<PAGE> 1
THE TRAVELERS VARIABLE PRODUCTS
MUTUAL FUNDS
SEMI-ANNUAL REPORTS
MANAGED ASSETS TRUST
HIGH YIELD BOND TRUST
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
THE TRAVELERS SERIES TRUST:
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
JUNE 30, 1995
[TRAVELERS INSURANCE LOGO]
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE> 2
[TIMCO LOGO] The Travelers Investment Management Company ("TIMCO")
provides management and advisory services for the Capital
Appreciation Fund. Additionally, TIMCO is a sub-adviser
for Managed Assets Trust.
[TAMIC LOGO] Travelers Asset Management International Corporation
("TAMIC") provides fixed income management and advisory
services for the following Travelers Variable Products
Mutual Funds contained in this report: U.S. Government
Securities Portfolio, High Yield Bond Trust, Managed Assets
Trust and Cash Income Trust.
[JANUS CAPITAL Janus Capital Corporation ("Janus") is the sub-adviser for
CORPORATION LOGO] Capital Appreciation Fund. As sub-adviser, Janus is
responsible for the daily management of Capital
Appreciation Fund.
[SMITH BARNEY LOGO] A division of Smith Barney Mutual Funds Management Inc.,
Greenwich Street Advisors provides management and advisory
services for the following Travelers Variable Products
Mutual Funds contained in this report: Social Awareness
Stock Portfolio and Utilities Portfolio.
<PAGE> 3
THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS
INVESTMENT ADVISORY COMMENTARY AS OF JUNE 30, 1995
ECONOMIC REVIEW AND OUTLOOK
While the economy has slowed more than we expected at the beginning of the
year, the magnitude and duration of this slow down is still unclear. The
slowing that has occurred already has enabled the ten-year U.S. Treasury Bond
rate to decrease 1.5% this year. Because of this at least some of the
stimulative effect of the Federal Reserve Board ("Fed") reducing rates has been
set in motion already. A reduction of the Federal funds rate, (a sensitive
indicator of the direction of interest rates), to a 5.50% or perhaps 5.00%
level is possible but may not add much more to economic growth since a decrease
in rates has already been priced into the bond market. The question remains
how weak is the economy and how long will the weakness persist. We lean
towards the scenario of a modest slowdown, much like the modest recovery, with
growth resuming by the end of this year. The decline in interest rates that
has already occurred along with the improved export competitiveness brought on
by the weak dollar should help growth to pick up. In addition, last year's
strong growth did not bring on typical late cycle excesses (business borrowings
for leverage or new plants, excessive inventory buildups, or significant wage
pressure increases). Therefore, we think this is a mid-cycle growth slowdown
in a longer recovery and the second half of the recovery will see more
confidence build up and allow some of the previous excesses to reappear.
Capacity utilization and unemployment have not yet fallen that far below the
historic inflation triggers that they reached last year, so that if growth
picks up by late this year or in the first half of next year, the Fed will have
to resume their bias towards tightening. This view implies rising short-term
and intermediate-term rates next year with the yield curve flattening assuming
the market stays comfortable with the Fed's anti-inflation resolve.
On the bullish side, the market has rallied so strongly because there is a
significant risk that 1994's growth was an aberration in a longer term
disinflationary cycle. With diminished consumer spending, the decline in
interest rates may have only a minor impact on consumer behavior. Foreign
economies may weaken in tandem with the United States, reducing the impact of
the weakness in the dollar to boost our exports. The global trend towards
tight fiscal and monetary policy continues. The U.S. budget cuts that are
currently being considered may cut 0.5% from 1996's growth rate in addition to
allowing the bond market to lower long-term inflation expectations. If numbers
continue to come in weak and the economy does not respond to the reduction in
bond rates seen so far, the Fed will get much more aggressive about cutting
rates. If this happens, the Fed funds rate could be in the 4-5% range by early
next year with the yield curve steepening as the long end lags the decline.
Because of the uncertainty that exists right now, we are vigilantly
watching key economic variables to give us a clue as to which view is
right. First, consumer spending on housing and autos should pick up
if the decline in interest rates is of any value in boosting the
economy. Numbers released in late June and early July have started to
show some pick up. Second, we have been concerned about the sharp
drop-off in growth in Europe and what looks like another recession in
Japan. We will be monitoring developments overseas closely to see
what impact they will have on the United States. Argentina and Mexico
are not completely out of the woods as their economies will be going
through a high stress period in the second half of the year. We think
they will make it through, but there remains a significant risk of
more problems developing that could hurt all emerging economies as
they did at the turn of this year. Finally, we will be watching the
behavior of the stock market. It has not shown signs of recession yet
and has been boosted by technology stocks which have been the major
beneficiaries of the strong growth in the investment sector of the
economy. To date, this has supported our view of a modest slowdown
but we will be watching this closely for any changes.
-1-
<PAGE> 4
FIXED-INCOME MARKET COMMENTARY
After a negative year in 1994, the bond market bounced back during the
first half of the year as represented by the Lehman
Government/Corporate Bond Index, a broad based bond market index. This
index was up 11.8% for the six months ending June 30, 1995, following
a loss of 3.5% in 1994. The month of May had the most impressive
performance, as payroll employment figures turned negative in April
and May, the first back-to-back reduction for non-farm payroll numbers
since January of 1992. The month of May was the best month in the
bond market since February 1986. Market expectations shifted from
expecting continued Fed tightening at the beginning of the year to
expectations of the Fed reducing interest rates. By the end of June,
the market had already anticipated a Fed rate cut of .5% to .75 % by
year end. Numerous economists are expecting second quarter gross
domestic product to come in close to zero, with growth forecasts for
the rest of the year not much better. Inflation still seems to be
relatively well contained, with our expectations of year-over-year
Consumer Price Index ("CPI"), a broad based indicator of inflation, to
remain in the 3.0-3.5% range.
Within the U.S. bond market, the tax exempt bond market sector was by
far the worst-performing sector as it was hurt with concerns about the
flat tax in April and then individual investors suffered "sticker
shock" at the low yields implied by the U.S. Treasury bond market
rally in May. Corporate and asset-backed securities outperformed U.S.
Treasuries while mortgage-backed securities lagged due to the sharp
decline in interest rates. The high yield market also lagged,
particularly the B quality sector whose spreads widened in May and
June. The yield curve steepened with the two-year to thirty-year
spread widening to 82 basis points from 18 at the beginning of the
year.
Until we develop more conviction about when economic growth is
bottoming, we are staying close to our duration targets. We have been
balancing a slightly long duration position with an underweighting on
the one- to three-year maturity range. The two-year U.S. Treasury
Bond has had a tremendous rally this year due to the shift in
expectations about Fed tightening. When the economy bottoms and
expectation for further rate cuts are dampened, we think the two year
will perform poorly.
In terms of sector strategy, the areas of the corporate bond market
that tend to be more recession proof are being favored in asset
selection. Relative spreads in the investment grade corporate market
are not compensating you for any recession risk. We are using the
recent corporate spread widening to selectively buy media, utility,
and consumer product names that should still show solid earnings in
the event of a slowdown. In the mortgage backed market, the recent
increase in volatility and the decline in rates has caused this sector
to widen. We are selectively looking for well structured securities
to add as corporate proxies, as well as sufficiently seasoned high
coupon collateral as cushion paper that should provide incremental
return. We remain cautious on the municipal market because pressure
from flat tax concerns will put a lid on the sector's relative
performance.
-2-
<PAGE> 5
EQUITY MARKET COMMENTARY
Lower interest rates and better than expected corporate profits
propelled broad stock market averages to a series of new highs during
the first half of 1995. Including dividends, the S&P 500 Stock Index
recorded a gain of 20.2% over the six-month period ended June 30,
1995. Small cap stocks continued to lag somewhat, with the Russell
2000 up 14.4% through the same period.
Technology stocks led the market during this record-setting advance.
The technology sector rose in market value by 40%, driven by
unprecedented levels of business spending for semiconductors, computer
systems and telecommunications equipment. When evidence of a rapid
slowdown in economic growth surfaced in May, bond yields fell sharply;
and the yield curve steepened in anticipation of Fed's easing of
interest rates. Stocks in the financial sector rallied strongly,
paced by money center banks, mortgage lenders and brokerage firms.
Lower interest rates also benefited economically sensitive groups such
as home-builders and stocks in the materials sector, including paper,
forest products, chemicals and containers.
Reflecting a lackluster retail environment, consumer oriented groups such as
food, apparel and household products lagged the overall market. The weakness
in the consumer sector culminated in a late June sell-off of consumer
cyclicals, following a series of preannounced earnings disappointments for the
second quarter. The weaker-than-expected earnings were attributed to soft
consumer demand and margin pressure created by higher materials prices.
Consequently, earnings estimates in the consumer durables area have plunged 10%
in the past month.
The surprise in the first half was the strength of reported earnings,
despite low income growth, sluggish consumer spending and tight
monetary policy. Actual earnings in the fourth quarter of 1994 and
the first quarter of 1995 dramatically exceeded expectations.
Earnings estimates continue to rise, especially in the technology,
commodities and energy sectors. Concerns remain, however, that
earnings disappointments lie ahead as an inevitable fallout of slowing
economic growth. Although capital spending has been the key driver of
this business expansion, it is reasonable to ask whether the
industrial sector can continue a high rate of investment spending in
the face of falling final demand? On the plus side, the recent Fed
decision to cut interest rates has given the financial markets
confidence. Since the odds favor continued easing by the Fed over
the next year, lower interest rates should provide ongoing support to
equity price to earnings ratios. In addition, the accelerated pace
of merger and acquisition activity seen recently in the technology,
health care and financial sectors seems likely to continue, and
provide an upward bias to stock prices.
-3-
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- --------------------------------------------------------
<S> <C>
MANAGED ASSETS TRUST . . . . . . . . . . . . . . . 5
HIGH YIELD BOND TRUST . . . . . . . . . . . . . . . 17
CAPITAL APPRECIATION FUND . . . . . . . . . . . . . 26
CASH INCOME TRUST . . . . . . . . . . . . . . . . . 35
THE TRAVELERS SERIES TRUST:
U.S. GOVERNMENT SECURITIES PORTFOLIO . . . . . . . 43
SOCIAL AWARENESS STOCK PORTFOLIO . . . . . . . . . 48
UTILITIES PORTFOLIO . . . . . . . . . . . . . . . . 54
</TABLE>
-4-
<PAGE> 7
MANAGED ASSETS TRUST
The bond market rebounded in the first half of 1995 with the Lehman
Government/Corporate Bond Index up 11.8% for the six months ending
June 30, 1995, following a loss of 3.5% in 1994. By the end of June,
the market had already anticipated a Federal Reserve Board ("Fed")
rate cut of .50% to .75% by year end, as implied by the front month
eurodollar and Fed Funds contracts. Stocks benefited tremendously
from the rally in the bond market. The equity rally became more
broadly based in the second quarter as the Russell 2000 Index was
within one percent of the Standard & Poors 500 Stock Index ("S&P
500")'s return after having registered only half the S&P 500's gain in
the first quarter. In addition to the decline in interest rates,
stocks were boosted by continued strength and exceptional profit
growth.
The Managed Assets Trust portfolio slightly underperformed its
benchmark (60% S&P 500, 40% Lehman Government/Corporate Bond Index.)
The portfolio's return versus the benchmark was hurt by its
underweighting in stocks. It was helped by the equity portion of the
portfolio outperforming the S&P 500 and strong performance from the
convertible holdings. The bond portion of the portfolio outperformed
the benchmark due to strong performance from some of the convertible
holdings (particularly Delta Airlines) and from being long in its
duration target through May.
While the economy has slowed more than we expected at the beginning of
the year, the magnitude and duration of this slow down are still
unclear. We lean towards the scenario of a modest slowdown, much like
the modest recovery, with growth resuming by the end of this year.
The decline in interest rates that has already occurred, along with
the improved export competitiveness brought on by the weak dollar,
should help growth to pick up. In addition, last year's strong growth
did not bring on typical late cycle excesses (business borrowings for
leverage or new plants, excessive inventory buildups, or significant
wage pressure increases). Therefore, we think this is a mid-cycle
growth slowdown in a longer recovery and the second half of the
recovery will see more confidence build up and allow some of the
previous excesses to reappear.
Until we develop more conviction about when economic growth is
bottoming, we are staying close to our duration targets in the fixed
income portfolios. We have been balancing a slightly long duration
position with an underweighting on the one- to three-year maturity
range. The two-year U.S. Treasury Bond has had a tremendous rally
this year due to the shift in expectations about Fed tightening of
interest rates. When the economy bottoms and expectation for further
rate cuts are dampened, we think the two year will perform poorly. In
terms of sector strategy, the areas of the corporate bond market that
tend to be more recession proof are being favored in asset selection.
Relative spreads in the investment grade corporate market are not
compensating you for any recession risk. In the mortgage bond market,
the recent increase in volatility and the decline in rates has caused
this sector to widen. We have been adding positions in pass throughs,
particularly in the premium area.
U.S. stocks have benefited by continued surprisingly strong earnings
and resurgence of merger activity. Companies cut employment rapidly
this year when consumer demand weakened demonstrating their much
tighter control over expenses. In addition, U.S. companies should
continue to benefit from the dollar's depreciation against the yen and
deutschemark. Equity market pricing remains in the fair value range.
Annualized returns of around 10% are still reasonable, with either
lower bond yields or more positive earnings surprises necessary to
push returns higher. We are slightly underweighted in equities with
exposure being added in convertibles whose valuations have not fully
benefited from the decline in interest rates that has occurred so far
this year.
-5-
<PAGE> 8
MANAGED ASSETS TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $141,087,922) . . . . . $157,197,913
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,757
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,549
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856,063
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . 4,637,409
Variation on futures margin . . . . . . . . . . . . . . . . . . . . . . . . . 40,863
------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,081,554
------------
LIABILITIES:
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . 7,431,078
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . 8,575
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,956
------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,478,609
------------
NET ASSETS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $155,602,945
============
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $136,190,216
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . 2,805,215
Accumulated net realized gains (losses) on investment security transactions . . 497,523
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . 16,109,991
------------
Total net assets (applicable to 11,046,123 shares outstanding at
$14.08 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $155,602,945
============
</TABLE>
See Notes to Financial Statements
-6-
<PAGE> 9
MANAGED ASSETS TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,193,512
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,049,105
----------
Total income . . . . . . . . . . . . . . . . . . . . . . . . $3,242,617
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . 364,807
Accounting and audit fees . . . . . . . . . . . . . . . . . . . 50,280
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 9,342
Printing and postage . . . . . . . . . . . . . . . . . . . . . . 9,881
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 2,212
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 880
----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . 437,402
-----------
Net investment income . . . . . . . . . . . . . . . . . . 2,805,215
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . 64,124,281
Cost of investment securities sold . . . . . . . . . . . . . 63,110,343
----------
Net realized gain . . . . . . . . . . . . . . . . . . . . 1,013,938
Change in unrealized gain (loss) on investment securities: . . .
