275,000 BB- ISP Chemco, Inc., Guaranteed Sr. Sub Notes, 10.250% due 7/1/11 (b)................................................ 281,875 Lyondell Chemical Co.: 325,000 BB Sr. Notes, Series B, 9.875% due 5/1/07.................... 312,000 625,000 B+ Sr. Sub. Notes, 10.875% due 5/1/09........................ 556,250 Millennium America Inc., Guaranteed Sr. Notes: 225,000 BBB- 7.000% due 11/15/06....................................... 214,313 100,000 BBB- 9.250% due 6/15/08........................................ 102,500 - -------------------------------------------------------------------------------------------------- 2,297,213 - -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS AND SERVICES -- 3.6% 275,000 B Elizabeth Arden, Inc., Sr. Notes, Series B, 11.750% due 2/1/11.................................................... 283,250 200,000 B- Home Products International, Inc., Guaranteed Sr. Sub. Notes, 9.625% due 5/15/08........................................ 189,250 250,000 B- ICON Health & Fitness Inc., Guaranteed Sr. Sub. Notes, 11.025% due 4/1/12 (b).................................... 247,500 175,000 B- Jarden Corp., Sr. Sub. Notes, 9.750% due 5/1/12 (b)......... 168,000 275,000 B- PCA LLC/PCA Finance Corp., Sr. Notes, 11.875% due 8/1/09 (b)....................................................... 273,625 325,000 B Salton Inc., Sr. Sub. Notes, 12.250% due 4/15/08............ 334,750
SEE NOTES TO FINANCIAL STATEMENTS. 22 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS AND SERVICES -- 3.6% (CONTINUED) $ 300,000 BB- Service Corp. International, Notes, 7.375% due 4/15/04...... $ 296,250 275,000 BB- Steinway Musical Instruments, Inc., Guaranteed Sr. Notes, 8.750% due 4/15/11........................................ 280,500 - -------------------------------------------------------------------------------------------------- 2,073,125 - -------------------------------------------------------------------------------------------------- ENERGY -- 6.1% 250,000 CCC- Belden & Blake Corp., Guaranteed Sr. Sub. Notes, Series B, 9.875% due 6/15/07........................................ 221,250 150,000 B Compton Petroleum Corp., Sr. Notes, 9.900% due 5/15/09 (b)....................................................... 153,000 150,000 CCC+ Continental Resources, Inc., Guaranteed Sr. Sub. Notes, 10.250% due 8/1/08........................................ 135,000 50,000 B Denbury Management, Inc., Guaranteed Sr. Sub. Notes, 9.000% due 3/1/08................................................ 49,375 200,000 B Denbury Resourses Inc., Guaranteed Sr. Sub. Notes, 9.000% due 3/1/08 (b)............................................ 197,500 225,000 BB Forest Oil Corp., Sr. Notes, 8.000% due 12/15/11 (b)........ 226,125 150,000 BB- Key Energy Services, Inc., Guaranteed Sr. Notes, Series C, 8.375% due 3/1/08......................................... 154,500 300,000 B+ Nuevo Energy Co., Sr. Sub Notes, Series B, 9.375% due 10/1/10................................................... 301,500 250,000 BBB- Petroleum Geo-Services ASA, Sr. Notes, 7.125% due 3/30/28... 167,956 125,000 B Plains E&P Co., Sr. Sub Notes, 8.750% due 7/1/12............ 122,970 225,000 BB Pogo Producing Co., Sr. Sub. Notes, Series B, 8.250% due 4/15/11................................................... 226,125 300,000 BB Pride International, Inc., Sr. Notes, 10.000% due 6/1/09.... 322,500 160,000 B- Range Resources Corp., Guaranteed Sr. Sub. Notes, 8.750% due 1/15/07................................................... 163,200 875,000 B Vintage Petroleum, Inc., Sr. Sub. Notes, 7.875% due 5/15/11................................................... 796,250 275,000 BB- XTO Energy, Inc., Sr. Sub. Notes, Series B, 8.750% due 11/1/09................................................... 290,125 - -------------------------------------------------------------------------------------------------- 3,527,376 - -------------------------------------------------------------------------------------------------- ENTERTAINMENT -- 2.2% 500,000 CCC+ AMC Entertainment Inc., Sr. Sub. Notes, 9.500% due 2/1/11... 498,125 100,000 B+ Intrawest Corp., Sr. Notes, 10.500% due 2/1/10.............. 104,500 Royal Caribbean Cruises., Sr. Notes, 150,000 BB+ 7.125% due 9/18/02........................................ 149,634 350,000 BB+ 8.250% due 4/1/05......................................... 332,738 175,000 B Vail Resorts, Inc., Guaranteed Sr. Sub. Notes, 8.750% due 5/15/09 (b)............................................... 175,875 - -------------------------------------------------------------------------------------------------- 1,260,872 - -------------------------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 1.6% Allied Waste North America, Inc., Guaranteed Sr. Notes, Series B: 525,000 BB- 7.625% due 1/1/06......................................... 509,250 400,000 BB- 8.875% due 4/1/08......................................... 394,000 - -------------------------------------------------------------------------------------------------- 903,250 - -------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE -- 0.2% 150,000 CCC Aurora Foods Inc., Sr. Sub. Notes, Series B, 8.750% due 7/1/08.................................................... 101,250 - -------------------------------------------------------------------------------------------------- GAMING -- 7.2% 200,000 B- Alliance Gaming Corp., Guaranteed Sr. Sub. Notes, Series B, 10.000% due 8/1/07........................................ 209,000 550,000 B Isle of Capri Casinos, Inc., Guaranteed Sr. Sub. Notes, 8.750% due 4/15/09........................................ 555,500 125,000 B Majestic Star Casino, LLC, Guaranteed Sr. Sub. Notes, Series B, 10.875% due 7/1/06..................................... 130,625 325,000 BB- Mandalay Resort Group, Sr. Sub. Notes, 6.750% due 7/15/03... 327,437 500,000 BB+ MGM MIRAGE, Guaranteed Sr. Sub. Notes, 8.375% due 2/1/11.... 505,000
SEE NOTES TO FINANCIAL STATEMENTS. 23 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- GAMING -- 7.2% (CONTINUED) Park Place Entertainment Corp., Sr. Sub Notes: $ 425,000 BB+ 7.875% due 12/15/05....................................... $ 427,125 100,000 NR 7.875% due 3/15/10 (b).................................... 99,750 525,000 CCC+ Pinnacle Entertainment, Inc., Guaranteed Sr. Sub. Notes, Series B, 9.250% due 2/15/07.............................. 472,500 375,000 B Resorts International Hotel and Casino, Inc., First Mortgage Notes, 11.500% due 3/15/09 (b)................................... 343,125 375,000 BB- Station Casinos Inc., Sr. Notes, 8.375% due 2/15/08......... 384,844 225,000 B+ Sun International Hotels Ltd., Guaranteed Sr. Sub. Notes, 8.875% due 8/15/11........................................ 230,906 475,000 B- Venetian Casino Resort LLC, Second Mortgage Notes, 11.000% due 6/15/10 (b)........................................... 480,344 - -------------------------------------------------------------------------------------------------- 4,166,156 - -------------------------------------------------------------------------------------------------- HEALTHCARE -- 1.1% 150,000 B- Alaris Medical, Inc., Guaranteed Sr. Sub. Notes, 9.750% due 12/1/06................................................... 148,500 265,000 BBB- HCA Inc., Notes, 7.000% due 7/1/07.......................... 278,420 175,000 BB+ HEALTHSOUTH Corp., Sr. Sub. Notes, 10.750% due 10/1/08...... 194,250 - -------------------------------------------------------------------------------------------------- 621,170 - -------------------------------------------------------------------------------------------------- LODGING -- 2.9% 675,000 BB- Host Marriott Corp., Guaranteed Sr. Notes, Series A, 7.875% due 8/1/05................................................ 661,500 475,000 BBB- ITT Corp., Notes, 6.750% due 11/15/05....................... 469,680 MeriStar Hospitality Corp., Guaranteed Sr. Notes: 250,000 B+ 9.000% due 1/15/08........................................ 240,000 125,000 B+ 9.125% due 1/15/11........................................ 120,000 150,000 B+ 9.125% due 1/15/11 (b).................................... 144,000 50,000 BB Prime Hospitality Corp., First Mortgage Notes, 9.250% due 1/15/06................................................... 51,375 - -------------------------------------------------------------------------------------------------- 1,686,555 - -------------------------------------------------------------------------------------------------- MANUFACTURING -- 2.5% 502,000 C Advance Glassfiber Yarns LLC, Sr. Sub. Notes, 9.875% due 1/15/09................................................... 228,410 725,000 D BGF Industries, Inc., Sr. Sub. Notes, Series B, 10.250% due 1/15/09................................................... 558,250 Foamex L.P., Guaranteed Sr. Sub. Notes: 200,000 B- 13.500% due 8/15/05....................................... 203,000 475,000 B- 9.875% due 6/15/07........................................ 425,125 - -------------------------------------------------------------------------------------------------- 1,414,785 - -------------------------------------------------------------------------------------------------- METALS/MINING -- 0.8% 425,000 BB U.S. Steel LLC, Guaranteed Sr. Notes, 10.750% due 8/1/08.... 444,125 - -------------------------------------------------------------------------------------------------- MULTI-INDUSTRY -- 1.4% Tyco International Group S.A., Notes: 300,000 BBB- 6.875% due 9/5/02......................................... 291,130 700,000 BBB- 6.375% due 10/15/11....................................... 536,893 - -------------------------------------------------------------------------------------------------- 828,023 - -------------------------------------------------------------------------------------------------- PACKAGING/CONTAINERS -- 1.4% Crown Cork & Seal Co. Inc.: 200,000 CCC Debentures, 7.375% due 12/15/26........................... 118,000 200,000 CCC Guaranteed Notes, 7.000% due 12/15/06..................... 149,000
SEE NOTES TO FINANCIAL STATEMENTS. 24 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- PACKAGING/CONTAINERS -- 1.4% (CONTINUED) $ 425,000 BB Owens-Brockway Glass Containers, Inc., Secured Sr. Notes, 8.875% due 2/15/09........................................ $ 427,125 150,000 CCC+ U.S. Can Corp., Guaranteed Sr. Sub. Notes, Series B, 12.375% due 10/1/10............................................... 126,750 - -------------------------------------------------------------------------------------------------- 820,875 - -------------------------------------------------------------------------------------------------- PAPER/FORESTRY PRODUCTS -- 3.5% 175,000 BBB Bowater Canada Finance Corp., Guaranteed Notes, 7.950% due 11/15/11 (b).............................................. 180,860 425,000 CCC- Doman Industries Ltd., Guaranteed Sr. Notes, 12.000% due 7/1/04.................................................... 393,125 250,000 BBB- Georgia-Pacific Corp., Notes, 8.125% due 5/15/11............ 239,643 225,000 B+ Millar Western Forest Products Ltd., Sr. Notes, 9.875% due 5/15/08................................................... 216,000 300,000 CCC+ Riverwood International Corp., Guaranteed Sr. Sub. Notes, 10.875% due 4/1/08........................................ 313,500 250,000 B Stone Container Corp., Sr. Notes, 8.375% due 7/1/12......... 253,125 425,000 BB+ Tembec Inc., Guaranteed Sr. Notes, 7.750% due 3/15/12....... 423,938 - -------------------------------------------------------------------------------------------------- 2,020,191 - -------------------------------------------------------------------------------------------------- PRINTING/PUBLISHING -- 0.9% 325,000 CCC- Penton Media Inc., Guaranteed Sr. Sub. Notes, 10.375% due 6/15/11................................................... 199,875 325,000 B- T/SF Communications Corp., Guaranteed Sr. Sub. Notes, Series B, 10.375% due 11/1/07.................................... 320,125 - -------------------------------------------------------------------------------------------------- 520,000 - -------------------------------------------------------------------------------------------------- RETAIL -- 6.9% 525,000 B Advance Holding Corp., Debentures, Series B, step bond to yield 19.159% due 4/15/09................................. 525,656 Advance Stores Co. Inc., Guaranteed Sr. Sub. Notes: 200,000 B 10.250% due 4/15/08....................................... 211,000 325,000 B Series B, 10.250% due 4/15/08............................. 342,875 250,000 NR Buffets, Inc., Sr. Sub. Notes, 11.250% due 7/15/10 (b)...... 251,250 100,000 CCC+ CKE Restaurants, Inc., Sub. Notes, 4.250% due 3/15/04 (d)... 89,750 CSK Auto, Inc.: 275,000 B Sr. Notes, 12.000% due 6/15/06 (b)........................ 295,281 100,000 B- Sr. Sub. Notes, Series A, 11.000% due 11/1/06............. 102,375 250,000 CCC+ Eye Care Centers of America, Inc., Guaranteed Sr. Sub. Notes, 9.125% due 5/1/08.................................. 213,750 100,000 BB- Fleming Cos., Inc., Guaranteed Sr. Notes, 10.125% due 4/1/08.................................................... 102,000 324,896 NR FRD Acquisition Co., Sr. Notes, Series B, 12.500% due 7/15/04 (c)............................................... 40,612 225,000 BB+ The Gap, Inc., Notes, 5.625% due 5/1/03..................... 221,895 J.C. Penney Co., Inc., Debentures: 550,000 BBB- 6.900% due 8/15/26........................................ 554,316 125,000 BBB- 8.125% due 4/1/27......................................... 106,556 100,000 BBB- 7.400% due 4/1/37......................................... 98,072 200,000 CCC J. Crew Operating Corp., Sr. Sub Notes, 10.375% due 10/15/07.................................................. 174,000 700,000 B- The Pantry, Inc., Guaranteed Sr. Sub. Notes, 10.250% due 10/15/07.................................................. 637,000 - -------------------------------------------------------------------------------------------------- 3,966,388 - -------------------------------------------------------------------------------------------------- TECHNOLOGY -- 3.7% 850,000 B+ Amkor Technology, Inc., Sr. Notes, 9.250% due 2/15/08....... 697,000 700,000 B+ Lucent Technologies, Inc., Debentures, 6.450% due 3/15/29... 364,000 550,000 BBB Motorola Inc., Notes, 7.625% due 11/15/10................... 517,545
SEE NOTES TO FINANCIAL STATEMENTS. 25 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
FACE AMOUNT RATING(a) SECURITY VALUE - -------------------------------------------------------------------------------------------------- TECHNOLOGY -- 3.7% (CONTINUED) $ 450,000 BB- Nortel Networks Ltd., Notes, 6.125% due 2/15/06............. $ 258,750 300,000 CCC+ ON Semiconductor Corp., Guaranteed Sr. Notes, 12.000% due 5/15/08 (b)............................................... 262,500 - -------------------------------------------------------------------------------------------------- 2,099,795 - -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 5.2% 625,000 C American Cellular Corp., Guaranteed Sr. Sub. Notes, 9.500% due 10/15/09.............................................. 115,625 175,000 B- Centennial Cellular Corp., Sr. Sub. Notes, 10.750% due 12/15/08.................................................. 84,875 525,000 B- Dobson Communications Corp., Sr. Notes, 10.875% due 7/1/10.................................................... 312,375 400,000 CCC Horizon PCS, Inc., Guaranteed Sr. Discount Notes, step bond to yield 20.695% due 10/1/10.............................. 74,000 525,000 B Nextel Communications, Inc., Sr. Notes, 9.375% due 11/15/09.................................................. 267,750 400,000 BB Qwest Capital Funding, Inc. Guaranteed Notes, 7.750% due 8/15/06................................................... 246,000 625,000 B Qwest Corp., Notes, 8.875% due 3/15/12 (b).................. 559,375 550,000 BB+ Rogers Wireless Inc., Secured Sr. Notes, 9.625% due 5/1/11.................................................... 376,750 550,000 B- Rural Cellular Corp., Sr. Sub. Notes, 9.750% due 1/15/10.... 266,750 425,000 BBB TeleCorp PCS, Inc., Guaranteed Sr. Sub. Discount Notes, step bond to yield 10.103% due 4/15/09......................... 325,125 150,000 B- Triton PCS, Inc., Guaranteed Sr. Sub. Notes, 8.750% due 11/15/11 (b).............................................. 93,000 200,000 B- TSI Telecommunications Services, Inc., Sr. Sub. Notes, 12.750% due 2/1/09 (b).................................... 195,000 500,000 D WorldCom, Inc. -- WorldCom Group, Notes, 7.500% due 5/15/11 (c)....................................................... 77,500 - -------------------------------------------------------------------------------------------------- 2,994,125 - -------------------------------------------------------------------------------------------------- TEXTILES/APPAREL -- 2.3% 475,000 B+ Avondale Mills Inc., Guaranteed Sr. Sub. Notes, 10.250% due 5/1/06.................................................... 449,468 100,000 BB- Levi Strauss & Co., Notes, 6.800% due 11/1/03............... 93,000 525,000 BBB- Tommy Hilfiger U.S.A., Inc., Guaranteed Sr. Notes, 6.500% due 6/1/03................................................ 528,659 250,000 B- Tropical Sportswear International Corp., Guaranteed Sr. Sub. Notes, Series A, 11.000% due 6/15/08...................... 265,000 - -------------------------------------------------------------------------------------------------- 1,336,127 - -------------------------------------------------------------------------------------------------- TRANSPORTATION -- 1.8% 425,000 B- Atlas Air, Inc., Sr. Notes, 10.750% due 8/1/05.............. 227,375 250,000 CC Greyhound Lines, Inc., Guaranteed Sr. Notes, Series B, 11.500% due 4/15/07....................................... 236,250 225,000 BB- Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., Sr. Notes, 12.500% due 6/15/12 (b)............................ 213,187 375,000 B- Pacer International, Inc., Guaranteed Sr. Sub. Notes, Series B, 11.750% due 6/1/07..................................... 380,625 - -------------------------------------------------------------------------------------------------- 1,057,437 - -------------------------------------------------------------------------------------------------- UTILITIES -- 0.7% 575,000 B+ Calpine Corp., Sr. Notes, 8.500% due 2/15/11................ 388,125 - -------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (Cost -- $47,067,260)....... 44,164,808 ==================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 26 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------------------- PREFERRED STOCK -- $0.2% - -------------------------------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.2% 200 Granite Broadcasting Corp., 12.750% Cumulative Exchangeable.............................................. $ 126,500 - -------------------------------------------------------------------------------------------------- TECHNOLOGY -- 0.0% 10,577 Viasystems Group, Inc., 8.000% Series B..................... 105 - -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 0.0% 3,157 Global Crossing Holding Ltd., 10.500% Sr. Exchangeable...... 32 - -------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost -- $558,075).................... 126,637 ================================================================================================== WARRANTS SECURITY VALUE - -------------------------------------------------------------------------------------------------- WARRANTS -- 0.0% - -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS AND SERVICES -- 0.0% 125 Jostens Inc., Expires 5/1/10 (d)............................ 1,906 - -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 0.0% 275 Horizon PCS Inc., Expires 10/1/10 (d)....................... 14 - -------------------------------------------------------------------------------------------------- TOTAL WARRANTS (Cost -- $7,558)............................. 1,920 ================================================================================================== SUB-TOTAL INVESTMENTS (Cost -- $47,632,893)................. 44,293,365 ================================================================================================== FACE AMOUNT SECURITY VALUE - -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 23.0% $13,238,000 State Street Bank & Trust Co., 1.880% due 7/1/02; Proceeds at maturity -- $13,240,074; (Fully collateralized by U.S. Treasury Bonds, 6.250% due 8/15/23; Market value -- $13,504,219 ) (Cost -- $13,238,000).............. 13,238,000 ================================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $60,870,893**)........... $57,531,365 ==================================================================================================
(a) All ratings are by Standard & Poor's Service, except those identified by an asterisk (*) 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) Security is in default. (d) Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. See page 32 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 27 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 HIGH YIELD BOND TRUST SUMMARY OF BONDS BY COMBINED RATINGS
STANDARD & % OF TOTAL CORPORATE POOR'S AND/OR MOODY'S BONDS AND NOTES - ------------------------------------------------- BBB Baa 12.6% BB Ba 25.2 B B 47.3 CCC Caa 9.5 CC Ca 0.5 C C 0.8 D D 2.6 NR NR 1.5 - ------------------------------------------------- 100.0% =================================================
28 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE - ------------------------------------------------------------------------------------------- COMMON STOCK -- 69.3% - ------------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 4.8% 475,000 General Dynamics Corp. ..................................... $ 50,516,250 - ------------------------------------------------------------------------------------------- APPAREL -- 0.4% 86,695 NIKE, Inc., Class B Shares.................................. 4,651,187 - ------------------------------------------------------------------------------------------- BANKS -- 3.9% 365,335 Bank of America Corp. ...................................... 25,704,971 305,585 Wells Fargo & Co. .......................................... 15,297,585 - ------------------------------------------------------------------------------------------- 41,002,556 - ------------------------------------------------------------------------------------------- BEVERAGES -- 6.7% 1,268,950 The Coca-Cola Co. .......................................... 71,061,200 - ------------------------------------------------------------------------------------------- BIOTECHNOLOGY -- 0.5% 160,215 Genentech, Inc.*............................................ 5,367,203 - ------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.8% 1,097,705 Nokia Oyj ADR............................................... 15,894,768 100,860 QUALCOMM Inc.*.............................................. 2,772,641 - ------------------------------------------------------------------------------------------- 18,667,409 - ------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIALS -- 9.7% 2,171,760 The Charles Schwab Corp. ................................... 24,323,712 81,000 Fannie Mae.................................................. 5,973,750 591,000 The Goldman Sachs Group, Inc. .............................. 43,349,850 300,000 SLM Corp. .................................................. 29,070,000 - ------------------------------------------------------------------------------------------- 102,717,312 - ------------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING -- 0.4% 36,485 3M Co. ..................................................... 4,487,655 - ------------------------------------------------------------------------------------------- HEALTHCARE PROVIDERS AND SERVICES -- 5.2% 550,000 Cardinal Health, Inc. ...................................... 33,775,500 131,380 McKesson Corp. ............................................. 4,296,126 112,990 Medtronic, Inc. ............................................ 4,841,622 125,510 UnitedHealth Group Inc. .................................... 11,490,440 - ------------------------------------------------------------------------------------------- 54,403,688 - ------------------------------------------------------------------------------------------- INSURANCE -- 7.8% 831,006 American International Group, Inc. ......................... 56,699,539 269,385 Marsh & McLennan Cos., Inc. ................................ 26,022,591 - ------------------------------------------------------------------------------------------- 82,722,130 - ------------------------------------------------------------------------------------------- MEDIA -- 11.2% 3,603,312 AOL Time Warner Inc.* ...................................... 53,004,720 1,474,425 Viacom Inc., Class B Shares* ............................... 65,420,237 - ------------------------------------------------------------------------------------------- 118,424,957 - ------------------------------------------------------------------------------------------- OIL AND GAS -- 6.1% 1,568,200 Exxon Mobil Corp. .......................................... 64,170,744 - -------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 29 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 CAPITAL APPRECIATION FUND
SHARES SECURITY VALUE - ------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 1.3% 379,350 Pfizer, Inc. ............................................... $ 13,277,250 - ------------------------------------------------------------------------------------------- SOFTWARE -- 5.7% 1,102,600 Microsoft Corp.* ........................................... 60,312,220 - ------------------------------------------------------------------------------------------- SPECIALTY RETAIL -- 3.8% 1,109,352 The Home Depot, Inc. ....................................... 40,746,499 - ------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $824,208,176)................... 732,528,260 =========================================================================================== FACE AMOUNT SECURITY VALUE - ------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 30.7% $324,443,000 U.S. Treasury Bills, due 7/5/02 (Cost -- $324,387,124)...... 324,387,124 =========================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $1,148,595,300**)........ $1,056,915,384 ===========================================================================================