Unrealized loss at December 31, 1994 . . . . . . . . . . . . (1,295,855)
Unrealized gain at June 30, 1995 . . . . . . . . . . . . . . 16,109,991
----------
Net change in unrealized gain (loss) for the period . . . . . 17,405,846
-----------
Net realized gain and change in unrealized gain (loss) . . 18,419,784
-----------
Net increase in net assets resulting from operations . . . . . . $21,224,999
===========
</TABLE>
See Notes to Financial Statements
-7-
<PAGE> 10
MANAGED ASSETS TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . $ 2,805,215 $ 5,313,706
Net realized gain from investment security transactions . . . . 1,013,938 1,907,694
Net change in unrealized gain (loss) on investment securities . 17,405,846 (10,603,386)
------------ ------------
Net increase (decrease) in net assets resulting from operations 21,224,999 (3,381,986)
------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions . . . . . . . . . . . . . . (5,441,569) (7,278,778)
Net long-term realized gains from
investment security transactions . . . . . . . . . . . . . . (1,783,880) (4,589,354)
------------ ------------
Total distribution to shareholders . . . . . . . . . . . . (7,225,449) (11,868,132)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . 1,404,370 4,758,206
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . 7,225,449 11,868,132
Payments for shares redeemed . . . . . . . . . . . . . . . . . . (7,913,332) (17,256,475)
------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions . . . . . . . . . . . . . . . . 716,487 (630,137)
------------ ------------
Net increase (decrease) in net assets . . . . . . . . . . . . 14,716,037 (15,880,255)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . 140,886,908 156,767,163
------------ ------------
End of period (including undistributed net investment income as follows:
June, 1995 $2,805,215 and December, 1994 $5,313,706) . . . . $155,602,945 $140,886,908
============ ============
</TABLE>
See Notes to Financial Statements
-8-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Managed Assets Trust ("Fund MA") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. Shares of Fund
MA are currently offered, without a sales charge, to separate accounts
of The Travelers Insurance Company ("The Travelers"), an indirect
wholly owned subsidiary of Travelers Group Inc., in connection with
the issuance of certain variable annuity and variable life insurance
contracts.
The following is a summary of significant accounting policies
consistently followed by Fund MA in the preparation of its financial
statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of
the close of business of the New York Stock Exchange on the last
business day of the period; securities traded on the over-the-counter
market and listed securities with no reported sales are valued at the
mean between the last-reported bid and asked prices or on the basis of
quotations received from a reputable broker or other recognized
source.
When market quotations are not considered to be readily available for long-term
corporate bonds and notes, such investments are generally stated at fair value
on the basis of valuations furnished by a pricing service. These valuations
are determined for normal institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders. Securities, including restricted securities, for which
pricing services are not readily available are valued by management at prices
which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity.
FUTURES CONTRACTS. Fund MA may use stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for the
purchase or sale of individual securities. When Fund MA enters into a
futures contract, it agrees to buy or sell a specified index of stocks
or debt securities at a future time for a fixed price, unless the
contract is closed prior to expiration. Fund MA is obligated to
deposit with a broker an "initial margin" equivalent to a percentage
of the face, or notional value of the contract.
It is Fund MA's practice to hold cash and cash equivalents (including
short-term investments) in an amount at least equal to the notional
value of outstanding purchased futures contracts, less the initial
margin. Generally, futures contracts are closed prior to expiration.
Futures contracts purchased by Fund MA are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statement of Investments.
However, when Fund MA holds open futures contracts, it assumes a
market risk generally equivalent to the underlying market risk of
changes in the value of the specified indexes or debt securities
associated with the futures contract.
OPTIONS. Fund MA may purchase index or individual equity put or call options,
thereby obtaining the right to sell or buy a fixed number of shares of the
underlying asset at the stated price on or before the stated expiration date.
Fund MA may sell the options before expiration. Options held by Fund MA are
listed on either national securities exchanges or on over-the-counter markets,
and are short-term contracts with a duration of less than nine months. The
market value of the options will be the latest sale price at the close of the
New York Stock Exchange, or in the absence of such sale, the latest bid
quotation.
REPURCHASE AGREEMENTS. When Fund MA enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to
repurchase the securities at a mutually agreed upon date and price),
the repurchase price of the securities will generally equal the amount
paid by Fund MA plus a negotiated interest amount. The seller under
the repurchase agreement will be required to provide to Fund MA
securities (collateral) whose market value, including accrued
interest, will be at least equal to 102% of the repurchase price.
Fund MA monitors the value of collateral on a daily basis. Repurchase
agreements will be limited to transactions with national banks and
reporting broker dealers believed to present minimal credit risks.
Fund MA's custodian will take actual or constructive receipt of all
securities underlying repurchase agreements until such agreements
expire.
-9-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
TAXES. Fund MA has qualified, and intends to continue to qualify each
year, as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a regulated investment
company, Fund MA is relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable
capital gains, if any, to its shareholders. Fund MA further intends
to avoid excise tax liability by distributing substantially all of its
investment income. Therefore, no federal income tax provision has
been made by Fund MA in its financial statements.
OTHER. Security transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis and dividend income
is recorded on the ex-dividend date. Distributions to shareholders
are recorded at the close of business on the record date.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $62,062,163 and $61,481,010, respectively for the six
months ended June 30, 1995. Realized gains and losses from security
transactions are reported on an identified-cost basis.
At June 30, 1995, Fund MA held 66 open S&P 500 Stock Index futures
contracts with a maturity date of September 15, 1995. The face value,
or notional value, of these contracts at June 30, 1995, amounted to
$18,055,950. In connection with these contracts, short-term
investments with a par value of $1,190,000 had been pledged as margin
deposits.
Net realized losses resulting from futures contracts were $3,074,868
and $471,650 for the six months ended June 30, 1995 and the year ended
December 31, 1994, respectively. These losses are included in the net
realized gain from investment security transactions on both the
Statement of Operations and the Statement of Changes in Net Assets.
The cash settlement for June 30, 1995 is shown on the Statement of
Assets and Liabilities as a receivable for variation on futures
margin.
3. FUND CHARGES
Investment management and advisory fees are calculated daily at an
annual rate of 0.50% of Fund MA's average net assets. These fees are
paid to Travelers Asset Management International Corporation
("TAMIC"), an indirect wholly owned subsidiary of Travelers Group Inc.
Pursuant to a sub-advisory agreement between The Travelers Investment
Management Company ("TIMCO"), an indirect wholly owned subsidiary of
Travelers Group Inc., and TAMIC, 50% of the investment management and
advisory fees earned by TAMIC are paid to TIMCO for investment
management and advisory services relating to the common stock
investments of Fund MA.
The Travelers has agreed to reimburse Fund MA for the amount by which
all of Fund MA's aggregate annualized operating expenses, excluding
brokerage commissions and any interest charges and taxes, exceed 1.25%
of Fund MA's average net assets. Trustees and officers of Fund MA who
are also officers and employees of Travelers Group Inc., or its
subsidiaries, receive no compensation directly from Fund MA.
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest without par value.
Transactions in shares of Fund MA were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------- ------------
1995 1994
---- ----
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 105,764 365,254
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . (601,632) (1,321,839)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized gains 433,799 542,808
from net long-term realized gains . . . . . . . . . . . . . . 147,492 340,238
-------- ----------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,423 (73,539)
======== ==========
</TABLE>
As of June 30, 1995, all outstanding shares of beneficial interest were owned
by The Travelers Fund U for Variable Annuities and The Travelers Fund UL for
Variable Life Insurance, both of which are separate accounts of The Travelers.
-10-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding
throughout each period.)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
---------- ------------------------------------------------------
1995 1994 1993 1992 1991 1990##
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period . . . . $12.85 $14.21 $14.02 $14.78 $12.77 $13.03
Income from operations
Net investment income . . . . . . . . . 0.25 0.46 0.51 0.64 0.74 0.65
Net gains or losses on securities
(realized and unrealized) . . . . . . 1.65 (0.73) 0.72 0.01 1.91 (0.37)
-------- -------- -------- -------- -------- -------
Total from investment operations . . 1.90 (0.27) 1.23 0.65 2.65 0.28
Less distributions
Distributions from net investment income and
net short-term realized gains . . . . (0.50) (0.67) (0.85) (1.04) (0.64) (0.54)
Distributions from net long-term realized
gains . . . . . . . . . . . . . . . . (0.17) (0.42) (0.19) (0.37) - -
-------- -------- -------- -------- -------- -------
Total distributions . . . . . . . (0.67) (1.09) (1.04) (1.41) (0.64) (0.54)
Net asset value, end of period . . . . . . . $14.08 $12.85 $14.21 $14.02 $14.78 $12.77
======== ======== ======== ======== ======== =======
TOTAL RETURN** . . . . . . . . . . . . . . . 15.39% (2.24)% 9.33% 5.14% 21.70% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) . $155,603 $140,887 $156,767 $148,971 $126,021 $92,464
Ratio of expenses to average
net assets*** . . . . . . . . . . . . 0.60%# 0.61% 0.56% 0.56% 0.56% 0.59%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . 3.85%# 3.59% 3.65% 4.97% 5.49% 5.17%
Portfolio turnover rate . . . . . . . . 43% 97% 86% 112% 141% 123%
</TABLE>
* The information set forth in Note 5 replaces the data presented in
prior periods as supplementary information.
** Total return is determined by dividing the increase (decrease) in value
of a share during the period, after reflecting the reinvestment of
dividends declared during the period, by the beginning of year share
price. As described in Note 1, shares in Fund MA are only sold to The
Travelers separate accounts in connection with the issuance of variable
annuity and variable life insurance contracts. The total return does
not reflect the deduction of any contract charges or fees assessed by
The Travelers separate accounts. For periods of less than one year,
total returns are not annualized.
*** The ratios of expenses to average net assets for the years 1990 - 1993
reflects an expense reimbursement by The Travelers in connection with
voluntary expense limitations. Without the expense reimbursement, the
ratios of expenses to average net assets would have been 0.60%, 0.63%,
0.69% and 0.74% for the years ended December 31, 1993, 1992, 1991 and
1990, respectively. For the six months ended June 30, 1995 and the
year ended December 31, 1994, there were no expense reimbursements by
The Travelers in connection with the voluntary expense limitations
described in Note 3.
# Annualized.
## On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund MA.
-11-
<PAGE> 14
MANAGED ASSETS TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCKS (61.2%)
AMUSEMENTS (0.7%)
Mirage Resorts, Inc. (A) 8,600 $ 263,375
Walt Disney Co. 16,000 890,000
----------
1,153,375
----------
BANKING (2.8%)
Banc One Corp. 19,372 624,747
Bank of Boston Corp. 2,600 97,500
BankAmerica Corp. 3,500 184,187
Barnett Banks, Inc. 3,500 179,375
Chase Manhattan Corp. 3,800 178,600
Citicorp 14,500 839,187
First Interstate Bancorp 2,400 192,600
First Union Corp. 3,600 162,900
J.P. Morgan & Co. 4,400 308,550
Mellon Bank Corp. 3,300 137,363
NationsBank Corp. 11,100 595,238
Norwest Corp. 16,300 468,625
U.S. Bancorp 10,000 240,625
Wells Fargo & Co. 1,200 216,300
----------
4,425,797
----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (8.1%)
Abbott Laboratories 17,400 704,700
American Home Products Corp. 7,600 588,050
Amgen (A) 3,100 249,162
Bristol-Myers Squibb Co. 17,800 1,212,625
Dow Chemical Co. 12,700 912,812
E.I. Dupont de Nemours & Co. 15,700 1,079,375
Eastman Chemical Company 4,400 261,800
Eli Lilly & Co. 6,700 525,950
Forest Labs, Inc. (A) 6,100 270,688
Geon Co. 10,900 313,375
International Flavors & Fragrances 10,600 527,350
Johnson & Johnson 19,400 1,311,925
Merck & Co., Inc. 22,700 1,112,300
Mylan Labs, Inc. 3,200 98,400
Pfizer, Inc. 7,700 711,288
Praxair, Inc. 19,400 485,000
Procter & Gamble Co. 18,700 1,344,063
Schering-Plough Corp. 11,200 494,200
Union Carbide Corp. 12,100 403,838
W.R. Grace & Co. 2,100 128,888
----------
12,735,789
----------
COMMUNICATION (6.3%)
Ameritech Corp. 18,300 805,200
AT&T Corp. 43,700 2,321,562
Bell Atlantic Corp. 11,300 632,800
Bellsouth Corp. 14,100 895,350
Capital Cities ABC, Inc. 5,400 583,200
CBS, Inc. 3,535 236,845
GTE Corp. 21,400 730,275
MCI Communications Corp. 15,100 331,256
NYNEX Corp. 16,400 660,100
Pacific Telesis Group 5,500 147,125
Sprint Corp. 8,700 292,538
SBC Communications, Inc. 21,100 1,004,888
Tele-Communications, Inc. (A) 16,100 377,343
U.S. West, Inc. 4,700 195,638