* Non-income producing security. ** Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 30 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 MONEY MARKET PORTFOLIO
FACE ANNUALIZED AMOUNT SECURITY YIELD VALUE - ------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES -- 17.5% $ 4,000,000 Federal Farm Credit Bank matures 7/23/02.................... 1.78% $ 3,995,722 23,000,000 Federal Home Loan Bank mature 7/12/02 to 8/28/02............ 1.78 22,969,423 3,500,000 Federal Home Loan Bank matures 5/13/03...................... 2.10 3,500,000 20,000,000 Federal Home Loan Mortgage Corp. mature 8/1/02 to 8/8/02.... 1.79 to 1.81 19,966,094 15,000,000 Federal National Mortgage Association matures 9/4/02........ 1.77 14,952,875 - ------------------------------------------------------------------------------------------------------ TOTAL U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES (Cost -- $65,384,114)....................................... 65,384,114 ====================================================================================================== COMMERCIAL PAPER -- 82.5% 17,500,000 American Express Credit Corp. mature 7/29/02 to 4/25/03..... 1.78 to 1.83 17,485,769 10,000,000 American International Group Funding Inc. matures 7/9/02.... 1.79 9,996,089 6,840,000 Bayer Corp. matures 7/1/02.................................. 1.98 6,840,000 5,800,000 Blue Ridge Asset Funding Corp. mature 7/22/02 to 8/6/02..... 1.82 to 1.83 5,792,060 17,700,000 Boston Edison Co. mature 7/1/02 to 7/17/02.................. 1.79 to 1.81 17,692,178 5,500,000 Dorada Finance Inc. matures 7/25/02......................... 1.83 5,493,400 10,000,000 Falcon Asset Securities matures 8/2/02...................... 1.83 9,984,000 2,037,000 Gannett Inc. matures 7/26/02................................ 1.78 2,034,525 5,000,000 General Dynamics Corp. matures 7/10/02...................... 1.78 4,997,813 8,500,000 General Electric Capital Corp. matures 7/11/02.............. 1.81 8,495,797 5,000,000 Goldman Sachs Group L.P. matures 7/18/02.................... 1.83 4,995,750 10,000,000 ING U.S. Funding LLC matures 7/10/02........................ 1.78 9,995,625 10,000,000 Marsh & McLennan Cos. Inc. matures 7/17/02.................. 1.81 9,992,089 4,500,000 May Department Stores Co. matures 7/19/02................... 1.78 4,496,063 9,800,000 McGraw Hill Inc. matures 8/7/02............................. 1.80 9,782,172 10,000,000 Morgan Stanley matures 7/24/02.............................. 1.78 9,988,819 12,600,000 National Rural Utilities Co-op Corp. mature 7/15/02 to 8/6/02...................................................... 1.82 to 1.85 12,588,307 5,000,000 Nestle Capital Corp. matures 8/16/02........................ 1.92 4,987,989 15,000,000 Nordea N.A. Inc. matures 8/7/02............................. 1.83 14,972,250 6,664,000 Old Slip Funding Corp. matures 7/5/02....................... 1.82 6,662,675 15,000,000 Paradigm Funding LLC matures 8/1/02......................... 1.82 14,976,879 10,000,000 Park Avenue Recreation Corp. matures 7/9/02................. 1.81 9,996,044 14,740,000 Preferred Receivable Funding mature 7/19/02 to 7/22/02...... 1.80 to 1.81 14,725,733 5,470,000 Quincy Capital Corp. mature 7/12/02 to 7/18/02.............. 1.81 to 1.86 5,466,379 15,000,000 Santander Finance matures 7/25/02........................... 1.83 14,982,000 18,600,000 Sheffield Receivable Funding mature 7/1/02 to 7/25/02....... 1.81 to 1.83 18,593,622 10,000,000 Southern Co. matures 7/8/02................................. 1.82 9,996,519 20,000,000 Tribune Corp. mature 7/3/02 to 7/8/02....................... 1.80 to 1.81 19,995,308 14,500,000 UBS Finance Inc. mature 8/16/02 to 8/19/02.................. 1.80 to 1.89 14,465,924 8,000,000 Windmill Funding Corp. matures 8/12/02...................... 1.81 7,983,387 - ------------------------------------------------------------------------------------------------------ TOTAL COMMERCIAL PAPER (Cost -- $308,455,165)............... 308,455,165 ====================================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $373,839,279*)........... $373,839,279 ======================================================================================================
* Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 31 - -------------------------------------------------------------------------------- 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.
32 - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2002
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost........................... $287,748,627 $47,632,893 $ 824,208,176 -- Short-term investments, at cost................ 10,057,978 13,238,000 324,387,124 $373,839,279 Foreign currency, at cost...................... 8 -- -- -- ============================================================================================================= Investments, at value.......................... $269,428,419 $44,293,365 $ 732,528,260 -- Short-term investments, at value............... 10,057,978 13,238,000 324,387,124 $373,839,279 Foreign currency, at value..................... 9 -- -- -- Cash........................................... 88,555 138,958 105,615 6,699 Receivable for securities sold................. 5,789,862 476,404 1,694,027 -- Dividends and interest receivable.............. 1,505,963 1,155,924 267,540 12,074 Receivable for Fund shares sold................ 30,730 89,333 -- -- Receivable from affiliate...................... -- -- -- 26,967 - ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS................................... 286,901,516 59,391,984 1,058,982,566 373,885,019 - ------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased............... 7,055,111 683,091 4,407,956 -- Payable for Fund shares purchased.............. 252,320 189,386 4,147,837 -- Investment advisory fee payable................ 117,244 21,933 656,002 103,200 Administration fee payable..................... 14,105 2,554 52,003 19,717 Payable to broker -- variation margin.......... 7,125 -- -- -- Dividends payable.............................. -- -- -- 147,838 Accrued expenses............................... 56,310 33,042 221,782 46,267 - ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.............................. 7,502,215 930,006 9,485,580 317,022 - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $279,399,301 $58,461,978 $1,049,496,986 $373,567,997 ============================================================================================================= NET ASSETS: Paid-in capital................................ $284,641,629 $59,590,021 $1,337,519,732 $373,567,997 Undistributed net investment income............ 13,447,233 6,135,016 14,567,071 -- Accumulated net realized loss from security transactions and futures contracts.......... (387,577) (3,923,531) (210,909,901) -- Net unrealized depreciation of investments and foreign currencies.......................... (18,301,984) (3,339,528) (91,679,916) -- - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS................................. $279,399,301 $58,461,978 $1,049,496,986 $373,567,997 ============================================================================================================= SHARES OUTSTANDING............................... 19,247,381 6,468,766 20,560,776 373,567,997 - ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE....................... $14.52 $9.04 $51.04 $1.00 =============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 33 - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest.......................................... $ 3,403,260 $ 2,471,167 $ 2,467,711 $3,657,968 Dividends......................................... 1,438,953 -- 3,812,540 -- Less: Foreign withholding tax..................... (5,915) -- (109,999) -- - ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME........................... 4,836,298 2,471,167 6,170,252 3,657,968 - ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee (Note 3).................. 743,526 136,564 4,379,836 634,761 Administration fee (Note 3)....................... 89,223 16,766 350,387 117,803 Shareholder communications........................ 13,745 4,067 81,821 24,833 Audit and legal................................... 13,720 10,910 22,809 10,756 Custody........................................... 10,665 6,695 30,744 11,877 Shareholder and system servicing fees............. 8,079 7,687 7,687 6,386 Trustees' fees.................................... 2,786 1,984 1,984 689 Pricing service fees.............................. 2,341 7,140 -- -- Registration fees................................. 25 -- -- 2,685 Other............................................. 544 992 992 2,529 - ------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES.................................... 884,654 192,805 4,876,260 812,319 Less: Expense reimbursement (Note 3).............. -- -- -- (26,967) - ------------------------------------------------------------------------------------------------------------- NET EXPENSES...................................... 884,654 192,805 4,876,260 785,352 - ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME............................... 3,951,644 2,278,362 1,293,992 2,872,616 - ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES (NOTES 4 AND 6): Realized Loss From: Security transactions (excluding short-term securities*)................................. (1,245,706) (2,182) (17,441,543) (8,402) Futures contracts.............................. (259,100) -- -- -- Foreign currency transactions.................. (598) -- -- -- - ------------------------------------------------------------------------------------------------------------- NET REALIZED LOSS................................. (1,505,404) (2,182) (17,441,543) (8,402) - ------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Depreciation From: Security transactions.......................... (22,503,669) (2,478,825) (180,634,565) -- Foreign currency transactions.................. 1,336 -- -- -- - ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED DEPRECIATION OF INVESTMENTS.................................... (22,502,333) (2,478,825) (180,634,565) -- - ------------------------------------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES................................ (24,007,737) (2,481,007) (198,076,108) (8,402) - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... $(20,056,093) $ (202,645) $(196,782,116) $2,864,214 =============================================================================================================
* Except for Money Market Portfolio where the net realized losses are only from the sale of short-term securities. SEE NOTES TO FINANCIAL STATEMENTS. 34 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - ------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income......................... $ 3,951,644 $ 2,278,362 $ 1,293,992 $ 2,872,616 Net realized loss............................. (1,505,404) (2,182) (17,441,543) (8,402) Change in net unrealized depreciation......... (22,502,333) (2,478,825) (180,634,565) -- - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................. (20,056,093) (202,645) (196,782,116) 2,864,214 - ------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income......................... -- -- -- (2,864,214) - ------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................... -- -- -- (2,864,214) - ------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares.............. 3,640,370 13,633,122 46,548,079 932,408,623 Net asset value of shares issued for reinvestment of dividends.................. -- -- -- 2,888,019 Cost of shares reacquired..................... (11,704,979) (4,984,233) (100,342,415) (914,998,141) - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... (8,064,609) 8,648,889 (53,794,336) 20,298,501 - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS............... (28,120,702) 8,446,244 (250,576,452) 20,298,501 NET ASSETS: Beginning of period........................... 307,520,003 50,015,734 1,300,073,438 353,269,496 - ------------------------------------------------------------------------------------------------------------- END OF PERIOD*................................ $279,399,301 $58,461,978 $1,049,496,986 $ 373,567,997 ============================================================================================================= * Includes undistributed net investment income of:........................................... $13,447,233 $6,135,016 $14,567,071 -- =============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 35 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
MANAGED HIGH YIELD CAPITAL MONEY ASSETS BOND APPRECIATION MARKET TRUST TRUST FUND PORTFOLIO - -------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income........................ $ 9,531,657 $ 3,854,544 $ 13,274,927 $ 8,779,133 Net realized gain (loss)..................... 1,220,771 (1,804,980) (151,852,985) 4,424 Change in net unrealized appreciation (depreciation)............................ (28,324,807) 1,588,101 (334,156,957) -- - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................ (17,572,379) 3,637,665 (472,735,015) 8,783,557 - -------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income........................ (8,531,205) (2,808,864) (6,832,941) (8,779,133) Net realized gains........................... (18,962,162) -- -- (4,424) - -------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.............................. (27,493,367) (2,808,864) (6,832,941) (8,783,557) - -------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Net proceeds from sale of shares............. 10,722,755 21,125,087 155,455,168 1,413,988,096 Net asset value of shares issued for reinvestment of dividends................. 27,493,367 2,808,864 6,832,941 8,851,893 Cost of shares reacquired.................... (28,464,299) (9,424,768) (180,089,113) (1,216,687,568) - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS........................ 9,751,823 14,509,183 (17,801,004) 206,152,421 - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS.............. (35,313,923) 15,337,984 (497,368,960) 206,152,421 NET ASSETS: Beginning of year............................ 342,833,926 34,677,750 1,797,442,398 147,117,075 - -------------------------------------------------------------------------------------------------------------- END OF YEAR*................................. $307,520,003 $50,015,734 $1,300,073,438 $ 353,269,496 ============================================================================================================== * Includes undistributed net investment income of:.......................................... $9,496,187 $3,856,654 $13,273,079 -- ==============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 36 - -------------------------------------------------------------------------------- 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, 2001, reclassifications were made to the capital accounts of the Managed Asset, 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, a portion of undistributed net investment income amounting to $9 was reclassified to paid in capital for the Managed Assets Trust. Additionally, a portion of accumulated net realized loss amounting to $134,581 was reclassified to paid in capital for the High Yield Bond Trust. Net investment income, net realized gains and net assets were not affected by these changes; (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. 37 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) TAMIC has a sub-advisory agreement with The Travelers Investment Management Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary of Citigroup. Pursuant to the sub-advisory agreement, TIMCO is responsible for the day-to-day portfolio operations and investment decisions for MAT. As a result, TAMIC pays TIMCO, as sub-adviser, 0.50% 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, advisory fee calculated at an annual rate of 0.55% on the first $100,000,000, 0.50% on the next $400,000,000 and 0.45% on the amount over $500,000,000 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"), 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% of the average daily net assets of each Fund. This fee is calculated daily and paid monthly. Travelers Bank & Trust, fsb. ("TB&T"), another subsidiary of Citigroup, acts as the Funds' transfer agent. TB&T receives account fees and asset-based fees that vary according to the size and type of account. For the six months ended June 30, 2002, each Portfolio paid transfer agent fees of $2,500 to TB&T. For the six months ended June 30, 2002, Travelers Insurance reimbursed expenses of $26,967 for MMP. For the six months ended June 30, 2002, Salomon Smith Barney Inc. and its affiliates did not receive any brokerage commissions. At June 30, 2002, Travelers Insurance and its affiliates owned 100% of the Trust's outstanding shares. One Trustee and all officers of the Funds are employees of Citigroup or its affiliates. 4. INVESTMENTS During the six months ended June 30, 2002, 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................................................... $71,631,661 $36,267,515 $120,202,790 - ------------------------------------------------------------------------------------------------------ Sales....................................................... 82,334,055 30,266,093 315,159,633 ======================================================================================================
At June 30, 2002, 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............................... $ 15,836,555 $1,250,991 $ 28,948,247 Gross unrealized depreciation............................... (34,156,763) (4,590,519) (120,628,163) - -------------------------------------------------------------------------------------------------------- Net unrealized depreciation................................. $(18,320,208) $(3,339,528) $ (91,679,916) ========================================================================================================
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. 38 - -------------------------------------------------------------------------------- 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, 2002, MAT had the following open futures contracts:
EXPIRATION # OF BASIS MARKET UNREALIZED MONTH/YEAR CONTRACTS VALUE VALUE GAIN - -------------------------------------------------------------------------------------------------------- FUTURES CONTRACTS TO BUY: S&P 500 Index............................ 9/02 15 $3,695,290 $3,712,875 $17,585 ========================================================================================================
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, 2002, 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, 2002, the Funds did not hold any TBA securities. 9. CAPITAL LOSS CARRYFORWARD At December 31, 2001, HYBT and CAF had, for Federal income tax purposes, approximately $3,636,000 and $193,468,000, 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:
FUND 2002 2004 2007 2008 2009 - ------------------------------------------------------------------------------------------------------------- High Yield Bond Trust............................ $38,000 $343,000 $142,000 $ 1,197,000 $ 1,916,000 Capital Appreciation Fund........................ -- -- -- 41,615,000 151,853,000 =============================================================================================================
39 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 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. 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, 2002 DECEMBER 31, 2001 - -------------------------------------------------------------------------------------------------- MANAGED ASSETS TRUST Shares sold................................................. 236,137 631,246 Shares issued on reinvestment............................... -- 1,769,200 Shares reacquired........................................... (768,571) (1,731,513) - -------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (532,434) 668,933 ================================================================================================== HIGH YIELD BOND TRUST Shares sold................................................. 1,470,419 2,305,052 Shares issued on reinvestment............................... -- 312,096 Shares reacquired........................................... (537,249) (1,035,325) - -------------------------------------------------------------------------------------------------- Net Increase................................................ 933,170 1,581,823 ================================================================================================== CAPITAL APPRECIATION FUND Shares sold................................................. 823,352 2,319,987 Shares issued on reinvestment............................... -- 114,685 Shares reacquired........................................... (1,822,272) (2,792,897) - -------------------------------------------------------------------------------------------------- Net Decrease................................................ (998,920) (358,225) ================================================================================================== MONEY MARKET PORTFOLIO Shares sold................................................. 932,408,623 1,413,988,096 Shares issued on reinvestment............................... 2,888,019 8,851,893 Shares reacquired........................................... (914,998,141) (1,216,687,568) - -------------------------------------------------------------------------------------------------- Net Increase................................................ 20,298,501 206,152,421 ==================================================================================================
40 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
MANAGED ASSETS TRUST 2002(1) 2001(2) 2000(2) 1999 1998 1997 - -------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.............................. $15.55 $17.94 $21.12 $19.99 $17.65 $14.98 - -------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............... 0.22 0.49 0.48 0.39 0.41 0.48 Net realized and unrealized gain (loss)........................... (1.25) (1.40) (0.71) 2.30 3.27 2.70 - -------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations... (1.03) (0.91) (0.23) 2.69 3.68 3.18 - -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income............... -- (0.46) (0.41) (0.39) (0.47) (0.12) Net realized gains(3)............... -- (1.02) (2.54) (1.17) (0.87) (0.39) - -------------------------------------------------------------------------------------------------------- Total Distributions................... -- (1.48) (2.95) (1.56) (1.34) (0.51) - -------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........ $14.52 $15.55 $17.94 $21.12 $19.99 $17.65 - -------------------------------------------------------------------------------------------------------- TOTAL RETURN.......................... (6.62)%++ (5.08)% (1.62)% 14.22% 21.44% 21.31% - -------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000S)...... $279,399 $307,520 $342,834 $339,438 $276,182 $223,870 - -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)......................... 0.60%+ 0.59% 0.59% 0.60% 0.60% 0.63% Net investment income............... 2.67+ 2.95 2.47 2.17 2.30 2.91 - -------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............... 24% 59% 56% 51% 74% 90% ========================================================================================================
HIGH YIELD BOND TRUST 2002(1)(2) 2001(2) 2000(3) 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.............................. $9.04 $8.77 $9.47 $9.85 $9.89 $8.49 - ----------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............... 0.38 0.80 0.79 0.81 0.77 0.76 Net realized and unrealized gain (loss)........................... (0.38) 0.04 (0.70) (0.38) (0.13) 0.65 - ----------------------------------------------------------------------------------------------------------- Total Income From Operations.......... 0.00 0.84 0.09 0.43 0.64 1.41 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income............... -- (0.57) (0.79) (0.81) (0.68) (0.01) - ----------------------------------------------------------------------------------------------------------- Total Distributions................... -- (0.57) (0.79) (0.81) (0.68) (0.01) - ----------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD........ $9.04 $9.04 $8.77 $9.47 $9.85 $9.89 - ----------------------------------------------------------------------------------------------------------- TOTAL RETURN.......................... 0.00%++ 9.55% 0.97% 4.42% 6.56% 16.56% - ----------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000S)...... $58,462 $50,016 $34,678 $30,317 $28,088 $25,272 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)......................... 0.69%+ 0.73% 0.83% 0.81% 0.82% 0.84% Net investment income............... 8.15+ 8.79 8.74 8.85 8.42 9.04 - ----------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............... 67% 110% 80% 112% 147% 137% ===========================================================================================================
(1) For the six months ended June 30, 2002 (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. 41 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