Viacom International, Inc. Cl. B (A) 14,600 677,075
----------
9,891,195
----------
CONTRACTORS (0.4%)
Fluor Corp. 6,700 348,400
Halliburton Co. 8,800 314,600
----------
663,000
----------
ELECTRICAL AND ELECTRONIC MACHINERY (4.1%)
Amphenol Corp. (A) 15,200 442,700
Andrew Corp. (A) 4,000 231,500
General Electric Co. 42,500 2,395,938
Intel Corp. 18,400 1,164,950
Maxim Integrated Products (A) 4,400 224,400
Micron Technology 4,800 263,400
Motorola, Inc. 11,400 765,225
Scientific-Atlanta, Inc. 11,900 261,800
Texas Instruments, Inc. 4,700 629,213
----------
6,379,126
----------
FINANCE (2.6%)
American Express Co. 11,300 396,912
Dean Witter Discover & Co. 10,300 484,100
Federal Home Loan Corp. 9,500 653,125
Federal National Mortgage Assoc. 8,800 830,500
Green Tree Financial Corp. 5,600 248,500
Household International 5,000 247,500
ITT Corp. 6,800 799,000
Lehman Brothers Holding, Inc. 20,600 450,625
----------
4,110,262
----------
FOOD (5.7%)
Archer-Daniels Midland Co. 27,000 502,875
Campbell Soup Co. 5,400 264,600
Coca-Cola Co. 34,900 2,224,875
CONAGRA, Inc. 15,000 523,125
CPC International, Inc. 3,500 216,125
H.J. Heinz Co. 5,900 261,813
Kellogg Co. 2,000 142,750
McDonalds Corp. 21,500 841,188
PepsiCo, Inc. 18,800 857,750
Philip Morris, Inc. 20,900 1,554,438
Ralston-Purina Group 8,000 408,000
Sara Lee Corp. 11,900 339,150
Seagram Co., Ltd. 8,100 280,463
Unilever NV 3,600 468,450
----------
8,885,602
----------
FURNITURE AND FIXTURES (0.1%)
Masco Corp. 6,400 172,800
----------
INSURANCE (2.0%)
Aetna Life & Casualty Co. 2,700 169,762
American International Group 9,100 1,037,400
Chubb Corp. 6,100 488,762
Cigna Corp. 1,800 139,725
General Reinsurance Corp. 1,000 133,875
Jefferson Pilot Corp. 7,500 410,625
Lincoln National Corp. 2,400 105,000
Saint Paul Companies 6,900 339,825
Transamerica Corp. 5,800 337,850
----------
3,162,824
----------
</TABLE>
-12-
<PAGE> 15
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
LUMBER AND WOOD PRODUCTS (0.3%)
Georgia-Pacific Corp. 2,400 $ 208,200
Weyerhaeuser Co. 5,900 278,038
---------
486,238
---------
MACHINERY (4.2%)
Apple Computers, Inc. 2,800 130,200
Black & Decker Corp. 9,300 287,137
Cabletron System, Inc. (A) 8,500 452,625
Caterpillar, Inc. 8,600 552,550
Cisco Systems, Inc. (A) 6,600 333,712
Compaq Computer Corp. (A) 3,600 163,350
Deere & Co. 3,400 291,125
Dell Computer Corp. (A) 5,400 325,012
Digital Equipment Corp. (A) 7,200 293,400
Harnischfeger Industries 7,700 266,613
Hewlett Packard Co. 12,800 953,600
International Business Machines Corp. 11,800 1,132,800
Silicon Graphics, Inc. (A) 10,700 426,663
Stewart & Stevenson Services, Inc. 100 3,606
Tenneco, Inc. 4,600 211,600
3Com Corp. (A) 4,400 294,800
Varity Corp. (A) 10,200 448,800
---------
6,567,593
---------
METAL PRODUCTS (1.5%)
Ball Corp. 9,900 345,262
Gillette Co. 17,200 767,550
Nucor Corp. 2,100 112,350
Parker-Hannifin Corp. 7,400 268,250
Phelps Dodge Corp. 5,800 342,200
Reynolds Metals Co. 5,600 289,800
USX-U.S. Steel Group 6,700 230,313
---------
2,355,725
---------
MINING (0.3%)
Barrick Gold Corp. 8,200 207,050
Placer Dome, Inc. 10,800 282,150
---------
489,200
---------
MISCELLANEOUS MANUFACTURING (1.9%)
Becton Dickinson & Co. 6,800 396,100
Biomet, Inc. (A) 1,800 27,787
Eastman Kodak Co. 8,300 503,187
Emerson Electric Co. 4,800 343,200
Honeywell, Inc. 3,200 138,000
KLA Instruments Corp. (A) 7,000 541,625
Medtronics, Inc. 6,500 501,313
Raytheon Co. 3,000 232,875
Xerox Corp. 2,600 304,850
---------
2,988,937
---------
OIL & GAS (0.3%)
Anadarko Petroleum 4,000 172,500
Schlumberger Ltd. 3,900 242,288
---------
414,788
---------
PAPER AND ALLIED PRODUCTS (0.6%)
Champion International Corp. 2,400 125,100
International Paper Co. 3,200 274,400
Stone Container Corp. (A) 13,500 286,875
Temple Inland, Inc. 5,000 238,125
---------
924,500
---------
PETROLEUM REFINING AND
RELATED INDUSTRIES (5.3%)
Amoco Corp. 16,900 1,125,962
Ashland Oil, Inc. 1,300 45,662
Atlantic Richfield, Inc. 6,519 715,460
Chevron Corp. 16,300 759,987
Exxon Corp. 31,700 2,238,812
Mobil Corp. 11,900 1,142,400
Phillips Petroleum Co. 6,400 213,600
Royal Dutch Petroleum Co. 15,300 1,864,688
Texaco, Inc. 2,800 183,750
---------
8,290,321
---------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (0.3%)
A.H. Belo 700 21,437
Franklin Quest Co. (A) 4,200 100,800
Time Warner Inc. 7,500 308,438
Times Mirror Co. 1,573 37,555
---------
468,230
---------
RETAIL (3.3%)
Albertsons, Inc. 16,200 481,950
Circuit City Stores, Inc. 11,900 376,337
Dayton Hudson Corp. 6,100 437,675
Dillard Department Stores 4,500 132,187
Home Depot, Inc. 6,100 247,813
J.C. Penney Co. 5,500 264,000
Kmart Corp. 5,200 76,050
Limited, Inc. 7,700 169,400
May Department Stores 6,700 278,888
Safeway, Inc. (A) 7,600 284,050
Sears Roebuck & Co. 8,700 520,913
Tandy Corp. 3,500 181,563
The GAP, Inc. 4,600 160,425
Toys R Us (A) 9,000 263,250
Wal-Mart Stores, Inc. 46,800 1,251,900
---------
5,126,401
---------
RUBBER AND PLASTIC PRODUCTS (0.3%)
Nike, Inc. 5,300 445,200
---------
SERVICES (2.2%)
Columbia/HCA Healthcare Corp. 14,700 635,775
Computer Associates International 3,700 250,675
CUC International, Inc. (A) 4,700 197,400
Health Care & Retirement Corp. (A) 8,800 257,400
Microsoft (A) 13,900 1,257,081
Novell, Inc. (A) 3,600 71,775
Oracle Systems Corp. (A) 21,300 821,381
---------
3,491,487
---------
STONE, CLAY, GLASS, AND
CONCRETE PRODUCTS (0.4%)
Minnesota Mining & Manufacturing Co. 9,400 538,150
Owens Corning Fiberglass (A) 1,800 66,375
---------
604,525
---------
TOBACCO MANUFACTURERS (0.4%)
RJR Nabisco Holding Corp. 24,920 694,645
---------
</TABLE>
-13-
<PAGE> 16
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
TRANSPORTATION (1.2%)
AMR, Inc. (A) 6,000 $ 447,750
Conrail, Inc. 6,400 356,000
CSX Corp. 2,600 195,325
Norfolk Southern Corp. 7,000 471,625
Pittston Co. 16,400 393,600
----------
1,864,300
----------
TRANSPORTATION MANUFACTURING (3.0%)
Boeing Co. 13,700 857,962
Chrysler Corp. 12,100 579,287
Eaton Corp. 1,600 93,000
Echlin, Inc. 1,400 48,650
Ford Motor Co. 28,900 859,775
General Motors Corp. 13,200 618,750
Martin-Marietta Corp. 9,480 598,425
McDonnell Douglas Corp. 8,700 667,725
United Technologies Corp. 4,900 382,813
----------
4,706,387
----------
UTILITIES (2.4%)
Baltimore Gas & Electric Co. 6,800 170,000
Carolina Power & Light Co. 5,900 178,475
Central & Southwest Corp. 11,000 288,750
Cinergy Corp. 6,700 175,875
Dominion Resources, Inc. 4,500 164,250
Enron Corp. 5,300 186,162
Florida Power & Light Co. 9,100 351,487
NIPSCO Industries, Inc. 8,300 282,200
Pacific Enterprises 5,600 137,200
Panhandle Eastern Corp. 14,700 358,313
PECO Energy Co. 16,800 464,100
Public Service Co. of Colorado 8,300 269,750
Public Service Enterprises Group 8,900 246,975
Southern Co. 24,300 543,713
----------
3,817,250
----------
WHOLESALE TRADE (0.5%)
Alco Standard Corp. 4,900 391,387
Arrow Electronics (A) 6,500 323,375
Cardinal Health, Inc. 3,400 160,650
----------
875,412
----------
TOTAL COMMON STOCKS
(COST $82,021,044) 96,190,909
----------
PREFERRED STOCKS (1.5%)
BANKING (0.6%)
Ahmanson (H F) & Co. 10,000 511,250
First Chicago Corp. 7,000 406,000
----------
917,250
----------
FINANCE (0.1%)
Merry Land & Investment, Inc. 8,000 215,000
----------
OIL & GAS (0.3%)
Occidental Petroleum Corp. 9,000 523,125
----------
PAPER AND ALLIED PRODUCTS (0.3%)
James River Corp. 12,000 537,000
----------
RETAIL (0.2%)
TJX Cos., Inc. 7,000 294,875
----------
TOTAL PREFERRED STOCKS
(COST $2,305,977) 2,487,250
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
BONDS (14.4%)
BANKING (0.3%)
Great Western Financial Corp.,
6.375% Notes, 2000 $ 500,000 493,398
----------
CHEMICALS AND ALLIED PRODUCTS (4.0%)
Ciba Geigy Corp.,
6.25% Debentures, 2016 1,000,000 973,750
Eli Lilly & Co.,
7.125% Debentures, 2025 2,000,000 1,926,448
Mallinckrodt Group, Inc.,
7.00% Debentures, 2013 3,000,000 2,876,700
McKesson Corp.,
4.50% Debentures, 2004 500,000 457,500
----------
6,234,398
----------
COMMUNICATION (1.3%)
Cox Communications, Inc.,
6.875% Notes, 2005 2,000,000 1,971,420
----------
CREDIT CARD RECEIVABLES (0.6%)
Signet Credit Card Master Trust 1993-4 B,
5.80% Pass Through, 1999 (E) 1,000,000 976,568
----------
FINANCE (0.1%)
Rouse Co.,
5.75% Debentures, 2002 200,000 185,000
----------
FOREIGN NATIONAL GOVERNMENT (1.0%)
United Mexican States,
8.50% Notes, 2002 2,000,000 1,572,008
----------
INSURANCE (0.7%)
Aegon NV,
4.75% Debentures, 2004 500,000 622,500
Equitable Cos., Inc.,
6.125% Debentures, 2024 500,000 520,000
----------
1,142,500
----------
MINING (0.2%)
Inco Ltd.,
5.75% Debentures, 2004 300,000 334,125
----------
MISCELLANEOUS MANUFACTURING (0.9%)
Cooper Industries, Inc.,
7.05% Bonds, 2015 877,000 909,888
Trinova Corp.,
6.00% Debentures, 2002 500,000 472,500
----------
1,382,388
----------
</TABLE>
-14-
<PAGE> 17
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<S> <C> <C>
PETROLEUM REFINING AND
RELATED INDUSTRIES (0.3%)
Pennzoil Co.,
4.75% Bonds, 2003 $ 500,000 $ 467,500
----------
PHARMACEUTICAL AND HEALTH
CARE PRODUCTS (1.4%)
Becton Dickson & Co.,
8.80% Notes, 2001 2,000,000 2,217,686
----------
SERVICES (1.3%)
Columbia/HCA Healthcare Corp.,
6.91% Notes, 2005 2,000,000 1,983,716
----------
TRANSPORTATION (1.3%)
Delta Airlines Inc.,
9.25% Sinking Fund, 2007 (E) 955,121 1,033,116
Delta Airlines Inc.,
8.27% Sinking Fund, 2007 900,027 927,702
----------
1,960,818
----------
TRANSPORTATION MANUFACTURING (0.7%)
Arvin Industries Inc.,
10.00% Debentures, 2000 1,000,000 1,111,679
----------
UTILITIES (0.3%)
Potomac Electric Power Co.,
5.00% Debentures, 2002 600,000 537,000
----------
TOTAL BONDS (Cost $22,560,364) 22,570,204
----------
U.S. GOVERNMENT
AGENCY SECURITIES (4.2%)
Federal Home Loan Mortgage Corp.,
8.50% Pass Through, 2002 797,584 816,971
FNMA Pool,
8.50% Pass Through, 2005 364,544 377,529
FNMA Pool,
8.50% Pass Through, 2005 171,119 177,214
GNMA Pool,
7.50% Pass Through, 2007 72,559 72,990
GNMA Pool,
7.50% Pass Through, 2007 391,705 394,030
GNMA Pool,
9.00% Pass Through, 2016 245,930 258,532
GNMA Pool,
9.00% Pass Through, 2019 331,416 348,399
GNMA Pool,
9.50% Pass Through, 2020 601,208 637,468
GNMA Pool,
9.50% Pass Through, 2020 248,239 263,210
GNMA Notification,
9.50% Pass Through, 2017 3,001,709 3,182,748
----------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $6,343,791) 6,529,091
----------
U.S. GOVERNMENT SECURITIES (16.7%)
United States of America Treasury,
6.50% Notes, 1999 8,000,000 8,147,488
United States of America Treasury,
6.875% Notes, 1999 3,000,000 3,097,500
United States of America Treasury,
7.25% Notes, 2004 6,900,000 7,365,750
United States of America Treasury,
5.875% Notes, 2004 2,000,000 1,955,000
United States of America Treasury,
7.875% Bonds, 2021 5,000,000 5,695,305
----------
TOTAL U.S. GOVERNMENT
SECURITIES (COST $24,698,789) 26,261,043
----------
SHORT-TERM INVESTMENTS (2.0%)
COMMERCIAL PAPER (1.3%)
Duke Power Co.,
5.95% due July 12, 1995 2,000,000 1,991,278
----------
U.S. GOVERNMENT SECURITIES (0.7%)
United States of America Treasury,
5.62% due September 21, 1995 (C) 100,000 97,987
United States of America Treasury,
5.76% due September 21, 1995 (C) 50,000 49,045
United States of America Treasury,
5.87% due September 21, 1995 (C) 75,000 71,063
United States of America Treasury,
6.05% due September 21, 1995 (C) 100,000 94,834
United States of America Treasury,
6.22% due September 21, 1995 (C) 445,000 422,439
United States of America Treasury,
6.34% due September 21, 1995 (C) 150,000 144,512
United States of America Treasury,
6.34% due September 21, 1995 (C) 100,000 96,358
United States of America Treasury,
6.63% due September 21, 1995 (C) 100,000 96,012
United States of America Treasury,
6.64% due September 21, 1995 (C) 100,000 95,888
----------
1,168,138
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,157,957) 3,159,416
----------
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL
VALUE
--------
<S> <C> <C>
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. September, 1995 (D) $18,055,950 -
------------
TOTAL INVESTMENTS (100%)
(COST $141,087,922) (B) $157,197,913
============
</TABLE>
-15-
<PAGE> 18
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
NOTES
(A) Non-income Producing Security.
(B) At June 30, 1995, net unrealized appreciation for all securities was
$16,109,991. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$17,452,780 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $1,342,789.
(C) Par value of $1,190,000 is pledged to cover margin deposits on futures
contracts.
(D) As more fully discussed in Note 1 to the financial statements, it is Fund
MA's practice to hold cash and cash equivalents (including short-term
investments) at least equal to the underlying face value, or notional
value, of outstanding purchased futures contracts, less the initial
margin. Fund MA uses futures contracts as a substitute for holding
individual securities.
(E) Management Priced Security.
See Notes to Financial Statements
-16-
<PAGE> 19
HIGH YIELD BOND TRUST
The overall high yield bond market had a strong first half of 1995. Various
high yield indices quote second quarter performance at a positive 10% to 12%
rate. The High Yield Bond Trust performed in line with the overall market and
returned in excess of 10% for the first half of 1995.
We continued our strategy of investing in opportunities where we sense the
potential for significant credit improvement over a 12-to 24-month time
horizon. Turnover has declined recently since investments made during prior
quarters had yet to realize sufficient relative credit improvement to merit
trading the securities.
Towards the end of June, we noted a meaningful reduction in market liquidity
which caused us to move to a more conservative investment position. We thus
raised cash levels in the High Yield Bond Trust from 4% to 21%. Since the end
of the quarter, we took advantage of a shaky market environment to bring cash
levels back under 10% by making several opportunistic security acquisitions.
Our outlook for the remainder of 1995 is very cautious. The portfolio contains
several cyclical issues which may be negatively impacted if the economy slides
into a recession. In addition, cash inflows and outflows at major mutual funds
tend to move bond prices materially regardless of company fundamentals. We are
therefore intensifying our efforts to identify and invest in non-cyclical
situations or cyclicals which have something occurring which can move cash
flows upward even in an economic slow down. An example of this kind of
cyclical is Sheffield Steel, a mini-mill operator which started up a new mill
this past April and should realize savings of $15 million per year going
forward even if overall steel markets are depressed. Sheffield Steel currently
has cash flow of $20 million, so the new mill could have a very positive impact
on credit quality.