CAPITAL APPRECIATION FUND 2002(1)(2) 2001(2) 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD............................ $60.30 $82.01 $108.80 $72.74 $46.32 $36.72 - --------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............. 0.06 0.61 0.29 0.04 0.06 0.19 Net realized and unrealized gain (loss)......................... (9.32) (22.01) (23.29) 38.08 28.07 9.41 - --------------------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations........................ (9.26) (21.40) (23.00) 38.12 28.13 9.60 - --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income............. -- (0.31) (0.04) (0.07) (0.18) -- Net realized gains(3)............. -- -- (3.75) (1.99) (1.53) (0.00)* - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions................. -- (0.31) (3.79) (2.06) (1.71) (0.00)* - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD...... $51.04 $60.30 $82.01 $108.80 $72.74 $46.32 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................ (15.36)%++ (26.09)% (21.88)% 53.52% 61.63% 26.14% - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (MILLIONS)........................ $1,049 $1,300 $1,797 $1,915 $891 $408 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)....................... 0.84%+ 0.84% 0.83% 0.83% 0.85% 0.84% Net investment income............. 0.22+ 0.91 0.30 0.07 0.18 0.54 - --------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............. 13% 47% 30% 37% 53% 89% ================================================================================================================================= MONEY MARKET PORTFOLIO 2002(1) 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- Net investment income(5)............ 0.007 0.036 0.060 0.049 0.049 0.049 Distributions from net investment income............................ (0.007) (0.036) (0.060) (0.049) (0.049) (0.049) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................ 0.72%++ 3.71% 6.18% 4.96% 5.08% 5.03% - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000S).... $373,568 $353,269 $147,117 $119,970 $42,069 $13,494 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(5)(6).................... 0.40%+ 0.40% 0.40% 0.37% 0.65% 0.57% Net investment income............. 1.46+ 3.46 6.04 4.96 5.37 5.03 =================================================================================================================================
(1) For the six months ended June 30, 2002 (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) Travelers Insurance reimbursed Money Market Portfolio for $26,967, $44,028, $47,023, $85,612, and $31,300 in expenses for the six months ended June 30, 2002 and the years ended December 31, 2001, 2000, 1999, and 1997, respectively. If expenses were not reimbursed, the per share decreases to net investment income would have been $0.000**, $0.000**, $0.000**, $0.001 and $0.002, respectively, and the actual expense ratios would have been 0.41%, 0.42%, 0.44%, 0.50%, and 1.39%, respectively. (6) For the six months ended June 30, 2002 and the years ended December 31, 2001, 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. 42 - -------------------------------------------------------------------------------- ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED) On March 27, 2002, a Special Meeting of shareholders of the Capital Appreciation Fund was held for the purpose of voting on the following proposal: To consider and approve a new investment sub-advisory agreement between TAMIC, on behalf of the Fund, and Janus Capital Corporation. The results of the vote on the proposal were as follows:
VOTES % OF SHARES VOTES % OF SHARES VOTES % OF SHARES FOR VOTED FOR AGAINST VOTED AGAINST ABSTAINED ABSTAINED - --------------------------------------------------------------------------------- 288,009,494 89.25% 18,055,655 5.60% 16,645,410 5.15%
43 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO INVESTMENT STRATEGY The U.S. Government Securities Portfolio ("Portfolio") seeks to select investments from the point of view of investors who are primarily concerned with highest credit quality, current income and total return. At least 80% of the assets of the Portfolio will be invested in obligations of the United States, its agencies and instrumentalities(1). PORTFOLIO OVERVIEW For the six months ended June 30, 2002, the Portfolio returned 4.50%, compared to 3.73% for the Merrill Lynch U.S. Treasury/Agency Master Index and 4.35% for a 50/50 blend of the Merrill Lynch U.S. Treasuries 15+ Years Index and the Merrill Lynch Mortgage Master Index(2). Past performance is not indicative of future results. U.S. Treasury and mortgage-backed security ("MBS") markets rallied strongly during the latter part of the period. Yields on the 10-year U.S. Treasury note ended the second quarter 60 basis points(3) lower, causing the MBS spread to U.S. Treasuries to fluctuate from 128 basis points to 111 basis points before ending the quarter nearly unchanged at 129 basis points. When the quarter began, the market was expecting an imminent hike in short-term interest rates. As stock prices fell and market enthusiasm waned, expectations of a rate hike diminished. Although the Federal Open Market Committee ("FOMC")(4) moved to a neutral bias from a weakness bias in March, it left the federal funds rate ("fed funds rate")(5) unchanged at 1.75% throughout the entire first half of 2002. At the end of the period, the forward London Interbank Offered Rate ("LIBOR")(6) was indicating future FOMC rate hikes. A major portion of the U.S. Treasury yield curve(7) steepened during the second quarter of 2002, with the yield spread between the 30-Year Treasury bond and 2-Year U.S. Treasury note moving from a steep 208 basis points to an even steeper 270 basis points. Most of the curve rallied, especially 2-Year Treasuries, whose yields fell 91 basis points during the quarter. We believe the economy is in a slow recovery, even though the first quarter's Gross Domestic Product ("GDP")(8) growth of 5.0% would indicate a very strong recovery. The second quarter is expected to grow much slower. Employment data seems to support these slow-growth projections, as only 39,000 non-farm jobs were created in the second quarter. Personal income and consumer spending grew slightly in April and May. The Institute for Supply Management Index ("ISM" Index)(9) reached 56.2 in June, its highest level since 1999. Thus, we do not expect a double-dip recession. - --------------- (1) Pursuant to a recently adopted SEC rule, an investment company with a name suggesting that the company focuses on a particular type of investment must invest at least 80% of its net assets in the type of investment suggested by its name. (2) The Merrill Lynch U.S. Treasury/Agency Master Index (also known as the U.S. Government Index) tracks the performance of the combined U.S. Treasury and U.S. Agency markets. The Merrill Lynch U.S. Treasuries 15+ Years Index tracks the performance of the direct Sovereign debt of the U.S. Government. It includes all U.S. dollar-denominated U.S. Treasury Notes and Bonds having at least 15 years remaining term to maturity and a minimum amount outstanding of $1 billion. The Merrill Lynch Mortgage Master Index (Mortgage Backed Securities Index) tracks the performance of U.S. dollar- denominated 30-year, 15-year and balloon pass-through mortgage securities having at least $150 million outstanding per generic production year (defined as the aggregation of all mortgage pools having a common issuer, type, coupon and production year). Please note that an investor cannot invest directly in an index. (3) A basis point is 0.01% or one one-hundredth of a percent. (4) The FOMC is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. (5) 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. (6) LIBOR is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (ARMs). (7) The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. (8) GDP is a market value of goods and services produced by labor and property in a given country. (9) The ISM's composite PMI Index (formerly the National Association of Purchasing Managers Index) is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector. 44 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST - -------------------------------------------------------------------------------- The Portfolio was even to its duration(10) target at the end of the period, but poised in expectation of the 10-year sector of the yield curve outperforming the 30-year. The Portfolio had a neutral weighting of MBS, but was overweighted in other spread products(11) such as U.S. government agency securities. SOCIAL AWARENESS STOCK PORTFOLIO INVESTMENT STRATEGY The Social Awareness Stock Portfolio ("Portfolio") seeks long-term capital appreciation by investing 80% of its assets in common stocks that meet the social criteria established for the Portfolio(1). 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. PORTFOLIO OVERVIEW For the six months ended June 30, 2002, the Portfolio returned negative 15.53%. In comparison, the S&P 500 Index ("S&P 500")(12) returned negative 13.15% and the Russell 2000 Index(13) returned negative 4.70% for the same period. Past performance is not indicative of future results. We believe that the early stages of an economic recovery can be uncomfortable for investors. This certainly was the case during the first half of 2002, as the S&P 500 moved downward in a zigzag pattern and ongoing concerns about corporate governance and accounting practices overshadowed generally positive economic news. Concerns about accounting practices and balance sheet strength affected several holdings in the Portfolio. The technology sector was particularly weak, as capital spending on technology did not rebound despite positive economic data during the period. The weakness in these areas was somewhat offset by companies such as United Parcel Service, Inc., The Black and Decker Corp. and KB HOME. It remains difficult to gauge how long investor sentiment toward Corporate America will remain negative. As we progress through the year, we anticipate that recently proposed changes in corporate governance, accounting and reporting standards, combined with voluntary company actions, will help restore investor confidence and re-focus attention on fundamentals of the economy. We believe the outlook for the economy and stock market returns continues to be favorable. Technical and fundamental data on inventories, productivity, new orders and inflation improved throughout the period. Additionally, corporate profits appear to have stabilized. A recovery in broad economic growth combined with greater capacity utilization, restructuring activities and improved productivity would help boost margins and corporate profit growth as we enter 2003. Given the current environment, we believe that any successful portfolio construction will require balance. Therefore, we plan to continue looking for stocks that are likely to benefit from a strengthening economy while also maintaining exposure to those companies we believe show solid growth opportunities regardless of the character of the economic recovery. UTILITIES PORTFOLIO INVESTMENT STRATEGY The Utilities Portfolio ("Portfolio") seeks to provide current income by investing at least 80% of its assets in equity and debt securities of companies in the utility industries(1). - --------------- (10) Duration is a common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates. (11) Spread products are fixed-income securities, such as mortgage-backed securities and corporate bonds, that provide a yield advantage when compared to U.S. Treasury securities. (12) The S&P 500 is a market capitalization-weighted measure of 500 widely held common stocks. Please note that an investor cannot invest directly in an index. (13) The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. Please note that an investor cannot invest directly in an index. 45 SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST - -------------------------------------------------------------------------------- PORTFOLIO OVERVIEW For the six months ended June 30, 2002, the Portfolio returned negative 18.31%. In comparison, the S&P Utility Index ("S&P Utility Index")(14) returned negative 14.11% for the same period. Past performance is not indicative of future results. The environment was extremely difficult for telecommunications companies and companies that own merchant generators(15) during the period. Although we made adjustments to the Portfolio that helped it weather the storm during the period, performance in the overall equities market and utilities sector was dragged down by concerns about corporate governance and accounting scandals. We believe that the telecommunications, power and utility sectors were particularly hard hit by these issues and we believe it remains difficult to gauge how long investor sentiment toward corporate America will remain negative. Given the depressed level of valuations for many of the companies in the utility universe, we believe that opportunities may exist to invest in high-quality utilities that present long-term potential for total return. Thank you for your investment in The Travelers Series Trust -- U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and Utilities Portfolio. We look forward to continuing to help you meet your investment objectives. Sincerely, /s/ HEATH B. McLENDON Heath B. McLendon Chairman July 31, 2002 The information provided in this letter represents the opinion of the managers and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities will remain in or out of the Portfolios. Please refer to pages 49 through 55 for a list and percentage breakdown of each Portfolio's holdings. Also, please note any discussion of the Trust's and Portfolios' holdings is as of June 30, 2002 and the Portfolio holdings and our views are subject to change. - --------------- (14) The S&P Utility Index is an unmanaged market cap-weighted index of natural gas and electric companies. Please note that an investor cannot invest directly in an index. (15) Merchant generators produce power as a commodity, selling power to a number of customers. 46 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ 4.50% Year Ended 6/30/02 9.33 Five Years Ended 6/30/02 7.86 Ten Years Ended 6/30/02 7.44 CUMULATIVE TOTAL RETURN ----------------------- 6/30/92 through 6/30/02 104.86% + 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, 1992, assuming reinvestment of dividends, through June 30, 2002. 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. The Merrill Lynch U.S. Treasury/Agency Master Index (also known as the U.S. Government Index) tracks the performance of the combined U.S. Treasury and U.S. Agency markets. The Merrill Lynch U.S. Treasuries 15+ Years Index tracks the performance of the direct Sovereign debt of the U.S. Government. It includes all U.S. dollar-denominated U.S. Treasury Notes and Bonds having at least 15 years remaining term to maturity and a minimum amount outstanding of $1 billion. The Merrill Lynch Mortgage Master Index (also called the Mortgage Backed Securities Index) tracks the performance of the U.S. dollar-denominated 30-year, 15-year and balloon pass-through mortgage securities having at least $150 million outstanding per generic production year (defined as the aggregation of all mortgage pools having a common issuer, type, coupon and production year.) [SECURITIES PORTFOLIO LINE GRAPH]
50% MERRILL LYNCH U.S. TREASURIES 15+ YEARS INDEX AND LEHMAN BROTHERS MERRILL LYNCH U.S. 50% MERRILL U.S. GOVERNMENT GOVERNMENT BOND CONSUMER PRICE TREASURY/AGENCY LYNCH MORTGAGE SECURITIES PORTFOLIO INDEX+ INDEX MASTER INDEX+ MASTER INDEX+ -------------------- --------------- -------------- ------------------ --------------- 6/92 $10,000 $10,000 $10,000 $10,000 $10,000 12/92 10,435 10,498 10,121 10,881 10,590 12/93 11,425 11,617 10,399 12,037 11,915 12/94 10,780 11,224 10,677 11,648 10,503 12/95 13,413 13,282 10,949 13,781 13,048 12/96 13,608 13,651 11,312 14,162 13,322 12/97 15,325 14,960 11,504 15,522 14,968 12/98 16,889 16,433 11,689 17,050 16,537 12/99 16,174 16,067 12,037 16,690 15,905 12/00 18,525 18,194 12,446 18,878 18,473 12/01 19,604 19,953 12,929 20,233 19,572 6/02 20,486 20,707 13,163 20,982 20,425
+ It is the opinion of the management that the Merrill Lynch U.S. Treasury/Agency Master Index and an equally weighted average of the Merrill Lynch U.S. Treasuries 15+ Years Index and the Merrill Lynch Mortgage Master Index ("Composite Index") more accurately reflect the current composition of the Travelers Series Trust -- U.S. Government Securities Portfolio rather than the Lehman Brothers Government Bond Index. In future reporting, the Merrill Lynch U.S. Treasury/Agency Master Index and the Composite Index will be used as the basis of comparison of total return performance rather than the Lehman Brothers Government Bond Index. - -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. 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 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ (15.53)% Year Ended 6/30/02 (22.17) Five Years Ended 6/30/02 3.45 Ten Years Ended 6/30/02 9.83 CUMULATIVE TOTAL RETURN ----------------------- 6/30/92 through 6/30/02 155.44% + 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, 1992, assuming reinvestment of dividends, through June 30, 2002. The S&P 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 PORTFOLIO S&P 500 INDEX CONSUMER PRICE INDEX ---------------------- ------------- -------------------- 6/92 $10,000 $10,000 $10,000 12/92 11,038 10,834 10,121 12/93 11,872 11,923 10,399 12/94 11,553 12,080 10,677 12/95 15,408 14,728 10,949 12/96 18,487 18,108 11,312 12/97 23,531 24,149 11,504 12/98 31,124 31,089 11,689 12/99 36,053 37,628 12,037 12/00 35,877 34,203 12,446 12/01 30,242 28,123 12,929 6/02 25,544 24,425 13,163
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. 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. 47 - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 6/30/02 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS ---------------------------- Six Months Ended 6/30/02+ (18.31)% Year Ended 6/30/02 (34.12) Five Years Ended 6/30/02 2.12 2/4/94* through 6/30/02 6.47 CUMULATIVE TOTAL RETURN ----------------------- 2/4/94* through 6/30/02 69.32% + 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, 2002. The S&P 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 S&P Utility Index is an unmanaged market cap-weighted index of natural gas and electric companies. 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]
UTILITIES PORTFOLIO S&P 500 INDEX S&P UTILITY INDEX CONSUMER PRICE INDEX ------------------- ------------- ----------------- -------------------- 2/4/94 $10,000 $10,000 $10,000 $10,000 12/94 10,170 10,072 9,500 10,205 12/95 13,149 13,852 12,611 10,464 12/96 14,638 17,031 13,328 10,811 12/97 18,340 22,712 16,613 10,995 12/98 21,680 29,240 19,078 11,171 12/99 21,662 35,390 17,327 11,504 12/00 26,917 32,168 27,236 11,895 12/01 20,728 26,450 18,945 12,357 6/30/02 16,932 22,972 16,272 12,581
- -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The performance data represents past performance and 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. 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. 48 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2002 U.S. GOVERNMENT SECURITIES PORTFOLIO
FACE AMOUNT SECURITY VALUE - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 25.2% U.S. Treasury Bonds $ 2,000,000 8.750% due 5/15/20........................................ $ 2,712,750 4,000,000 8.000% due 11/15/21....................................... 5,117,504 4,000,000 7.250% due 8/15/22........................................ 4,765,904 4,000,000 7.625% due 11/15/22....................................... 4,952,116 7,000,000 7.125% due 2/15/23........................................ 8,241,338 5,000,000 6.875% due 8/15/25........................................ 5,764,240 5,000,000 6.000% due 2/15/26........................................ 5,202,330 - ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $36,760,509)..... 36,756,182 ======================================================================================== U.S. GOVERNMENT AGENCIES -- 52.7% 3,000,000 Federal Home Loan Bank (FHLB) Certificates, 5.875% due 2/15/11................................................... 3,108,150 Federal Home Loan Mortgage Corp. (FHLMC) Certificates: 414,913 8.000% due 9/1/30......................................... 440,441 6,865,023 5.500% due 12/1/31 (a).................................... 6,661,307 4,980,967 5.500% due 2/1/32......................................... 4,833,159 3,000,000 7.500% due 5/1/32 (b)..................................... 3,150,000 4,995,159 6.500% due 5/15/32........................................ 5,104,575 Federal National Mortgage Association (FNMA) Certificates: 4,871,122 5.000% due 1/1/17 (c)..................................... 4,782,264 3,130,000 6.000% due 6/1/17......................................... 3,197,099 3,000,000 6.250% due 5/15/29........................................ 3,006,492 3,191,050 7.500% due 11/1/29 (c).................................... 3,366,080 10,275,103 5.500% due 2/1/32 (c)..................................... 10,198,114 3,902,715 6.500% due 5/1/32 (c)..................................... 3,987,567 13,949,000 Financing Corp. Strips, Series 13, zero coupon due 6/27/11................................................... 8,420,049 Government National Mortgage Association (GNMA) Certificates: 829,705 9.000% due 9/15/09 (c).................................... 902,171 331,609 8.500% due 6/15/18 (c).................................... 361,154 3,341,308 7.500% due 11/15/30....................................... 3,530,151 4,680,000 Student Loan Marketing Association (SLMA) Certificates, zero coupon due 5/15/14........................................ 1,822,359 9,000,000 Tennessee Valley Authority Certificates, 7.125% due 5/1/30.................................................... 10,018,764 - ---------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $75,594,981)........ 76,889,896 ======================================================================================== COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.0% Federal Home Loan Mortgage Corp. (FHLMC): 1,443,050 Series 1103, Class J, 8.500% due 6/15/21.................. 1,535,552 7,000,000 Series 2315, Class CL, 6.500% due 5/15/31................. 6,964,168 3,000,000 Series 2422, Class CH, 6.500% due 2/15/32................. 3,053,023 5,000,000 Series 2451, Class QB, 6.500% due 3/15/30................. 5,073,413 5,000,000 FNMA Series 2000-46, Class PB, 7.500% due 3/25/29 (a)....... 5,209,195 - ---------------------------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost -- $21,567,796)..................................... 21,835,351 ========================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 49 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 U.S. GOVERNMENT SECURITIES PORTFOLIO
FACE AMOUNT SECURITY VALUE - ---------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- $7.1% $10,422,000 State Street Bank & Trust Co., 1.880% due 7/1/02; Proceeds at maturity -- $10,423,633; (Fully collateralized by U.S. Treasury Bonds, 6.250% due 8/15/23; Market value -- $10,634,231) (Cost -- $10,422,000)........ $ 10,422,000 ======================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $144,345,286*)........... $145,903,429 ========================================================================================
(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. (c) 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. 50 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------- COMMON STOCK -- 95.8% - -------------------------------------------------------------------------------------- BASIC MATERIALS -- 5.7% 22,400 Air Products & Chemicals, Inc. ............................. $ 1,130,528 30,000 Alcoa Inc. ................................................. 994,500 25,000 E.I. du Pont de Nemours & Co. .............................. 1,110,000 15,000 Engelhard Corp. ............................................ 424,800 10,000 Praxair, Inc. .............................................. 569,700 - -------------------------------------------------------------------------------------- 4,229,528 - -------------------------------------------------------------------------------------- COMMUNICATIONS AND MEDIA -- 4.9% 31,100 AOL Time Warner Inc.+....................................... 457,481 34,500 Comcast Corp., Class A Shares+.............................. 822,480 7,500 Cox Communications, Inc., Class A Shares+................... 206,625 10,000 SBC Communications Inc. .................................... 305,000 54,500 Sprint Corp. -- PCS Group+.................................. 243,615 9,000 Univision Communications Inc., Class A Shares+.............. 282,600 28,650 Viacom Inc., Class B Shares+................................ 1,271,200 - -------------------------------------------------------------------------------------- 3,589,001 - -------------------------------------------------------------------------------------- CONSUMER DURABLES -- 3.0% 17,900 The Black & Decker Corp. ................................... 862,780 8,000 Centex Corp. ............................................... 462,320 8,217 KB HOME..................................................... 423,258 10,900 Stanley Works............................................... 447,009 - -------------------------------------------------------------------------------------- 2,195,367 - -------------------------------------------------------------------------------------- CONSUMER NON-DURABLES -- 10.6% 8,000 ConAgra Foods, Inc. ........................................ 221,200 30,000 Gillette Co. ............................................... 1,016,100 2,000 Hershey Foods Corp. ........................................ 125,000 29,600 Kimberly-Clark Corp. ....................................... 1,835,200 25,000 Kraft Foods Inc., Class A Shares............................ 1,023,750 17,500 PepsiCo, Inc. .............................................. 843,500 56,500 Sara Lee Corp. ............................................. 1,166,160 58,100 SYSCO Corp. ................................................ 1,581,482 - -------------------------------------------------------------------------------------- 7,812,392 - -------------------------------------------------------------------------------------- CONSUMER SERVICES -- 3.5% 22,550 Brinker International, Inc.+................................ 715,963 10,000 Omnicom Group Inc. ......................................... 458,000 34,700 Wendy's International, Inc. ................................ 