-17-
<PAGE> 20
HIGH YIELD BOND TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $12,669,410) . . . . . . . . . $12,479,341
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,927
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . 8,391
-----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,778,722
-----------
LIABILITIES:
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . 694
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,391
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,942
-----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,424
-----------
NET ASSETS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,745,298
===========
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,812,952
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 568,592
Accumulated net realized gains (losses) on investment security transactions . . . . . (6,446,177)
Net unrealized depreciation on investment securities . . . . . . . . . . . . . . . . . (190,069)
-----------
Total net assets (applicable to 1,473,126 shares outstanding at
$8.65 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,745,298
===========
</TABLE>
See Notes to Financial Statements
-18-
<PAGE> 21
HIGH YIELD BOND TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 644,481
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . $ 30,378
Accounting and audit fees . . . . . . . . . . . . . . . . . . . 39,418
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 3,808
Printing and postage . . . . . . . . . . . . . . . . . . . . . . 8,093
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 2,178
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 405
----------
Total expenses before reimbursement from The Travelers . . 84,280
Less: Reimbursement from The Travelers . . . . . . . . . . . . . (8,391)
----------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . 75,889
-----------
Net investment income . . . . . . . . . . . . . . . . 568,592
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED LOSS ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . 16,202,144
Cost of investment securities sold . . . . . . . . . . . . 15,723,380
----------
Net realized gain . . . . . . . . . . . . . . . . . . 478,764
Change in unrealized loss on investment securities:
Unrealized loss at December 31, 1994 . . . . . . . . . . . (421,485)
Unrealized loss at June 30, 1995 . . . . . . . . . . . . . (190,069)
----------
Net change in unrealized loss for the period . . . . . 231,416
-----------
Net realized gain and change in unrealized loss . . 710,180
-----------
Net increase in net assets resulting from operations . . . . . . $1,278,772
==========
</TABLE>
See Notes to Financial Statements
-19-
<PAGE> 22
HIGH YIELD BOND TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . $ 568,592 $ 949,721
Net realized gain (loss) from investment security transactions . 478,764 (30,534)
Net change in unrealized gain (loss) on investment securities . 231,416 (1,108,223)
----------- ------------
Net increase (decrease) in net assets resulting from
operations . . . . . . . . . . . . . . . . . . . . . . . 1,278,772 (189,036)
----------- ------------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME . . . . . . . (960,192) (919,615)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . 1,127,942 2,094,990
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . 960,192 919,615
Payments for shares redeemed . . . . . . . . . . . . . . . . . . (1,377,822) (2,954,925)
----------- ------------
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . 710,312 59,680
----------- ------------
Net increase (decrease) in net assets . . . . . . . . 1,028,892 (1,048,971)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . 11,716,406 12,765,377
----------- ------------
End of period (including undistributed net investment income as follows:
June, 1995 $568,592 and December, 1994 $949,721) . . . . . $12,745,298 $11,716,406
=========== ===========
</TABLE>
See Notes to Financial Statements
-20-
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
High Yield Bond Trust ("Fund HY") is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. Shares of Fund HY are currently
offered, without a sales charge, to separate accounts of The Travelers
Insurance Company ("The Travelers"), an indirect wholly owned subsidiary of
Travelers Group Inc., in connection with the issuance of certain variable
annuity and variable life insurance contracts.
The following is a summary of significant accounting policies consistently
followed by Fund HY in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange are valued at the last-reported sale price as of the close of business
of the New York Stock Exchange on the last business day of the period;
securities traded on the over-the-counter market and listed securities with no
reported sales are valued at the mean between the last-reported bid and asked
prices or on the basis of quotations received from a reputable broker or other
recognized source.
When market quotations are not considered to be readily available for long-term
corporate bonds and notes, such investments are stated at fair value on the
basis of valuations furnished by a pricing service. These valuations are
determined for normal institutional-size trading units of such securities using
methods based on market transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Securities, including restricted securities, for which
pricing services are not readily available are valued by management at prices
which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are valued
at market. Short-term investments for which there is no reliable quoted market
price are valued by computing a market value based upon quotations from dealers
or issuers for securities of a similar type, quality and maturity.
REPURCHASE AGREEMENTS. When Fund HY enters into a repurchase agreement (a
purchase of securities whereby the seller agrees to repurchase the securities
at a mutually agreed upon date and price), the repurchase price of the
securities will generally equal the amount paid by Fund HY plus a negotiated
interest amount. The seller under the repurchase agreement will be required to
provide to Fund HY securities (collateral) whose market value, including
accrued interest, will be at least equal to 102% of the repurchase price. Fund
HY monitors the value of collateral on a daily basis. Repurchase agreements
will be limited to transactions with national banks and reporting broker
dealers believed to present minimal credit risks. Fund HY's custodian will
take actual or constructive receipt of all securities underlying repurchase
agreements until such agreements expire.
TAXES. Fund HY has qualified, and intends to continue to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended. As a regulated investment company, Fund HY is
relieved of any federal income tax liability by distributing all of its net
taxable investment income and net taxable capital gains, if any, to its
shareholders. Fund HY further intends to avoid excise tax liability by
distributing substantially all of its investment income. Therefore, no federal
income tax provision has been made by Fund HY in its financial statements. As
of December 31, 1994, Fund HY had capital loss carryovers totaling $6,553,958
which may be available to offset any future realized taxable gains, to the
extent provided by regulations. These amounts expire during the period
1995-2002.
OTHER. Security transactions are accounted for on the trade date. Interest
income is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date. Distributions to shareholders are recorded at the close of
business on the record date.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments aggregated
$14,672,957 and $15,703,303, respectively, for the six months ended June 30,
1995. Realized gains and losses from security transactions are reported on an
identified-cost basis.
-21-
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
3. FUND CHARGES
Investment management and advisory fees are calculated daily at annual rates
which start at 0.50% and decrease, as net assets increase, to 0.25% of Fund
HY's average net assets. These fees are paid to Travelers Asset Management
International Corporation, an indirect wholly owned subsidiary of Travelers
Group Inc.
The Travelers has agreed to reimburse Fund HY for the amount by which all of
Fund HY's aggregate annualized operating expenses, excluding brokerage
commissions and any interest charges and taxes, exceed 1.25% of Fund HY's
average net assets. Trustees and officers of Fund HY who are also officers and
employees of Travelers Group Inc., or its subsidiaries, receive no compensation
directly from Fund HY.
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of
Fund HY were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------- ------------
1995 1994
---- ----
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,578 243,214
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,154) (348,173)
Shares issued in reinvestment of distributions from net
investment income . . . . . . . . . . . . . . . . . . . . . . . . . 122,474 105,582
-------- --------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,898 623
======== ========
</TABLE>
As of June 30, 1995, all outstanding shares of beneficial interest were owned
by The Travelers Fund U for Variable Annuities and The Travelers Fund UL for
Variable Life Insurance, both of which are separate accounts of The Travelers.
-22-
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding
throughout each period.)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
---------- -----------------------------------------------------
1995 1994 1993 1992 1991 1990##
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period . . . . . . . $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33
Income from operations
Net investment income . . . . . . . . . . . . 0.38 0.66 0.68 0.88 0.94 1.02
Net gains or losses on securities (realized and
unrealized) . . . . . . . . . . . . . . . . 0.48 (0.76) 0.47 0.18 0.88 (1.81)
------- ------- ------- ------- ------ ------
Total from investment operations . . . . 0.86 (0.10) 1.15 1.06 1.82 (0.79)
Less distribution
Distribution from net investment income . . . (0.70) (0.66) (0.81) (0.90) (0.94) (0.67)
------- ------- ------- ------- ------ ------
Net asset value, end of period . . . . . . . . . . $ 8.65 $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87
======= ======= ======= ======= ====== ======
TOTAL RETURN** . . . . . . . . . . . . . . . . . . 10.98% (1.26)% 14.01% 13.16% 26.11% (9.12)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) . . . . $12,745 $11,716 $12,765 $10,289 $7,724 $6,238
Ratio of expenses to average net assets*** . . 1.25%# 1.25% 0.99% 0.56% 0.56% 0.92%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . 9.30%# 7.71% 7.69% 10.24% 11.93% 12.33%
Portfolio turnover rate . . . . . . . . . . . 134% 146% 19% 52% 35% 29%
</TABLE>
* The information set forth in Note 5 replaces the data presented in
prior periods as supplementary information.
** Total return is determined by dividing the increase (decrease) in
value of a share during the period, after reflecting the reinvestment
of dividends declared during the period, by the beginning of period
share price. As described in Note 1, shares in Fund HY are only sold
to The Travelers separate accounts in connection with the issuance of
variable annuity and variable life insurance contracts. The total
return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts. For periods of less
than one year, total returns are not annualized.
*** The ratio of expenses to average net assets for 1990 and later
periods reflects an expense reimbursement by The Travelers in
connection with voluntary expense limitations, including those
described in Note 3. Without the expense reimbursement, the ratios
of expenses to average net assets would have been 1.39% annualized
for the six months ended June 30, 1995 and 1.33%, 1.31%, 1.28%, 1.87%
and 2.13% for the years ended December 31, 1994, 1993, 1992, 1991 and
1990, respectively.
# Annualized.
## On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund HY.
-23-
<PAGE> 26
HIGH YIELD BOND TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCKS (0.3%)
FINANCE (0.2%)
Perry Capital Corp. (C) 500 $ 25,000
---------
TRANSPORTATION (0.0%)
Terex Corp. (A)(C) 2,000 2
---------
UTILITIES (0.1%)
Great Bay Power Co. (A) 1,500 12,563
---------
TOTAL COMMON STOCKS
(COST $156,522) 37,565
---------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
BONDS (78.1%)
CHEMICALS AND ALLIED PRODUCTS (3.9%)
Renaissance Cosmetics, Inc.,
13.75% Notes, 2001 (C) $ 500,000 490,000
---------
COMMUNICATION (9.1%)
Adelphia Communication,
9.50% Notes, 2004 (C) 261,875 227,069
Adelphia Communication,
9.875% Notes, 2005 250,000 221,250
Australia Media Ltd.,
0.00% Notes, 2003 500,000 262,500
Commodore Media, Inc.,
7.50% Notes, 2003 (C) 500,000 429,745
---------
1,140,564
---------
CONSTRUCTION (6.7%)
Greystone Homes, Inc.,
10.75% Notes, 2004 500,000 443,750
Hovnanian Enterprises,
9.75% Notes, 2005 500,000 390,000
---------
833,750
---------
FINANCE (6.8%)
B.F. Saul REIT,
11.625% Notes, 2002 500,000 475,000
Lomas Mortgage USA, Inc.,
9.75% Notes, 1997 500,000 372,500
---------
847,500
---------
FOOD (2.8%)
Heileman Acquisition,
9.625% Notes, 2004 500,000 347,500
---------
METAL PRODUCTS (7.6%)
Bayou Steel Corp.,
10.25% Notes, 2001 500,000 467,500
Sheffield Steel,
12.00% Bonds, 2001 500,000 487,500
---------
955,000
---------
OIL & GAS (2.1%)
WRT Energy,
13.875% Notes, 2002 250,000 258,125
---------
PAPER AND ALLIED PRODUCTS (7.5%)
Mail-Well, Inc.,
10.50% Notes, 2004 500,000 442,500
Stone Container Corp.,
9.875% Notes, 2001 500,000 500,000
---------
942,500
---------
RETAIL (18.9%)
Broadway Stores, Inc.,
6.25% Debentures, 2000 (C) 500,000 314,000
Family Restaurant, Inc.,
0.00% Notes, 2004 250,000 58,750
Family Restaurant, Inc.,
9.75% Notes, 2002 250,000 158,750
Flagstar Corp.,
10.75% Notes, 2001 250,000 235,000
Flagstar Corp.,
11.25% Debentures, 2004 250,000 196,250
Foodmaker, Inc.,
9.75% Notes, 2002 500,000 417,500
Hosiery Corp. of America,
14.25% Notes, 2002 (C) 500,000 537,775
Rickel Home Centers,
13.50% Notes, 2001 500,000 437,500
---------
2,355,525
---------
SERVICES (5.1%)
Florists Transworld Delivery,
14.00% Notes, 2001 (C) 500,000 485,000
United International Holdings,
0.00% Notes, 1999 250,000 146,250
---------
631,250
---------
STONE, CLAY, GLASS, AND
CONCRETE PRODUCTS (3.7%)
NVR, Inc.,
11.00% Notes, 2003 500,000 458,750
---------
TRANSPORTATION (3.9%)
Terex Corp.,
13.25% Notes, 2002 (C) 500,000 486,250
---------
TOTAL BONDS
(COST $9,817,735) 9,746,714
---------
</TABLE>
-24-
<PAGE> 27
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<S> <C> <C>
SHORT-TERM INVESTMENTS (21.6%)
COMMERCIAL PAPER (21.6%)
Deutsche Bank Financial, Inc.,
6.00% due July 6, 1995 $ 600,000 $ 599,283
E.I. Dupont de Nemours & Co.,
6.00% due July 6, 1995 600,000 599,283
McKenna Triangle National Corp.,
6.02% due July 17, 1995 600,000 598,192
Tampa Electric Co.,
5.96% due July 13, 1995 600,000 598,562
UBS Financial, Inc.,
6.21% due July 5, 1995 300,000 299,742
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,695,153) 2,695,062
-----------
TOTAL INVESTMENTS (100%)
(Cost $12,669,410) (B) $12,479,341
===========
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At June 30, 1995, net unrealized depreciation for all securities was
$190,069. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$298,157 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $488,226.
(C) Management Priced Security.
See Notes to Financial Statements
-25-
<PAGE> 28
CAPITAL APPRECIATION FUND
The financial markets rallied sharply during the first six months of 1995.
Interest rates dropped dramatically and bond prices surged, as economic growth
slowed to more moderate levels and inflation remained benign. The U.S. dollar
also appeared to stabilize. All these factors are providing an excellent
environment for equities.
There are three major investment themes that are currently driving portfolio
performance. First, low interest rates and modest inflation have created an
extremely favorable context for financial stocks. We expect these conditions
to continue into year-end and believe many of our long-term holdings, such as
Merrill Lynch, Citicorp, Federal National Mortgage, and Federal Home Loan
Mortgage, will continue to grow their earnings at substantial rates.
Second, our technology positions are benefiting from a global upgrade and
expansion in communications and computer-related products and services. The
rapid acceptance of the new Pentium chip and the coming introduction of
Microsoft's powerful new software, Windows 95, will continue to drive demand
for a wide array of computer and telecommunications equipment as users upgrade
existing systems and discover new uses for these exciting products. The boom
in wireless communications and on-line computer services, both of which are
increasing almost exponentially, are two areas where new applications for this
equipment are especially robust. Portfolio positions such as Nokia, the
Finnish cellular phone and telecom equipment manufacturer, Texas Instruments
and LSI Logic, which both make semiconductors, and Hewlett Packard, which
dominates the desk-top printer market and is expanding rapidly into the PC
market, have all performed extremely well. Microsoft is also up strongly.
The third driver of performance is the enormous cash flow many of our
companies are now experiencing. A number of companies are generating more
cash than they can prudently reinvest in their businesses, so companies such
as Citicorp are repurchasing their own stock as a way of enhancing shareholder
value. In the past, these companies might have used their excess cash to
increase their dividend payments. Our view is that stock repurchase is a more
effective way to reward shareholders, however, because it allows shareholders
to decide when to take profits and pay capital gains taxes.
During the first half of this year, we took profits in Home Depot, a chain of
home improvement centers, Compaq Computer, and Lone Star Steakhouse. We added
to our positions in Hewlett Packard and LSI Logic. In June, credit card
processor First Data, announced it intends to acquire First Financial
Management, which also processes credit cards. The merge will create a number
of synergies and First Data should enjoy an even faster growth rate.
As we enter the second half of the year, we remain very optimistic on the
equity markets. Markets do not go straight up, of course, but as long as
economic growth is moderate, inflation low, and interest rates continue at
current levels, stocks should perform well.