1,382,101 - -------------------------------------------------------------------------------------- 2,556,064 - -------------------------------------------------------------------------------------- ENERGY -- 5.1% 16,800 Anadarko Petroleum Corp. ................................... 828,240 6,000 Apache Corp. ............................................... 344,880 24,026 BP PLC ADR.................................................. 1,213,073 24,800 Royal Dutch Petroleum Co. ADR............................... 1,370,696 - -------------------------------------------------------------------------------------- 3,756,889 - --------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 51 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------- FINANCE -- 21.0% 22,000 AMBAC Financial Group, Inc. ................................ $ 1,478,400 32,900 American Express Co. ....................................... 1,194,928 17,360 American International Group, Inc. ......................... 1,184,473 40,000 The Bank of New York Co., Inc. ............................. 1,350,000 31,500 Bank One Corp. ............................................. 1,212,120 12,000 Capital One Financial Corp. ................................ 732,600 10,000 FleetBoston Financial Corp. ................................ 323,500 7,100 Freddie Mac................................................. 434,520 16,315 Hartford Financial Services Group, Inc. .................... 970,253 10,000 Household International, Inc. .............................. 497,000 20,000 J.P. Morgan Chase & Co. .................................... 678,400 5,000 Lehman Brothers Holdings, Inc. ............................. 312,600 6,831 Marsh & McLennan Cos., Inc. ................................ 659,874 6,500 MBNA Corp. ................................................. 214,955 10,000 Merrill Lynch & Co., Inc. .................................. 405,000 24,000 Morgan Stanley.............................................. 1,033,920 7,500 State Street Corp. ......................................... 335,250 10,000 Washington Mutual, Inc. .................................... 371,100 25,000 Wells Fargo & Co. .......................................... 1,251,500 10,000 XL Capital Ltd., Class A Shares............................. 847,000 - -------------------------------------------------------------------------------------- 15,487,393 - -------------------------------------------------------------------------------------- HEALTHCARE -- 12.8% 24,500 Amgen Inc.+................................................. 1,026,060 10,000 Bristol-Myers Squibb Co. ................................... 257,000 21,000 Eli Lilly & Co. ............................................ 1,184,400 2,000 Guidant Corp.+.............................................. 60,460 29,000 Johnson & Johnson........................................... 1,515,540 27,000 Medtronic, Inc. ............................................ 1,156,950 11,300 Merck & Co., Inc. .......................................... 572,232 54,000 Pfizer Inc. ................................................ 1,890,000 25,200 Tenet Healthcare Corp.+..................................... 1,803,060 - -------------------------------------------------------------------------------------- 9,465,702 - -------------------------------------------------------------------------------------- INDUSTRIAL -- 2.3% 22,000 Honeywell International, Inc. .............................. 775,060 6,500 Illinois Tool Works Inc. ................................... 443,950 4,000 SPX Corp. .................................................. 470,000 - -------------------------------------------------------------------------------------- 1,689,010 - -------------------------------------------------------------------------------------- RETAIL -- 5.5% 12,000 Costco Wholesale Corp.+..................................... 463,440 23,000 The Home Depot, Inc. ....................................... 844,790 20,000 Lowe's Cos., Inc. .......................................... 908,000 34,300 Wal-Mart Stores, Inc. ...................................... 1,886,843 - -------------------------------------------------------------------------------------- 4,103,073 - --------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 52 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 SOCIAL AWARENESS STOCK PORTFOLIO
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------- TECHNOLOGY -- 18.3% 55,000 Applied Materials, Inc.+.................................... $ 1,046,100 18,100 Automatic Data Processing, Inc. ............................ 788,255 13,000 Celestica, Inc.+............................................ 295,230 73,700 Cisco Systems, Inc.+........................................ 1,028,115 25,500 Dell Computer Corp.+........................................ 666,570 18,300 Electronic Data Systems Corp. .............................. 679,845 110,400 EMC Corp.+.................................................. 833,520 66,700 Intel Corp. ................................................ 1,218,609 10,000 International Business Machines Corp. ...................... 720,000 25,000 Maxtor Corp.+............................................... 113,000 44,400 Microsoft Corp.+............................................ 2,428,680 25,000 Motorola, Inc. ............................................. 360,500 30,000 Nokia Corp. ADR............................................. 434,400 64,900 Oracle Corp.+............................................... 614,603 13,000 SAP AG Sponsored ADR........................................ 315,770 121,700 Sun Microsystems, Inc.+..................................... 609,717 30,000 Texas Instruments Inc. .................................... 711,000 30,000 Vishay Intertechnology, Inc.+............................... 660,000 - -------------------------------------------------------------------------------------- 13,523,914 - -------------------------------------------------------------------------------------- TRANSPORTATION -- 2.9% 15,000 Norfolk Southern Corp. ..................................... 350,700 25,230 Southwest Airlines Co. ..................................... 407,717 22,700 United Parcel Service, Inc., Class B Shares................. 1,401,725 - -------------------------------------------------------------------------------------- 2,160,142 - -------------------------------------------------------------------------------------- UTILITIES -- 0.2% 5,000 FirstEnergy Corp. .......................................... 166,900 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $70,393,906).................... 70,735,375 ====================================================================================== FACE AMOUNT SECURITY VALUE - -------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 4.2% $3,112,000 J.P. Morgan Chase & Co., 1.800% due 7/1/02; Proceeds at maturity -- $3,112,467; (Fully collateralized by U.S. Treasury Bonds, 7.250% to 13.875% due 5/15/09 to 2/15/20; Market value -- $3,174,257) (Cost -- $3,112,000).......... 3,112,000 ====================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $73,505,906*)............ $73,847,375 ======================================================================================
+ Non-income producing security. * Aggregate cost for Federal income tax purposes is substantially the same. SEE NOTES TO FINANCIAL STATEMENTS. 53 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 UTILITIES PORTFOLIO
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------- COMMON STOCK -- 98.7% - -------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 8.5% 15,359 AT&T Corp. ................................................. $ 164,341 30,000 SBC Communications Inc. .................................... 915,000 24,000 Sprint Corp. -- FON Group................................... 254,640 28,100 Verizon Communications Inc. ................................ 1,128,215 - -------------------------------------------------------------------------------------- 2,462,196 - -------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 66.3% 20,000 Allegheny Energy, Inc. ..................................... 515,000 15,000 American Electric Power Co., Inc. .......................... 600,300 32,000 Cinergy Corp. .............................................. 1,151,680 40,000 Constellation Energy Group, Inc. ........................... 1,173,600 28,806 Dominion Resources, Inc. ................................... 1,906,957 15,095 DTE Energy Co. ............................................. 673,841 62,800 Duke Energy Co. ............................................ 1,953,080 10,000 The Empire District Electric Co. ........................... 205,000 25,000 Entergy Corp. .............................................. 1,061,000 17,500 Exelon Corp. ............................................... 915,250 52,500 FirstEnergy Corp. .......................................... 1,752,450 15,600 FPL Group, Inc. ............................................ 935,844 25,000 PG&E Corp. ................................................. 447,250 10,000 Pinnacle West Capital Corp. ................................ 395,000 24,000 PPL Corp. .................................................. 793,920 25,000 Progress Energy Inc. ....................................... 1,300,250 18,000 Public Service Enterprise Group, Inc. ...................... 779,400 35,000 The Southern Co. ........................................... 959,000 31,300 TXU Corp. .................................................. 1,613,515 - -------------------------------------------------------------------------------------- 19,132,337 - -------------------------------------------------------------------------------------- GAS UTILITIES -- 20.0% 35,880 El Paso Corp. .............................................. 739,487 27,800 Energen Corp. .............................................. 764,500 22,500 Keyspan Corp. .............................................. 847,125 5,000 Kinder Morgan, Inc. ........................................ 190,100 42,000 National Fuel Gas Co. ...................................... 945,420 20,000 NiSource Inc. .............................................. 436,600 42,400 Sempra Energy............................................... 938,312 36,400 Southwest Gas Corp. ........................................ 900,900 - -------------------------------------------------------------------------------------- 5,762,444 - -------------------------------------------------------------------------------------- METALS AND MININGS -- 2.4% 20,000 Arch Coal Inc. ............................................. 454,200 8,100 Peabody Energy Corp. ....................................... 229,230 - -------------------------------------------------------------------------------------- 683,430 - -------------------------------------------------------------------------------------- MULTI-UTILITIES -- 0.2% 6,896 Aquila, Inc................................................. 55,168 - --------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 54 - -------------------------------------------------------------------------------- SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2002 UTILITIES PORTFOLIO
SHARES SECURITY VALUE - -------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.3% 40,404 AT&T Wireless Services Inc.+................................ $ 236,363 30,000 Sprint Corp. -- PCS Group+.................................. 134,100 - -------------------------------------------------------------------------------------- 370,463 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost -- $28,854,712).................... 28,466,038 ======================================================================================
FACE AMOUNT RATING++ SECURITY VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS -- 0.7% - --------------------------------------------------------------------------------------------------- ELECTRIC/GAS -- 0.7% $ 200,000 A- Arizona Public Service Co., 1st Mortgage Bonds, 7.250% due 8/1/23 (Cost -- $176,884)........................................ 195,780 - --------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 0.6% 183,000 J.P. Morgan Chase & Co., 1.800% due 7/1/02; Proceeds at maturity -- $183,027; (Fully collateralized by U.S. Treasury Bonds, 7.250% to 13.875% due 5/15/09 to 2/15/20; Market value -- $186,661) (Cost -- $183,000)........................................ 183,000 =================================================================================================== TOTAL INVESTMENTS -- 100% (Cost -- $29,214,596**)........... $28,844,818 ===================================================================================================
+ Non-income producing security. ++ All ratings are by Standard & Poor's Rating Service, except for those which are 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 56 for definitions of ratings. SEE NOTES TO FINANCIAL STATEMENTS. 55 - -------------------------------------------------------------------------------- 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.
56 - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2002
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost................................. $144,345,286 $73,505,906 $29,214,596 ============================================================================================================= Investments, at value................................ $145,903,429 $73,847,375 $28,844,818 Cash................................................. 26 679 256 Dividends and interest receivable.................... 1,201,830 57,646 80,730 Receivable for securities sold....................... 2,028,181 -- -- Receivable for Fund shares sold...................... 57,687 52,251 -- Other assets......................................... 401 -- -- - ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS......................................... 149,191,554 73,957,951 28,925,804 - ------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased..................... 7,204,330 -- -- Investment advisory fee payable...................... 36,935 37,478 15,726 Administration fee payable........................... 6,860 5,000 1,147 Payable for Fund shares purchased.................... -- 113,970 12,099 Accrued expenses..................................... 28,979 27,599 23,788 - ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.................................... 7,277,104 184,047 52,760 - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $141,914,450 $73,773,904 $28,873,044 ============================================================================================================= NET ASSETS: Paid-in capital...................................... $131,104,474 $82,805,995 $37,560,179 Undistributed net investment income.................. 9,668,998 476,035 1,450,308 Accumulated net realized loss from security transactions...................................... (417,165) (9,849,595) (9,767,665) Net unrealized appreciation (depreciation) of investments....................................... 1,558,143 341,469 (369,778) - ------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS....................................... $141,914,450 $73,773,904 $28,873,044 ============================================================================================================= SHARES OUTSTANDING..................................... 10,916,496 3,618,534 2,547,388 - ------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, PER SHARE............................. $13.00 $20.39 $11.33 =============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 57 - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................ $ 3,688,963 $ 17,645 $ 20,123 Dividends............................................... -- 402,558 538,194 Less: Foreign withholding tax........................... -- (6,753) -- - -------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME................................. 3,688,963 413,450 558,317 - -------------------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory fee (Note 2)........................ 206,401 245,966 109,396 Administration fee (Note 2)............................. 39,390 24,128 10,098 Audit and legal......................................... 9,599 11,040 10,316 Shareholder and system servicing fees................... 8,793 9,105 7,714 Shareholder communications.............................. 6,614 4,618 2,189 Custody................................................. 3,868 3,016 2,723 Trustees' fees.......................................... 2,753 2,840 2,748 Pricing service fees.................................... 1,481 -- 69 Other................................................... 561 616 362 - -------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES.......................................... 279,460 301,329 145,615 - -------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME..................................... 3,409,503 112,121 412,702 - -------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized Gain (Loss) From Security Transactions (excluding short-term securities): Proceeds from sales.................................. 106,216,430 15,671,667 8,169,742 Cost of securities sold.............................. 105,929,423 20,763,600 14,975,874 - -------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS)................................ 287,007 (5,091,933) (6,806,132) - -------------------------------------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments: Beginning of period.................................. (541,063) 8,826,950 49,410 End of period........................................ 1,558,143 341,469 (369,778) - -------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION).... 2,099,206 (8,485,481) (419,188) - -------------------------------------------------------------------------------------------------------------- NET GAIN (LOSS) ON INVESTMENTS............................ 2,386,213 (13,577,414) (7,225,320) - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... $ 5,795,716 $(13,465,293) $(6,812,618) ==============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 58 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income........................... $ 3,409,503 $ 112,121 $ 412,702 Net realized gain (loss)........................ 287,007 (5,091,933) (6,806,132) Change in net unrealized appreciation (depreciation)............................... 2,099,206 (8,485,481) (419,188) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................... 5,795,716 (13,465,293) (6,812,618) - ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................ 25,471,074 5,745,631 992,388 Cost of shares reacquired....................... (15,843,223) (1,850,483) (4,739,391) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS........................... 9,627,851 3,895,148 (3,747,003) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS................. 15,423,567 (9,570,145) (10,559,621) NET ASSETS: Beginning of period............................. 126,490,883 83,344,049 39,432,665 - ------------------------------------------------------------------------------------------------------- END OF PERIOD*.................................. $141,914,450 $ 73,773,904 $ 28,873,044 ======================================================================================================= * Includes undistributed net investment income of:............................................. $9,668,998 $476,035 $1,450,308 =======================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 59 - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2001
U.S. GOVERNMENT SOCIAL AWARENESS SECURITIES STOCK UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income........................... $ 6,175,059 $ 364,152 $ 1,038,124 Net realized gain (loss)........................ 1,566,826 (3,906,695) (2,961,533) Change in net unrealized appreciation (depreciation)............................... (1,842,992) (10,401,433) (10,419,460) - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................... 5,898,893 (13,943,976) (12,342,869) - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income........................... (4,359,413) (345,874) (855,489) Net realized gains.............................. -- -- (2,174,214) - ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................................. (4,359,413) (345,874) (3,029,703) - ------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Net proceeds from sale of shares................ 53,164,510 21,161,058 13,760,099 Net asset value of shares issued for reinvestment of dividends.................... 4,359,413 345,874 3,029,703 Cost of shares reacquired....................... (23,542,477) (5,056,878) (10,440,940) - ------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS................................. 33,981,446 16,450,054 6,348,862 - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS................. 35,520,926 2,160,204 (9,023,710) NET ASSETS: Beginning of year............................... 90,969,957 81,183,845 48,456,375 - ------------------------------------------------------------------------------------------------------- END OF YEAR*.................................... $126,490,883 $ 83,344,049 $ 39,432,665 ======================================================================================================= * Includes undistributed net investment income of:.......................................... $6,259,495 $363,914 $1,037,606 =======================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 60 - -------------------------------------------------------------------------------- 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 13 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 Securities, formerly known as Convertible Bond, MFS Mid Cap Growth, MFS Research, MFS Value, 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; 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 adviser to U.S. Government Securities Portfolio ("USGS"). USGS pays TAMIC an investment management and advisory fee calculated at the annual rate of 0.3233% of its average daily net assets. This fee is calculated daily and paid monthly. Smith Barney Fund Management LLC ("SBFM"), a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") and an indirect wholly owned subsidiary of Citigroup, acts as investment manager and adviser 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. 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. Travelers Bank & Trust, fsb. ("TB&T"), another subsidiary of Citigroup, acts as the Portfolios' transfer agent. TB&T receives account fees and asset-based fees that vary according to the size and type of account. For the six months ended June 30, 2002, each Portfolio paid transfer agent fees of $2,500 to TB&T. 61 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) For the six months ended June 30, 2002, Salomon Smith Barney Inc. and its affiliates did not received any brokerage commissions. At June 30, 2002, Travelers Insurance and its affiliates owned 100% of the Trust's outstanding shares. One Trustee and all officers of the Trust are employees of Citigroup or its affiliates. 3. INVESTMENTS During the six months ended June 30, 2002, 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................................................... $120,023,590 $20,625,996 $5,652,701 - ----------------------------------------------------------------------------------------------------- Sales....................................................... 106,216,430 15,671,667 8,169,742 =====================================================================================================
At June 30, 2002, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
USGS SAS UTILITIES - ----------------------------------------------------------------------------------------------------- Gross unrealized appreciation............................... $2,324,404 $ 10,709,693 $ 3,296,074 Gross unrealized depreciation............................... (766,261) (10,368,224) (3,665,852) - ----------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation).................. $1,558,143 $ 341,469 $ (369,778) =====================================================================================================
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, 2002, the Portfolios did not hold any futures contracts. 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, 2002, the Portfolios did not hold any purchased call or put option contracts. 62 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 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, 2002, USGS held TBA securities with a total cost of $3,141,563. 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, 2002 DECEMBER 31, 2001 - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES PORTFOLIO Shares sold................................................. 2,007,445 4,263,211 Shares issued on reinvestment............................... -- 351,566 Shares reacquired........................................... (1,256,917) (1,892,426) - ------------------------------------------------------------------------------------------------- Net Increase................................................ 750,528 2,722,351 ================================================================================================= SOCIAL AWARENESS STOCK PORTFOLIO Shares sold................................................. 249,693 817,078 Shares issued on reinvestment............................... -- 14,071 Shares reacquired........................................... (83,044) (202,423) - ------------------------------------------------------------------------------------------------- Net Increase................................................ 166,649 628,726 ================================================================================================= UTILITIES PORTFOLIO Shares sold................................................. 78,404 778,866 Shares issued on reinvestment............................... -- 189,593 Shares reacquired........................................... (374,169) (646,898) - ------------------------------------------------------------------------------------------------- Net Increase (Decrease)..................................... (295,765) 321,561 =================================================================================================
9. CAPITAL LOSS CARRYFORWARD At December 31, 2001, USGS, SAS and Utilities had, for Federal income tax purposes approximately $532,000, $4,043,000 and $944,000 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 2009 - --------------------------------------------------------------------------------------------- U.S. Government Securities Portfolio........................ $532,000 -- -- Social Awareness Stock Portfolio............................ -- $774,000 $3,269,000 Utilities Portfolio......................................... -- -- 944,000 =============================================================================================
63 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
U.S. GOVERNMENT SECURITIES PORTFOLIO 2002(1)(2) 2001(2) 2000(2) 1999(2) 1998 1997 - -------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD............................ $12.44 $12.22 $11.30 $11.80 $11.65 $10.86 - -------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............. 0.33 0.69 0.74 0.68 0.49 0.58 Net realized and unrealized gain (loss)......................... 0.23 0.02 0.84 (1.18) 0.70 0.79 - -------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations........................ 0.56 0.71 1.58 (0.50) 1.19 1.37 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income............. -- (0.49) (0.66) (0.00)* (0.50) (0.58) Net realized gains................ -- -- -- -- (0.54) -- - -------------------------------------------------------------------------------------------------------------- Total Distributions................. -- (0.49) (0.66) (0.00)* (1.04) (0.58) - -------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD...... $13.00 $12.44 $12.22 $11.30 $11.80 $11.65 - -------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................ 4.50%++ 5.82% 14.53% (4.23)% 10.20% 12.62% - -------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)... $141,914 $126,491 $90,970 $61,623 $66,454 $35,279 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)....................... 0.42%+ 0.45% 0.48% 0.48% 0.45% 0.49% Net investment income............. 5.18+ 5.55 6.46 5.97 5.31 6.10 - -------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............. 83% 327% 289% 164% 349% 208% ==============================================================================================================
SOCIAL AWARENESS STOCK PORTFOLIO 2002(1) 2001(2) 2000(2) 1999(2) 1998 1997 - ------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD............................ $24.14 $28.76 $29.42 $25.92 $20.06 $15.76 - ------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM OPERATIONS: Net investment income............. 0.03 0.11 0.14 0.13 0.10 0.15 Net realized and unrealized gain (loss)......................... (3.78) (4.63) (0.29) 3.93 6.30 4.15 - ------------------------------------------------------------------------------------------------------------ Total Income (Loss) From Operations........................ (3.75) (4.52) (0.15) 4.06 6.40 4.30 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM:(3) Net investment income............. -- (0.10) (0.16) (0.09) (0.12) -- Net realized gains................ -- -- (0.35) (0.47) (0.42) -- - ------------------------------------------------------------------------------------------------------------ Total Distributions................. -- (0.10) (0.51) (0.56) (0.54) -- - ------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD...... $20.39 $24.14 $28.76 $29.42 $25.92 $20.06 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN........................ (15.53)%++ (15.71)% (0.49)% 15.84% 32.27% 27.28% - ------------------------------------------------------------------------------------------------------------ NET ASSETS, END OF PERIOD (000'S)... $73,774 $83,344 $81,184 $68,239 $39,482 $21,013 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: Expenses(4)....................... 0.75%+ 0.74% 0.75% 0.80% 0.84% 0.98% Net investment income............. 0.28+ 0.45 0.48 0.69 0.63 0.97 - ------------------------------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE............. 20% 22% 33% 12% 14% 19% ============================================================================================================
(1) For the six months ended June 30, 2002 (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%. * 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. 64 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) For a share of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:
UTILITIES PORTFOLIO 2002(1)(2) 2001(2) 2000(2) 1999(2) 1998 1997 - -------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD............................ $13.87 $19.22 $15.91 $17.18 $15.29 $12.22 - -------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS: Net investment income............. 0.15 0.37 0.43 0.41 0.37 0.46 Net realized and unrealized gain (loss)......................... (2.69) (4.65) 3.36 (0.36) 2.33 2.63 - -------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations........................ (2.54) (4.28) 3.79 0.05 2.70 3.09 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM:(3) Net investment income............. -- (0.30) (0.45) (0.40) (0.42) (0.01) Net realized gains................ -- (0.77) (0.03) (0.92) (0.39) (0.01) - -------------------------------------------------------------------------------------------------------------- Total Distributions................. -- (1.07) (0.48) (1.32) (0.81) (0.02) - -------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD...... $11.33 $13.87 $19.22 $15.91 $17.18 $15.29 - -------------------------------------------------------------------------------------------------------------- TOTAL RETURN........................ (18.31)%++ (23.00)% 24.26% (0.08)% 18.21% 25.29% - -------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S)... $28,873 $39,433 $48,456 $31,413 $32,909 $21,413 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(4)....................... 0.86%+ 0.81% 0.84% 0.88% 0.80% 1.06% Net investment income............. 2.45+ 2.18 2.47 2.41 3.06 3.58 - -------------------------------------------------------------------------------------------------------------- PORTFOLIO TURNOVER RATE............. 17% 20% 22% 10% 51% 68% - --------------------------------------------------------------------------------------------------------------
(1) For the six months ended June 30, 2002 (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. 65 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 ---------- STATE STREET BANK AND 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)(8-02) -----END PRIVACY-ENHANCED MESSAGE-----