-26-
<PAGE> 29
CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $82,775,237) .................. $ 101,032,520
Cash .................................................................................. 491,339
Receivables:
Dividends........................................................................ 57,068
Interest......................................................................... 1,031
Investment securities sold....................................................... 248,297
-------------
Total Assets.................................................................. 101,830,255
-------------
LIABILITIES:
Payables:
Investment securities purchased ................................................. 1,408,623
Investment management and advisory fees.......................................... 8,078
Accrued expenses....................................................................... 26,405
-------------
Total Liabilities............................................................. 1,443,106
-------------
NET ASSETS:.............................................................................. $ 100,387,149
=============
NET ASSETS REPRESENTED BY:
Paid-in capital........................................................................ $ 84,185,364
Undistributed net investment income.................................................... 436,850
Accumulated net realized gains (losses) on investment security transactions............ (2,492,348)
Net unrealized appreciation on investment securities................................... 18,257,283
-------------
Total net assets (applicable to 3,436,350 shares outstanding at $29.21 per
share) ..................................................................... $ 100,387,149
=============
</TABLE>
See Notes to Financial Statements
-27-
<PAGE> 30
CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 419,598
Interest................................................... 393,637
------------
Total income ........................................ $ 813,235
EXPENSES:
Investment management and advisory fees.................... 322,478
Accounting and audit fees.................................. 42,143
Custodian fees............................................. 121
Printing and postage....................................... 9,342
Trustees' fees............................................. 2,171
Registration fees.......................................... 130
------------
Total expenses....................................... 376,385
------------
Net investment income............................. 436,850
------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold............. 71,142,406
Cost of investment securities sold................... 68,638,521
------------
Net realized gain................................. 2,503,885
Change in unrealized gain on investment securities:
Unrealized gain at December 31, 1994................. 4,796,334
Unrealized gain at June 30, 1995 .................... 18,257,283
------------
Net change in unrealized gain for the period...... 13,460,949
------------
Net realized gain and change in unrealized gain. 15,964,834
------------
Net increase in net assets resulting from operations......... $ 16,401,684
============
</TABLE>
See Notes to Financial Statements
-28-
<PAGE> 31
CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income...................................................... $ 436,850 $ 559,581
Net realized gain (loss) from investment security transactions............. 2,503,885 (4,598,572)
Net change in unrealized gain on investment securities..................... 13,460,949 752,650
------------ ------------
Net increase (decrease) in net assets resulting from operations...... 16,401,684 (3,286,341)
------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME...................... (540,784) (359,166)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................................................. 10,756,045 29,010,545
Dividend reinvestment...................................................... 540,784 359,166
Payments for shares redeemed............................................... (5,264,182) (9,644,753)
------------ ------------
Net increase in net assets resulting from capital share transactions. 6,032,647 19,724,958
------------ ------------
Net increase in net assets........................................ 21,893,547 16,079,451
NET ASSETS:
Beginning of period ...................................................... 78,493,602 62,414,151
------------ ------------
End of period (including undistributed net investment income as follows:
June, 1995 $436,850 and December, 1994 $559,581)........................ $100,387,149 $ 78,493,602
============ ============
</TABLE>
See Notes to Financial Statements
-29-
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Capital Appreciation Fund ("Fund CA") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. Shares of Fund CA are
currently offered, without a sales charge, to separate accounts of The
Travelers Insurance Company ("The Travelers"), an indirect wholly owned
subsidiary of Travelers Group Inc., in connection with the issuance of certain
variable annuity and variable life insurance contracts.
The following is a summary of significant accounting policies consistently
followed by Fund CA in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange are valued at the last-reported sale price as of the close of
business of the New York Stock Exchange on the last business day of the
period; securities traded on the over-the-counter market and listed securities
with no reported sales are valued at the mean between the last-reported bid
and asked prices or on the basis of quotations received from a reputable
broker or other recognized source.
When market quotations are not considered to be readily available for long-
term corporate bonds and notes, such investments are generally stated at fair
value on the basis of valuations furnished by a pricing service. These
valuations are determined for normal institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Securities, including restricted
securities, for which pricing services are not readily available are valued by
management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are valued
at market. Short-term investments for which there is no reliable quoted
market price are valued by computing a market value based upon quotations from
dealers or issuers for securities of a similar type, quality and maturity.
FUTURES CONTRACTS. Fund CA may use stock index futures contracts, and may
also use interest rate futures contracts, as a substitute for the purchase or
sale of individual securities. When Fund CA enters into a futures contract,
it agrees to buy or sell a specified index of stocks or debt securities at a
future time for a fixed price, unless the contract is closed prior to
expiration. Fund CA is obligated to deposit with a broker an "initial margin"
equivalent to a percentage of the face, or notional value of the contract.
It is Fund CA's practice to hold cash and cash equivalents (including short-
term investments) in an amount at least equal to the notional value of
outstanding purchased futures contracts, less the initial margin. Generally,
futures contracts are closed prior to expiration.
Futures contracts purchased by Fund CA are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or losses
and no asset is recorded in the Statement of Investments. However, when Fund
CA holds open futures contracts, it assumes a market risk generally equivalent
to the underlying market risk of changes in the value of the specified indexes
or debt securities associated with the futures contract.
OPTIONS. Fund CA may purchase index or individual equity put or call options,
thereby obtaining the right to sell or buy a fixed number of shares of the
underlying asset at the stated price on or before the stated expiration date.
Fund CA may sell the options before expiration. Options held by Fund CA are
listed on either national securities exchanges or on over-the-counter markets,
and are short-term contracts with a duration of less than nine months. The
market value of the options will be the latest sale price at the close of the
New York Stock Exchange, or in the absence of such sale, the latest bid
quotation.
REPURCHASE AGREEMENTS. When Fund CA enters into a repurchase agreement (a
purchase of securities whereby the seller agrees to repurchase the securities
at a mutually agreed upon date and price), the repurchase price of the
securities will generally equal the amount paid by Fund CA plus a negotiated
interest amount. The seller under the repurchase agreement will be required
to provide to Fund CA securities (collateral) whose market value,
including accrued interest, will be at least equal to 102% of the repurchase
price. Fund CA monitors the value of collateral on a daily basis. Repurchase
agreements will be limited to transactions with national banks and reporting
broker dealers believed to present minimal credit risks. Fund CA's custodian
will take actual or constructive receipt of all securities underlying
repurchase agreements until such agreements expire.
-30-
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
TAXES. Fund CA has qualified, and intends to continue to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. As a regulated investment company, Fund CA is relieved of
any federal income tax liability by distributing all of its net taxable
investment income and net taxable capital gains, if any, to its shareholders.
Fund CA further intends to avoid excise tax liability by distributing
substantially all of its investment income. Therefore, no federal income tax
provision has been made by Fund CA in its financial statements. As of December
31, 1994, Fund CA had capital loss carryovers totaling $4,875,708, which may be
available to offset any future realized taxable capital gains, to the extent
provided by regulations. These amounts expire during the period 1998-2002.
OTHER. Security transactions are accounted for on the trade date. Interest
income is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date. Distributions to shareholders are recorded at the close of
business on the record date.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments aggregated
$62,497,175 and $43,198,464, respectively, for the six months ended June 30,
1995. Realized gains and losses from security transactions are reported on an
identified-cost basis.
3. FUND CHARGES
Investment management and advisory fees are calculated daily at an annual rate
of 0.75% of Fund CA's average net assets. These fees are paid to The
Travelers Investment Management Company ("TIMCO"), an indirect wholly owned
subsidiary of Travelers Group Inc.
Pursuant to a sub-advisory agreement between TIMCO and Janus Capital
Corporation ("Janus Capital"), TIMCO pays Janus Capital an amount equivalent
on an annual basis to 0.55% of Fund CA's average net assets for investment
management and advisory services as sub-adviser.
The Travelers has agreed to reimburse Fund CA for the amount by which all of
Fund CA's aggregate annualized operating expenses, excluding brokerage
commissions and any interest charges and taxes, exceed 1.25% of Fund CA's
average net assets. Trustees and officers of Fund CA who are also officers or
employees of Travelers Group Inc. or its subsidiaries receive no compensation
directly from Fund CA.
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of
Fund CA were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ --------------
1995 1994
---- ----
<S> <C> <C>
Shares sold................................ 411,397 1,167,145
Shares redeemed............................ (201,464) (388,338)
Shares issued in reinvestment of
distributions from net investment income 22,109 13,442
---------- -----------
Net ....................................... 232,042 792,249
========== ===========
</TABLE>
As of June 30, 1995, all outstanding shares of beneficial interest were owned
by The Travelers Fund U for Variable Annuities and The Travelers Fund UL for
Variable Life Insurance, both of which are separate accounts of The Travelers.
-31-
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding
throughout each period.)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31, (DERIVED FROM
JUNE 30, AUDITED FINANCIAL INFORMATION)
--------- -----------------------------------------------
1995 1994 1993### 1992 1991 1990##
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................... $ 24.50 $ 25.87 $ 22.72 $ 19.63 $ 14.62 $ 15.76
Income from operations
Net investment income ..................................... 0.13 0.19 0.19 0.28 0.36 0.09
Net gains or losses on securities (realized and unrealized) 4.75 (1.41) 3.21 3.13 4.75 (1.08)
-------- ------- ------- ------- ------- -------
Total from investment operations....................... 4.88 (1.22) 3.40 3.41 5.11 (0.99)
Less distribution
Distribution from net investment income................... (0.17) (0.15) (0.25) (0.32) (0.10) (0.15)
-------- ------- ------- ------- ------- -------
Net asset value, end of period............................... $ 29.21 $ 24.50 $ 25.87 $ 22.72 $ 19.63 $ 14.62
======== ======= ======= ======== ======= =======
TOTAL RETURN** 20.05% (4.76)% 15.09% 17.60% 35.16% (6.24)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)..................... $100,387 $78,494 $62,414 $29,506 $20,497 $13,494
Ratio of expenses to average net assets *** .............. 0.88%# 0.89% 0.87% 0.56% 0.56% 0.82%
Ratio of net investment income to average net assets...... 1.03%# 0.79% 0.81% 1.39% 2.05% 0.58%
Portfolio turnover rate................................... 59% 106% 155% 126% 205% 80%
</TABLE>
* The information set forth in Note 5 replaces the data presented in prior
periods as supplementary information.
** Total return is determined by dividing the increase (decrease) in value of
a share during the period, after reflecting the reinvestment of the
dividends declared during the period, by the beginning of period share
price. As described in Note 1, shares in Fund CA are only sold to The
Travelers separate accounts in connection with the issuance of variable
annuity and variable life insurance contracts. The total return does not
reflect the deduction of any contract charges or fees assessed by The
Travelers separate accounts. For periods of less than one year, total
returns are not annualized.
*** The ratio of expenses to average net assets for 1990-1993 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
expenses to average net assets would have been 0.96%, 0.91%, 1.28%, and
1.56% for the years ended December 31, 1993, 1992, 1991 and 1990,
respectively. For the six months ended June 30, 1995 and the year ended
December 31, 1994, there were no expense reimbursements by The Travelers
in connection with the voluntary expense limitation described in
Note 3.
# Annualized.
## On May 1, 1990, TIMCO replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund CA.
### Effective May 1, 1993, Janus Capital Corporation became sub-adviser for
Fund CA.
-32-
<PAGE> 35
CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (UNAUDITED)
June 30, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- --------
<S> <C> <C>
COMMON STOCKS (93.9%)
AMUSEMENTS (2.7%)
Circus Circus Enterprises, Inc. (A) 5,075 $ 178,894
Walt Disney Co. 46,050 2,561,531
----------
2,740,425
----------
BANKING (4.7%)
Chase Manhattan Corp. 20,075 943,525
Chemical Banking Corp. 13,900 656,775
Citicorp 28,640 1,657,540
First Bank Systems, Inc. 26,050 1,068,050
First Interstate Bancorp 5,150 413,287
----------
4,739,177
----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (7.1%)
Amgen (A) 19,550 1,571,331
Hercules, Inc. 21,425 1,044,469
Lynx Therapeutics (A) (C) 1,056 211
Merck & Co., Inc. 32,425 1,588,825
Pfizer, Inc. 32,525 3,004,497
----------
7,209,333
----------
COMMUNICATION (0.4%)
Infinity Broadcasting (A) 5,363 178,973
Lin Television Corp. (A) 275 9,247
L.M. Ericsson Telephone Co. 10,600 212,662
----------
400,882
----------
CREDIT CARD RECEIVABLES (0.2%)
National Instruments Corp. (A) 10,225 184,050
----------
ELECTRICAL AND ELECTRONIC MACHINERY (24.8%)
Alliance Semiconductor (A) 17,825 868,969
Altera Corp. (A) 26,900 1,166,787
Datalogix International (A) 1,475 35,584
Duracell International, Inc. 21,700 938,525
General Instrument Corp. (A) 17,725 680,197
Intel Corp. 42,450 2,687,616
LSI Logic Corp. (A) 30,350 1,187,444
Micron Technology 32,000 1,756,000
National Semiconductor (A) 37,375 1,037,156
Nokia Corp. 30,000 1,788,750
Philips NV 50,225 2,147,119
Polygram NV 7,900 467,088
Tellabs, Inc. (A) 30,000 1,441,875
Texas Instruments, Inc. 23,775 3,182,878
U.S. Robotics, Inc. (A) 42,475 4,624,466
Xilinx, Inc. (A) 11,175 1,049,053
----------
25,059,507
----------
FINANCE (11.0%)
Amexs Co. 1,000 48,500
Countrywide Credit Industries 50,400 1,058,400
Federal Home Loan Corp. 30,075 2,067,656
Federal National Mortgage Assoc. 29,070 2,743,481
Lehman Brothers Holding, Inc. 8,900 194,687
Merrill Lynch & Co., Inc. 60,165 3,158,663
Reuters Holding PLC 7,425 371,714
Schwab Charles Corp. 19,575 849,066
Smithkline Beecham PLC 14,100 638,025
----------
11,130,192
----------
FOOD (6.5%)
Coca-Cola Co. 46,625 2,972,344
PepsiCo, Inc. 65,275 2,978,172
RJR Nabisco Holding Corp. 23,100 623,700
----------
6,574,216
----------
LUMBER AND WOOD PRODUCTS (1.1%)
Georgia-Pacific Corp. 12,775 1,108,231
----------
MACHINERY (9.4%)
Applied Materials (A) 26,475 2,290,088
Cisco Systems, Inc. (A) 14,125 714,195
Diebold, Inc. 18,700 813,450
Hewlett Packard Co. 51,525 3,838,613
Lam Resh Corp. (A) 20,575 1,314,228
Silicon Graphics, Inc. (A) 12,775 509,403
----------
9,479,977
----------
METAL PRODUCTS (4.6%)
Crown Cork & Seal, Inc. (A) 44,475 2,229,309
Phelps Dodge Corp. 41,550 2,451,450
----------
4,680,759
----------
MISCELLANEOUS MANUFACTURING (0.4%)
Mattel, Inc. 14,350 373,100
----------
PAPER AND ALLIED PRODUCTS (1.4%)
Boise Cascade Corp. 16,250 658,125
Willamette Industries 13,575 750,019
----------
1,408,144
----------
RETAIL (3.3%)
Lowe's Co.'s, Inc. 102,925 3,074,884
U.S. Office Products Co. (A) 18,050 214,344
----------
3,289,228
----------
SERVICES (10.6%)
BDM International, Inc. (A) 2,000 40,750
First Data Corp. 62,625 3,561,797
Gartner Group, Inc. (A) 75,000 2,165,625
Heritage Media Corp. (A) 2,500 72,188
Intuit, Inc. (A) 17,025 1,294,964
Microsoft (A) 35,575 3,217,314
Vivra, Inc. (A) 15,575 422,472
----------
10,755,110
----------
TRANSPORTATION MANUFACTURING (3.6%)
General Motors Corp., Cl. E 55,425 2,410,987
Martin-Marietta Corp. 18,975 1,197,797
----------
3,608,784
----------
UTILITIES (2.1%)
Browning and Ferris Ind. 57,550 2,078,994
----------
TOTAL COMMON STOCKS
(COST $76,582,655) 94,840,109
----------
</TABLE>
-33-
<PAGE> 36
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- --------
<S> <C> <C>
PREFERRED STOCKS (0.0%)
PHARMACEUTICAL AND
HEALTH CARE PRODUCTS (0.0%)
Lynx Therapeutics (A) (C) 1,536 $ 1,536
------------
TOTAL PREFERRED STOCKS
(COST $1,536) 1,536
------------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.1%)
COMMERCIAL PAPER (4.1%)
Ford Motor Credit Co.,
6.05% due July 3, 1995 $4,200,000 4,197,845
------------
U.S. GOVERNMENT AGENCY SECURITIES (2.0%)
Federal Home Loan Banks,
5.88% due July 21, 1995 2,000,000 1,993,030
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $6,191,046) 6,190,875
------------
TOTAL INVESTMENTS (100%)
(COST $82,775,237) (B) $101,032,520
============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At June 30, 1995, net unrealized appreciation for all securities was
$18,257,283. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$18,465,017 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $207,734.
(C) Management Priced Security.
See Notes to Financial Statements
-34-
<PAGE> 37
CASH INCOME TRUST
The assets in Cash Income Trust continue to be invested in U.S. Treasuries and
its asset size has remained constant throughout the second quarter. This has
provided the portfolio with safety, liquidity and stability. The growth of the
account is constantly monitored. Any opportunities for diversification in
holdings resulting from a drastic increase in asset size will be captured as
deemed appropriate.
-35-
<PAGE> 38
CASH INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $1,479,331)................... $ 1,479,083
Cash.................................................................................. 10,720
Receivables:
Interest.......................................................................... 2,020
Receivable from The Travelers..................................................... 37,704
----------------
Total Assets................................................................... 1,529,527
----------------
LIABILITIES:
Payables:
Investment management and advisory fees........................................... 53
Dividends......................................................................... 3,716
Accrued expenses:
Reimbursable expenses............................................................. 37,704
Other expenses.................................................................... 3,015
----------------
Total Liabilities.............................................................. 44,488
----------------
NET ASSETS:
(Applicable to 1,485,039 shares outstanding at $1.00 per share)................... $ 1,485,039
================
</TABLE>
See Notes to Financial Statements
-36-
<PAGE> 39
CASH INCOME TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................. $ 32,550
EXPENSES:
Investment management and advisory fees.............................. $ 1,987
Accounting and audit fees............................................ 33,303
Custodian fees....................................................... 1,492
Printing and postage................................................. 6,121
Trustees' fees....................................................... 2,132
Registration fees.................................................... 178
---------------
Total expenses before reimbursement from The Travelers........... 45,213
Less: Reimbursement from The Travelers............................... (37,704)
---------------
Net expenses..................................................... 7,509
----------------
Net investment income......................................... 25,041
----------------
Net increase in net assets resulting from operations................. $ 25,041
================
</TABLE>
See Notes to Financial Statements
-37-
<PAGE> 40
CASH INCOME TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income................................................ $ 25,041 $ 29,710
---------------- ----------------
Net increase in net assets resulting from operations............. 25,041 29,710
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDER FROM NET INVESTMENT INCOME................. (25,041) (29,710)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold............................................ 1,562,460 3,009,583
Dividends reinvested................................................. 27,446 24,539
Payments for shares redeemed......................................... (1,307,560) (2,478,281)
---------------- ----------------
Net increase in net assets resulting from capital share
transactions.................................................. 282,346 555,841
---------------- ----------------
Net increase in net assets.................................... 282,346 555,841
NET ASSETS:
Beginning of period.................................................. 1,202,693 646,852
---------------- ----------------
End of period........................................................ $ 1,485,039 $ 1,202,693
================ ================
</TABLE>
See Notes to Financial Statements
-38-
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Cash Income Trust ("Fund CI") is a Massachusetts business trust registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. Shares of Fund CI are currently offered, without
a sales charge, to separate accounts of The Travelers Insurance Company ("The
Travelers"), an indirect wholly owned subsidiary of Travelers Group Inc., in
connection with the issuance of certain variable life insurance contracts.
The following is a summary of significant accounting policies consistently
followed by Fund CI in the preparation of its financial statements.
SECURITY VALUATION. Short-term investments for which a quoted market price
is available are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type, quality and
maturity.
REPURCHASE AGREEMENTS. When Fund CI enters into a repurchase agreement (a
purchase of securities whereby the seller agrees to repurchase the securities at
a mutually agreed upon date and price), the repurchase price of the securities
will generally equal the amount paid by Fund CI plus a negotiated interest
amount. The seller under the repurchase agreement will be required to provide to
Fund CI securities (collateral) whose market value, including accrued interest,
will be at least equal to 102% of the repurchase price. Fund CI monitors the
value of collateral on a daily basis. Repurchase agreements will be limited to
transactions with national banks and reporting broker dealers believed to
present minimal credit risks. Fund CI's custodian will take actual or
constructive receipt of all securities underlying repurchase agreements until
such agreements expire.
TAXES. Fund CI has qualified, and intends to continue to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. As a regulated investment company, Fund CI is relieved of
any federal income tax liability by distributing all of its net taxable
investment income and net taxable capital gains, if any, to its shareholder.
Fund CI further intends to avoid excise tax liability by distributing
substantially all of its investment income. Therefore, no federal income tax
provision has been made by Fund CI in its financial statements. As of December
31, 1994, Fund CI had capital loss carryovers totaling $1,981, which may be
available to offset any future realized taxable gains, to the extent provided by
regulations. These amounts expire during the period 1995-2002.
DIVIDENDS. Fund CI declares dividends daily, pays dividends monthly, and
automatically reinvests such dividends in additional shares at net asset value.
Dividends are declared from the total of net investment income.
OTHER. Security transactions are accounted for on the trade
date. Interest income is recorded on the accrual basis.
2. INVESTMENTS
Realized gains and losses from security transactions are reported on an
identified-cost basis.
3. FUND CHARGES
Investment management and advisory fees are calculated daily at an annual rate
of 0.3233% of Fund CI's average net assets. These fees are paid to Travelers
Asset Management International Corporation, an indirect wholly owned subsidiary
of Travelers Group Inc.
The Travelers has agreed to reimburse Fund CI for the amount by which all of
Fund CI's aggregate annualized operating expenses, excluding brokerage
commissions and any interest charges and taxes, exceed 1.25% of Fund CI's
average net assets. Trustees and officers of Fund CI who are also officers or
employees of Travelers Group Inc., or its subsidiaries, receive no compensation
directly from Fund CI.
-39-
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest with a par value of $0.10 per share. Transactions
in shares of Fund CI were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------------- ---------------
1995 1994
---- ----
<S> <C> <C>
Shares sold..................................................... 1,562,460 3,009,583
Shares redeemed................................................. (1,307,560) (2,478,281)
Shares issued in reinvestment of distributions.................. 27,446 24,539
---------- ----------
Net............................................................. 282,346 555,841
========== ==========
</TABLE>
As of June 30, 1995, all outstanding shares of beneficial interest were owned
by The Travelers Fund UL for Variable Life Insurance, a separate account of The
Travelers.
-40-
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding
throughout each period.)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
--------- -----------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from operations.......................... 0.0205 0.0278 0.0214 0.0322 0.0650 0.0744
Less distributions from net investment income... (0.0205) (0.0278) (0.0214) (0.032) (0.0650) (0.0744)
-------- --------- --------- -------- -------- --------
Net asset value, end of period (unchanged during
the period)........................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ======== ======== ========
TOTAL RETURN** 2.05% 2.78% 2.14% 3.22% 6.50% 7.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)............. $1,485 $1,203 $647 $697 $690 $619
Ratio of expenses to average net assets ***....... 1.25%# 1.25% 0.94% 0.38% 0.38% 0.08%
</TABLE>
* The information set forth in Note 5 replaces the data presented in prior
periods as supplementary information.
** Total return is determined after reflecting the reinvestment of dividends
declared during the period, by dividing net investment income by average
net assets. As described in Note 1, shares in Fund CI are only sold to
The Travelers separate accounts in connection with the issuance of
variable life insurance contracts. The total return does not reflect the
deduction of any contract charges or fees assessed by The Travelers
separate accounts. For periods of less than one year, total returns are
not annualized. Prior period amounts have been reclassified to conform to
the current period's presentation.
*** The ratio of expenses to average net assets for 1990 and later periods
reflects an expense reimbursement by The Travelers in connection with
voluntary expense limitations, including those described in Note 3.
Without the expense reimbursement, the ratios of expenses to average net
assets would have been 7.39% annualized for the six months ended June 30,
1995 and 6.40%, 8.47%, 7.70%, 11.61% and 20.99% for the years ended
December 31, 1994, 1993, 1992, 1991, and 1990, respectively.
# Annualized.
-41-
<PAGE> 44
CASH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (100%)
U.S. GOVERNMENT SECURITIES (100%)
United States of America Treasury,
5.37% due August 31, 1995 ............ $ 300,000 $ 296,882
United States of America Treasury,
5.38% due September 28, 1995 ......... 200,000 197,060
United States of America Treasury,
5.37% due September 28, 1995 ......... 300,000 295,635
United States of America Treasury,
5.39% due August 31, 1995 ............ 200,000 197,891
United States of America Treasury,
5.39% due October 26, 1995 ........... 300,000 294,290
United States of America Treasury,
5.42% due September 21, 1995 ......... 200,000 197,325
----------
TOTAL INVESTMENTS (100%)
(COST $1,479,331) .................... $1,479,083
==========
</TABLE>
See Notes to Financial Statements
-42-
<PAGE> 45
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT
SECURITIES PORTFOLIO
The rally that began in November continued through the first half of 1995.
Yields on U.S. Treasuries between one and ten years rallied 150 basis points or
more, while the bond market lagged, rallying only 126 basis points. The yield
curve steepened, with 2-year to 30-year Treasuries increasing 82 basis points,
while trading in a range of 65 to 100 basis points over the month. The
five-year part of the yield curve was the best performer on a
duration-adjusted basis, as investors bought this issue heavily to adjust
portfolio durations. Mortgage-backed securities lagged behind government bonds
of similar duration as yield volatility rose and fears of the next refinancing
wave prompted the investment community to shy away from this sector. During the
first half of the year, the Lehman Mortgage Index returned 10.7% versus the
11.8% return for the Lehman/Government Corporate Bond Index.
The six-month return for the portfolio exceeded the return of its
benchmark for the same time period. The portfolio duration was only marginally
longer than the benchmark, with a duration that was 3-5% longer. Asset
selection in the mortgage portfolio also contributed to performance, as the
portfolio held discount pass throughs with 6.0% and 6.5% coupons and well
structured, low coupon Planned Amortization Class Collateralized Mortgage
Obligations that were well-insulated from prepayment fears.
As the market has repriced the mortgage landscape, we are selectively
looking at reducing high-call protected securities as they have have already
experienced increases in value. Agency debentures that offer incremental value
versus U.S. Treasuries are attractive as bullet substitutes. The portfolio
duration will be kept close to neutral as we believe that the bulk of the rally
has already passed.
-43-
<PAGE> 46
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $25,537,392).................... $ 26,150,610
Interest receivable..................................................................... 257,639
-----------------
Total Assets..................................................................... 26,408,249
-----------------
LIABILITIES:
Cash overdraft.......................................................................... 50,440
Payable for investment management and advisory fees..................................... 944
Accrued expenses........................................................................ 26,543
-----------------
Total Liabilities................................................................ 77,927
-----------------
NET ASSETS:................................................................................ $ 26,330,322
=================
NET ASSETS REPRESENTED BY:
Paid-in capital......................................................................... $ 25,185,672
Undistributed net investment income..................................................... 766,264
Accumulated net realized gains (losses) on investment security transactions............. (234,832)
Net unrealized appreciation on investment securities.................................... 613,218
-----------------
Total net assets (applicable to 2,287,809 shares outstanding at $11.51 per
share) ........................................................................ $ 26,330,322
=================
</TABLE>
See Notes to Financial Statements
-44-
<PAGE> 47
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................. $ 853,096
EXPENSES:
Investment management and advisory fees.............................. $ 41,756
Accounting and audit fees............................................ 32,945
Custodian fees....................................................... 4,463
Printing and postage................................................. 5,490
Trustees' fees....................................................... 1,360
Registration fees.................................................... 818
------------------
Total expenses................................................... 86,832
------------------
Net investment income......................................... 766,264
------------------
REALIZED LOSS AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold......................... 4,282,991
Cost of investment securities sold............................... 4,304,604
------------------
Net realized loss............................................. (21,613)
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994............................. (2,374,647)
Unrealized gain at June 30, 1995................................. 613,218
------------------
Net change in unrealized gain (loss) for the period........... 2,987,865
------------------
Net realized loss and change in unrealized gain (loss).... 2,966,252
------------------
Net increase in net assets resulting from operations................. $ 3,732,516
==================
</TABLE>
See Notes to Financial Statements
-45-
<PAGE> 48
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 766,264 $ 1,418,225
Net realized loss from investment security transactions.................. (21,613) (211,271)
Net change in unrealized gain (loss) on investment securities............ 2,987,865 (2,752,337)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations...... 3,732,516 (1,545,383)
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions...................................... (1,404,917) (883,624)
Net long-term realized gains from investment security transactions....... - (63,504)
--------------- ---------------
Total distribution to shareholders................................ (1,404,917) (947,128)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................................ 2,564,994 7,137,525
Dividend reinvestment.................................................... 1,404,917 947,128
Payments for shares redeemed............................................. (4,489,353) (6,590,182)
--------------- ---------------
Net increase (decrease) in net assets resulting from
capital share transactions...................................... (519,442) 1,494,471
--------------- ---------------
Net increase (decrease) in net assets............................. 1,808,157 (998,040)
NET ASSETS:
Beginning of period...................................................... 24,522,165 25,520,205
--------------- ---------------
End of period (including undistributed net investment income as follows:
June, 1995 $766,264 and December, 1994 $1,418,225).............. $ 26,330,322 $ 24,522,165
=============== ===============
</TABLE>
See Notes to Financial Statements
-46-
<PAGE> 49
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ------------
<S> <C> <C>
BONDS (51.8%)
COLLATERALIZED MORTGAGE
OBLIGATIONS (51.8%)
Federal Farm Credit Banks,
5.93% Notes, 2003 ..................... $ 1,000,000 $ 968,280
Federal Home Loan Mortgage Corp.,
6.50% Pass Through, 2024 .............. 2,539,005 2,445,379
Federal Home Loan Mortgage Corp.,
5.50% Pass Through, 2010 .............. 1,095,770 1,015,821
Federal Home Loan Mortgage Corp.,
6.25% Pass Through, 2023 .............. 1,000,000 955,739
Federal Home Loan Mortgage Corp.,
7.00% Pass Through, 2007 .............. 1,000,000 1,004,849
Federal Housing Authority 236,
7.79% Pass Through, 2013 (B) .......... 967,819 993,446
Federal Housing Authority 236,
7.28% Pass Through, 2018 (B) .......... 937,280 944,104
FNMA Remic Trust 1993-05,
7.50% Pass Through, 2008 .............. 1,000,000 1,032,689
FNMA Remic Trust 1993-13,
6.50% Pass Through, 2000 .............. 1,163,296 1,122,975
FNMA Remic Trust 1994-22,
5.00% Pass Through, 2023 .............. 1,000,000 873,239
Guaranteed Export Certificate 1994-A,
7.12% Sinking Fund, 2006 .............. 945,118 975,710
Vendee Mortgage Trust 1992-1,
7.75% Pass Through, 2005 .............. 200,000 206,688
Vendee Mortgage Trust 1993-3,
6.50% Pass Through, 2020 .............. 1,120,128 1,006,715
-------------
TOTAL BONDS
(COST $13,302,328) .................... 13,545,634
-------------
U.S. GOVERNMENT AGENCY
SECURITIES (5.9%)
GNMA 30-Year Single Family,
6.00% Pass Through, 2024 .............. 1,514,635 1,417,602
GNMA 30-Year Single Family,
9.00% Pass Through, 2016 .............. 33,513 35,231
GNMA 30-Year Single Family,
9.00% Pass Through, 2019 .............. 77,688 81,669
-------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(COST $1,428,796) ..................... 1,534,502
-------------
U.S. GOVERNMENT SECURITIES (38.5%)
United States of America Treasury,
0.00% Bonds, 2010 4,500,000 1,674,801
United States of America Treasury,
7.25% Bonds, 2016 3,850,000 4,100,250
United States of America Treasury,
7.25% Bonds, 2022 3,000,000 3,205,308
United States of America Treasury,
7.875% Bonds, 2021 960,000 1,093,499
-------------
TOTAL U.S. GOVERNMENT
SECURITIES
(COST $9,809,579 ) 10,073,858
-------------
SHORT-TERM INVESTMENTS (3.8%)
COMMERCIAL PAPER (3.8%)
Manitoba Hydro Electric Board,
5.97% due July 12, 1995 1,000,000 996,616
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $996,689) 996,616
-------------
TOTAL INVESTMENTS (100%)
(COST $25,537,392) (A) $ 26,150,610
=============
</TABLE>
NOTES
(A) At June 30, 1995, net unrealized appreciation for all securities was
$613,218. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$915,207 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $301,989.
(B) Management Priced Security.
See Notes to Financial Statements.
-47-
<PAGE> 50
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS
STOCK PORTFOLIO
The Social Awareness Stock Portfolio's investment objective is long-term
capital appreciation and retention of net investment income. The Portfolio seeks
to fulfill this objective by selecting investments, primarily common stocks,
that meet certain social criteria.
During the first quarter of 1995, performance was helped by two holdings in the
Technology sector: Applied Materials, a semiconductor equipment manufacturer,
and Digital Equipment, a data processing equipment manufacturer. Within the
Consumer Discretionary sector, holdings in Walt Disney, the theme park and film
giant, and Alco Standard, a paper and office equipment distributor, also
contributed to the Portfolio's performance. In the Materials and Processing
sector, the Portfolio benefited from an overweighting in Stone Container, a
paper product manufacturer, due to rapidly rising paper prices. In the Producer
Durables sector, improving sales growth and cost cutting helped both John Deere
and McDonnell Douglas.
On May 1, 1995, Smith Barney Mutual Funds Management Inc. assumed management
responsibilities for the Portfolio from The Travelers Investment Management
Company. Since that time, we have been refining the Portfolio's holdings to
achieve a portfolio which is consistent with the social concerns of the
majority of ethical investors. We have broadened our screens to include
environmental problems and nuclear power while tightening the Portfolio's
existing screens for weapons production. In addition to these areas, our screen
will exclude so-called "sin stocks." These are companies that are involved with
either tobacco products, alcoholic beverages, or gambling. We also try to be
supportive in our stock selection by investing in companies that actively
promote social and environmental well-being through such areas as charitable
giving, environmental problem-solving and innovative employee benefits and
programs.
In selecting stocks for the Portfolio, we follow a value-oriented discipline.
Our investment style is designed to provide investors with long-term growth of
principal while adhering to these selected socially responsible criteria. To
achieve these goals, we utilize various proprietary, quantitative measures in
addition to intensive company-level qualitative research. Once these stocks
have been identified as potentially good investments, we then subject
them to the social screening process. In our opinion, this approach is somewhat
unique among socially responsible investors, and we believe that it will
contribute to the Portfolio's performance going forward.
-48-
<PAGE> 51
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $5,524,500)..................... $ 6,197,378
Cash.................................................................................... 3,643
Receivables:
Dividends........................................................................... 5,809
Interest............................................................................ 48
Receivable from The Travelers ...................................................... 31,423
-----------------
Total Assets..................................................................... 6,238,301
-----------------
LIABILITIES:
Payable for investment management and advisory fees..................................... 437
Accrued expenses:
Reimbursable expenses............................................................... 31,423
Other expenses...................................................................... 7,749
-----------------
Total Liabilities................................................................ 39,609
-----------------
NET ASSETS:................................................................................ $ 6,198,692
-----------------
NET ASSETS REPRESENTED BY:
Paid-in capital......................................................................... $ 5,332,491
Undistributed net investment income..................................................... 31,538
Accumulated net realized gains (losses) on investment security transactions............. 161,785
Net unrealized appreciation on investment securities.................................... 672,878
-----------------
Total net assets (applicable to 482,035 shares outstanding at $12.86 per share).. $ 6,198,692
=================
</TABLE>
See Notes to Financial Statements
-49-
<PAGE> 52
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $ 50,999
Interest............................................................. 11,564
------------------
Total income..................................................... $ 62,563
EXPENSES:
Investment management and advisory fees.............................. 16,250
Accounting and audit fees............................................ 33,406
Custodian fees....................................................... 4,963
Printing and postage................................................. 6,230
Trustees' fees....................................................... 1,361
Registration fees.................................................... 238
------------------
Total expenses before reimbursement from The Travelers........... 62,448
Less: Reimbursement from The Travelers............................... (31,423)
------------------
Net expenses..................................................... 31,025
------------------
Net investment income......................................... 31,538
------------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold......................... 2,415,606
Cost of investment securities sold............................... 2,235,035
------------------
Net realized gain............................................. 180,571
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994............................. (26,432)
Unrealized gain at June 30, 1995................................. 672,878
------------------
Net change in unrealized gain (loss) for the period........... 699,310
------------------
Net realized gain and change in unrealized gain (loss).... 879,881
------------------
Net increase in net assets resulting from operations................. $ 911,419
==================
</TABLE>
See Notes to Financial Statements
-50-
<PAGE> 53
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 31,538 $ 51,650
Net realized gain from investment security transactions.................. 180,571 50,675
Net change in unrealized gain (loss) on investment securities............ 699,310 (195,236)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations...... 911,419 (92,911)
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions..................................... (51,494) (70,411)
Net long-term realized gains from investment security transactions....... (68,327) (17,258)
--------------- ---------------
Total distribution to shareholders................................... (119,821) (87,669)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................................ 1,583,813 1,378,970
Dividend reinvestment.................................................... 119,821 87,669
Payments for shares redeemed............................................. (175,811) (768,126)
--------------- ---------------
Net increase in net assets resulting from capital share transactions. 1,527,823 698,513
--------------- ---------------
Net increase in net assets........................................ 2,319,421 517,933
NET ASSETS:
Beginning of period...................................................... 3,879,271 3,361,338
--------------- ---------------
End of period (including undistributed net investment income as follows:
June, 1995 $31,538 and December, 1994 $51,650)...................... $ 6,198,692 $ 3,879,271
=============== ===============
</TABLE>
See Notes to Financial Statements
-51-
<PAGE> 54
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCKS (95.2%)
AMUSEMENTS (1.1%)
Walt Disney Co. 1,200 $ 66,750
-------------
BANKING (7.4%)
Banc One Corp. 1,200 38,700
Bank of Boston Corp. 500 18,750
Barnett Banks, Inc. 200 10,250
Chase Manhattan Corp. 300 14,100
Citicorp 1,000 57,875
First Interstate Bancorp 200 16,050
First Union Corp. 600 27,150
Mellon Bank Corp. 300 12,487
MBNA Corp. 650 21,938
NationsBank Corp. 800 42,900
Norwest Corp. 900 25,875
NBD Bancorp, Inc. 500 16,000
State Street Boston Corp. 3,400 125,375
U.S. Bancorp 600 14,438
Wells Fargo & Co. 100 18,025
-------------
459,913
-------------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (12.5%)
Abbott Laboratories 1,700 68,850
Air Products & Chemicals, Inc. 200 11,150
Allergan, Inc. 500 13,563
Amgen (A) 300 24,113
Bristol-Myers Squibb Co. 1,100 74,937
Eli Lilly & Co. 600 47,100
Forest Labs, Inc. (A) 100 4,437
Georgia Gulf Corp. 500 16,313
International Flavors & Fragrances 300 14,925
Johnson & Johnson 1,100 74,388
Merck & Co., Inc. 2,100 102,900
Pfizer, Inc. 600 55,425
Praxair, Inc. 5,000 125,000
Procter & Gamble Co. 1,200 86,250
Schering-Plough Corp. 1,200 52,950
-------------
772,301
-------------
COMMUNICATION (8.2%)
Airtouch Communications (A) 500 14,250
Ameritech Corp. 1,400 61,600
Bell Atlantic Corp. 800 44,800
Bellsouth Corp. 900 57,150
Capital Cities ABC, Inc. 400 43,200
CBS, Inc. 300 20,100
MCI Communications Corp. 1,000 21,938
NYNEX Corp. 700 28,175
Pacific Telesis Group 500 13,375
Sprint Corp. 800 26,900
SBC Communications, Inc. 2,500 119,063
Tele-Communications, Inc. (A) 1,700 39,844
U.S. West, Inc. 500 20,812
-------------
511,207
-------------
ELECTRICAL AND ELECTRONIC
MACHINERY (2.4%)
Advanced Micro Device 500 18,187
AMP, Inc. 500 21,125
DSC Communications, Inc. (A) 200 9,313
Intel Corp. 1,600 101,300
-------------
149,925
-------------
FINANCE (3.4%)
American Express Co. 1,200 42,150
Dean Witter Discover & Co. 600 28,200
Federal Home Loan Corp. 800 55,000
Federal National Mortgage Assoc. 500 47,188
Green Tree Financial Corp. 300 13,313
Merrill Lynch & Co., Inc. 500 26,250
-------------
212,101
-------------
FOOD (6.6%)
Campbell Soup Co. 300 14,700
Coca-Cola Co. 2,300 146,625
General Mills, Inc. 100 5,138
Hershey Foods Corp. 100 5,525
Kellogg Co. 500 35,687
McDonalds Corp. 1,200 46,950
PepsiCo, Inc. 1,400 63,875
Unilever NV 200 26,025
Wendy's International, Inc. 3,400 60,775
-------------
405,300
-------------
INSURANCE (3.4%)
Aetna Life & Casualty Co. 200 12,575
American International Group 700 79,800
Chubb Corp. 100 8,012
Health System International, Inc.
(A) 500 14,500
Jefferson Pilot Corp. 100 5,475
Lincoln National Corp. 300 13,125
Transamerica Corp. 300 17,475
U.S. Healthcare, Inc. 250 7,688
United Healthcare Corp. 600 24,825
UNUM Corp. 200 9,375
USF&G Corp. 1,100 17,875
-------------
210,725
-------------
MACHINERY (10.8%)
Apple Computers, Inc. 400 18,600
Applied Materials (A) 400 34,600
Cabletron System, Inc. (A) 300 15,975
Compaq Computer Corp. (A) 700 31,762
Deere & Co. 200 17,125
Digital Equipment Corp. (A) 700 28,525
EMC Corp. (A) 5,200 126,100
International Business Machines
Corp. 1,100 105,600
Pitney Bowes, Inc. 700 26,862
Sun Microsystems (A) 300 14,569
Varity Corp. (A) 2,800 123,200
York International, Inc. 2,800 126,000
-------------
668,918
-------------
METAL PRODUCTS (5.6%)
Belden, Inc. 2,400 64,800
Birmingham Steel Corp. 5,400 99,900
Gillette Co. 800 35,700
Newell Company 5,000 122,500
Nucor Corp. 500 26,750
-------------
349,650
-------------
</TABLE>
-52-
<PAGE> 55
STATEMENT OF INVESTMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
--------- -------------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (7.4%)
Beckman Instruments, Inc. 500 $ 13,937
Callaway Golf Co. 500 7,500
Dentsply International, Inc. 3,300 119,006
Emerson Electric Co. 500 35,750
Medtronics, Inc. 300 23,137
Stryker Corp. 3,100 118,575
Xerox Corp. 1,200 140,700
-------------
458,605
-------------
OIL & GAS (0.1%)
Anadarko Petroleum 200 8,625
-------------
PAPER AND ALLIED PRODUCTS (0.7%)
Kimberly Clark Corp. 300 17,962
Mead Corp. 300 17,812
Temple Inland, Inc. 200 9,525
-------------
45,299
-------------
PETROLEUM REFINING AND RELATED
INDUSTRIES (0.2%)
Sun Co., Inc. 500 13,688
-------------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (1.4%)
A.H. Belo 600 18,375
Dow Jones & Co., Inc. 200 7,375
Time Warner, Inc. 700 28,788
Tribune Co. 500 30,688
-------------
85,226
-------------
RETAIL (8.3%)
Albertsons, Inc. 500 14,875
Home Depot, Inc. 2,900 117,813
Kroger Co. (A) 2,200 59,125
May Department Stores 1,500 62,437
Office Depot, Inc. (A) 600 16,875
Pep Boys Manny, Moe & Jack 4,000 107,000
Tandy Corp. 200 10,375
The GAP, Inc. 300 10,462
Toys R Us (A) 600 17,550
Wal-Mart Stores, Inc. 3,500 93,625
-------------
510,137
-------------
RUBBER AND PLASTIC PRODUCTS (0.6%)
Nike, Inc. 200 16,800
Reebok International, Ltd. 600 20,400
-------------
37,200
-------------
SERVICES (6.8%)
Columbia/HCA Healthcare Corp. 2,500 108,125
Computer Associates International 300 20,325
Dun & Bradstreet Corp. 200 10,500
Microsoft (A) 1,100 99,481
Novell, Inc. (A) 1,100 21,931
Olsten Corp. 3,600 117,900
Omnicom Group, Inc. 300 18,187
Oracle Systems Corp. (A) 700 26,994
-------------
423,443
-------------
TRANSPORTATION (1.5%)
Consolidated Freightways (A) 500 11,062
Norfolk Southern Corp. 900 60,637
Southwest Airlines 800 19,100
-------------
90,799
-------------
TRANSPORTATION MANUFACTURING (4.0%)
Fleetwood Enterprises, Inc. 5,800 114,550
PACCAR, Inc. 345 16,129
Superior Industries 3,800 118,275
-------------
248,954
-------------
UTILITIES (2.4%)
Cinergy Corp. 300 7,875
Enron Corp. 3,300 115,912
Pacific Enterprises 200 4,900
Portland General Electric Co. 600 13,275
Wheelabrator Technologies, Inc. 500 7,688
-------------
149,650
-------------
WHOLESALE TRADE (0.4%)
Alco Standard Corp. 300 23,962
-------------
TOTAL COMMON STOCKS
(COST $5,229,500) 5,902,378
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.8%)
REPURCHASE AGREEMENTS (4.8%)
Barclays Bank PLC
5.90% Repurchase Agreement
dated June 30, 1995, due
July 3, 1995, collateralized
by: United States of America
Treasury, $295,000,
7.75% due January 31, 2000 $295,000 295,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $295,000) 295,000
-------------
TOTAL INVESTMENTS (100%)
(COST $5,524,500) (B) $ 6,197,378
=============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At June 30, 1995, net unrealized appreciation for all securities was
$672,878. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$721,172 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $48,294.
-53-
<PAGE> 56
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
Electric utility stocks and bonds continued to provide investors with positive
investment returns for the first half of 1995. The primary catalyst for the
rally was the decline in long-term interest rates reflecting slower economic
growth and controlled inflation. The yield on the long-term (30-year) Treasury
bond declined to approximately 6.5% on June 30, 1995 from 7.4% at the end of
the first quarter. The evolution toward a more competitive utility
industry continues to influence the price levels of electric utility stocks.
This is reflected in the yield spread between the average utility stock and
long-term Treasury bonds. Currently, this spread is approximately 20 basis
points compared to historical averages of approximately 100 basis points. This
narrow yield spread reflects slower earnings and dividend growth as companies
focus on reducing utility rates to remain competitive. In our opinion, the
narrow yield spread makes utility stocks an attractive alternative to bonds for
investors seeking current income.
We continue to favor electric utility stocks and bonds as a balance to a
diversified investment portfolio. The high current income and reduced
volatility make this sector attractive for a wide variety of investment
strategies. The evolutionary changes occurring within the industry stress the
importance of individual stock selection and diversification to avoid
unnecessary risk exposure.
The financial markets have continued to segment the electric utility sector.
Those companies with lower cost structures and more defined growth
opportunities have a higher relative valuation compared with the higher
cost companies with higher dividend payout ratios and limited growth
opportunities. Our portfolio strategy focuses on attractive relative valuations
to provide a combination of current income and long-term growth.
The Travelers Series Trust Utilities Portfolio is comprised of 74% equities,
14% fixed-income securities and 12% cash. We have gradually reduced our cash
position during the quarter while increasing our equity and fixed-income
holdings. We have continued to maintain our disciplined investment strategy and
the selection of holdings based on attractive relative valuations. The rapid
increase in utility stock prices since the beginning of the year has caused us
to slow our rate of investment and maintain a cash position we will use to take
advantage of opportunities provided by market corrections. During the quarter,
we have added to or initiated positions in: Baltimore Gas and Electric, General
Public Utilities, Houston Industries, New York State Electric and Gas, Public
Service Enterprises, Pinnacle West, Southern Company, Wisconsin Energy, GTE
Corporation, US West, Coastal Corporation and Williams Company. We have sold
our holdings of CMS Energy and Central and Southwest Corporation due to high
relative valuations. We have established our initial holdings of investment
grade utility bonds with the purchase of Arizona Public Service and PECO Energy
debentures.
Utilities provide a basic necessity to our growing domestic economy. The
industry has faced numerous challenges in the past, including the oil embargo
of the 1970's and the major construction cycle of the 1980's, and continued to
grow. The 1990's will be the decade of competition for the electric utility
sector. This reinforces our belief that professional management and
diversification are essential to achieving competitive total returns.
-54-
<PAGE> 57
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $9,741,734)..................... $ 10,348,133
Receivables:
Dividends........................................................................... 32,018
Interest............................................................................ 14,013
Receivable from The Travelers....................................................... 23,452
-----------------
Total Assets..................................................................... 10,417,616
-----------------
LIABILITIES:
Cash overdraft.......................................................................... 159,759
Payable for investment management and advisory fees..................................... 729
Accrued expenses:
Reimbursable expenses............................................................... 23,452
Other expenses...................................................................... 12,633
-----------------
Total Liabilities................................................................ 196,573
-----------------
NET ASSETS:................................................................................ $ 10,221,043
=================
NET ASSETS REPRESENTED BY:
Paid-in capital......................................................................... $ 9,391,340
Undistributed net investment income..................................................... 200,059
Accumulated net realized gains (losses) on investment security transactions............. 23,245
Net unrealized appreciation on investment securities.................................... 606,399
-----------------
Total net assets (applicable to 920,780 shares outstanding at $11.10 per share).. $ 10,221,043
=================
</TABLE>
See Notes to Financial Statements
-55-
<PAGE> 58
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $ 168,492
Interest............................................................. 85,170
-----------------
Total income..................................................... $ 253,662
EXPENSES:
Investment management and advisory fees.............................. 28,009
Accounting and audit fees............................................ 37,110
Custodian fees....................................................... 4,992
Printing and postage................................................. 5,827
Trustees' fees....................................................... 953
Registration fees.................................................... 419
-----------------
Total expenses before reimbursement from The Travelers........... 77,310
Less: Reimbursement from The Travelers............................... (23,452)
-----------------
Net expenses..................................................... 53,858
------------------
Net investment income......................................... 199,804
------------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold......................... 793,042
Cost of investment securities sold............................... 769,797
-----------------
Net realized gain............................................. 23,245
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994............................. (77,549)
Unrealized gain at June 30, 1995................................. 606,399
-----------------
Net change in unrealized gain (loss) for the period........... 683,948
------------------
Net realized gain and change in unrealized gain (loss).... 707,193
------------------
Net increase in net assets resulting from operations................. $ 906,997
==================
</TABLE>
See Notes to Financial Statements
-56-
<PAGE> 59
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 4, *
ENDED 1994, TO
JUNE 30, DECEMBER 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 199,804 $ 139,138
Net realized gain from investment security transactions.................. 23,245 11,353
Net change in unrealized gain (loss) on investment securities............ 683,948 (77,549)
---------------- ----------------
Net increase in net assets resulting from operations................. 906,997 72,942
---------------- ----------------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME AND
NET SHORT-TERM REALIZED GAINS FROM INVESTMENT SECURITY TRANSACTIONS...... (150,236) -
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................................ 4,645,347 7,595,972
Dividend reinvestment.................................................... 150,236 -
Payments for shares redeemed............................................. (1,087,960) (1,912,255)
---------------- ----------------
Net increase in net assets resulting from capital share transactions. 3,707,623 5,683,717
---------------- ----------------
Net increase in net assets........................................ 4,464,384 5,756,659
NET ASSETS:
Beginning of period...................................................... 5,756,659 -
---------------- ----------------
End of period (including undistributed net investment income as follows:
June, 1995 $199,804 and December, 1994 $139,138)...................... $ 10,221,043 $ 5,756,659
================ ================
</TABLE>
* Date operations commenced.
See Notes to Financial Statements
-57-
<PAGE> 60
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
--------- -------------
<S> <C> <C>
COMMON STOCKS (73.5%)
COMMUNICATION (13.6%)
Ameritech Corp. 3,500 $ 154,000
AT&T Corp. 5,000 265,625
Bellsouth Corp. 5,000 317,500
GTE Corp. 5,000 170,625
NYNEX Corp. 3,500 140,875
Pacific Telesis Group 2,500 66,875
Sprint Corp. 2,500 84,063
U.S. West, Inc. 5,000 208,125
--------------
1,407,688
--------------
UTILITIES (59.9%)
Allegheny Power System, Inc. 3,500 82,250
American Electric Power Co. 7,500 263,437
Baltimore Gas & Electric Co. 7,500 187,500
Cinergy Corp. 5,000 131,250
Coastal Corp. 10,000 303,750
Duquesne Light Co. 12,750 299,625
DPL, Inc. 10,000 221,250
El Paso Natural Gas Co. 5,000 142,500
Florida Power & Light Co. 7,500 289,687
General Public Utilities 10,000 297,500
Houston Industries 8,000 337,000
New York State Electric & Gas Co. 7,500 175,312
NIPSCO Industries, Inc. 6,500 221,000
Ohio Edison Co. 5,000 113,125
Pacific Gas & Electric Co. 5,000 145,000
Pacificorp 5,000 93,750
PECO Energy Co. 7,500 207,187
Pinnacle West Capital Corp. 12,000 294,000
Portland General Electric Co. 10,000 221,250
Public Service of New Mexico (A) 7,000 99,750
Public Service Co. of Colorado 7,500 243,750
Public Service Enterprises Group 5,500 152,625
Southern Co. 7,500 167,812
SCE Corp. 6,000 102,750
Tenneco, Inc. 7,000 322,000
Texas Utilities Co. 6,500 223,438
Unicom Corp. 7,500 199,688
Westcoast Energy, Inc. 5,000 73,750
Western Resources, Inc. 6,500 200,688
Williams Company 5,000 174,375
Wisconsin Energy 7,500 210,000
--------------
6,196,999
--------------
TOTAL COMMON STOCKS
(COST $7,070,799) 7,604,687
--------------
BONDS (3.9%)
UTILITIES (3.9%)
Arizona Public Service Co.,
7.25% Bonds, 2023 200,000 185,801
PECO Energy Co.,
8.75% Bonds, 2022 200,000 215,707
--------------
TOTAL BONDS
(COST $376,458) 401,508
--------------
U.S. GOVERNMENT SECURITIES (10.1%)
United States of America
Treasury,
7.50% Notes, 1996 500,000 512,188
United States of America
Treasury,
7.75% Notes, 1999 500,000 533,750
--------------
TOTAL U.S. GOVERNMENT
SECURITIES
(COST $998,477) 1,045,938
--------------
SHORT-TERM INVESTMENTS (12.5%)
REPURCHASE AGREEMENTS (12.5%)
Barclays Bank PLC
5.90% Repurchase Agreement
dated June 30, 1995, due
July 3, 1995, collateralized
by: United States of America
Treasury, $1,296,000,
7.75% due January 31, 2000 1,296,000 1,296,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $1,296,000) 1,296,000
--------------
TOTAL INVESTMENTS (100%)
(COST $9,741,734) (B) $ 10,348,133
==============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At June 30, 1995, unrealized appreciation for all securities was
$606,399. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$659,817 and aggregate gross unrealized depreciation for all securities
in which there was an excess of cost over market value of $53,418.
See Notes to Financial Statements
-58-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Series Trust (the "Series Trust") is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Declaration of Trust
authorizes the shares of the Series Trust to be divided into two or more
series. As of June 30, 1995, the Series Trust consisted of three series: U.S.
Government Securities Portfolio, Social Awareness Stock Portfolio and
Utilities Portfolio (the "Portfolios"). Shares in each Portfolio are currently
offered, without a sales charge, to separate accounts of The Travelers Insurance
Company ("The Travelers"), an indirect wholly owned subsidiary of Travelers
Group Inc., in connection with the issuance of certain variable annuity and
variable life insurance contracts.
The following is a summary of significant accounting policies consistently
followed by each Portfolio in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange are valued at the last-reported sale price as of the close of business
of the New York Stock Exchange on the last business day of the period;
securities traded on the over-the-counter market and listed securities with no
reported sales are valued at the mean between the last reported bid and asked
prices or on the basis of quotations received from a reputable broker or other
recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated at
fair value on the basis of valuations furnished by a pricing service. These
valuations are determined for normal institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders. Securities, including restricted securities, for pricing
services are not readily available are valued by management at prices which it
deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable quoted
market price are valued by computing a market value based upon quotations from
dealers or issuers for securities of a similar type, quality and maturity.
FUTURES CONTRACTS. Each Portfolio may use stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for the purchase
or sale of individual securities. When each Portfolio enters into a futures
contract, it agrees to buy or sell a specified index of stocks, or debt
securities, at a future time for a fixed price, unless the contract is closed
prior to expiration. Each Portfolio is obligated to deposit with a broker an
"initial margin" equivalent to a percentage of the face, or notional value of
the contract.
It is each Portfolio's practice to hold cash and cash equivalents
(including short-term investments) in an amount at least equal to the notional
value of outstanding purchased futures contracts, less the initial margin.
Generally, futures contracts are closed prior to expiration.
Futures contracts purchased by each Portfolio are priced and settled
daily; accordingly, changes in daily prices are recorded as realized gains or
losses and no asset is recorded in the Statements of Investments. However, when
each Portfolio holds open futures contracts, it assumes a market risk generally
equivalent to the underlying market risk of changes in the value of the
specified indexes or debt securities associated with the futures contract.
OPTIONS. Each Portfolio may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number of shares of
the underlying asset at the stated price on or before the stated expiration
date. Each Portfolio may sell the options before expiration. Options held in
each Portfolio are listed on either national securities exchanges or on
over-the-counter markets, and are short-term contracts with a duration of less
than nine months. The market value of the options will be the latest sale price
at the close of the New York Stock Exchange, or in the absence of such sale,
the latest bid quotation.
-59-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
REPURCHASE AGREEMENTS. When each Portfolio enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed-upon date and price), the repurchase price of
the securities will generally equal the amount paid by each Portfolio plus a
negotiated interest amount. The seller under the repurchase agreement will be
required to provide to each Portfolio securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Each Portfolio monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national banks
and reporting broker dealers believed to present minimal credit risks. Each
Portfolio's custodian will take actual or constructive receipt of all securities
underlying repurchase agreements until such agreements expire.
TAXES. Each Portfolio has qualified, and intends to continue to qualify each
year, as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company, each
Portfolio is relieved of any federal income tax liability by distributing all
of its net taxable investment income and net taxable capital gains, if any,
to its shareholders. Each Portfolio further intends to avoid excise tax
liability by distributing substantially all of its investment income.
Therefore, no federal income tax provision has been made by each Portfolio in
its financial statements. As of December 31, 1994, the U.S. Government
Securities Portfolio had a capital loss carryover of $212,281, which may be
available to offset any future realized taxable capital gains, to the extent
provided by regulations. This amount expires during the year 2002.
OTHER. Security transactions are accounted for on the trade date. Interest
income is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date. Distributions to shareholders are recorded at the close of
business on the record date.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments aggregated
$4,369,733 and $3,094,098, respectively, for U.S. Government Securities
Portfolio; $3,956,158 and $2,394,489, respectively, for Social Awareness Stock
Portfolio; and $3,816,845 and $793,042, respectively, for Utilities Portfolio
for the six months ended June 30, 1995. Realized gains and losses from security
transactions are reported on an identified cost basis.
Net realized gains (losses) from options transactions in the Social Awareness
Stock Portfolio were $21,118 and ($3,020) for the six months ended June 30,
1995 and the year ended December 31, 1994, respectively. These gains (losses)
are included in the net realized gain from investment security transactions on
both the Statement of Operations and the Statement of Changes in Net Assets.
3. PORTFOLIO CHARGES
Investment management and advisory fees for U.S. Government Securities
Portfolio are calculated daily at an annual rate of 0.3233% of the Portfolio's
average net assets. These fees are paid to Travelers Asset Management
International Corporation, an indirect wholly owned subsidiary of Travelers
Group Inc.
Investment management and advisory fees for Social Awareness Stock
Portfolio are calculated daily at annual rates which start at 0.65% and
decrease, as net assets increase, to 0.40% of the Portfolio's average net
assets. Prior to May 1, 1995, these fees were paid to The Travelers Investment
Management Company, an indirectly wholly owned subsidary of Travelers Group Inc.
Effective May 1, 1995, these fees are paid to Greenwich Street Advisors, a
division of Smith Barney Mutual Funds Management Inc. ("SBMFM"), an indirect
wholly owned subsidiary of Travelers Group Inc.
Investment management and advisory fees for Utilities Portfolio are calculated
daily at an annual rate of 0.65% of the Portfolio's average net assets. These
fees are paid to Greenwich Street Advisors, a division of SBMFM, an indirect
wholly owned subsidiary of Travelers Group Inc.
Travelers Insurance has agreed to reimburse the Portfolios for the amount by
which each Portfolio's aggregate annualized operating expenses, excluding
brokerage commissions and any interest charges and taxes, exceed 1.25% of each
Portfolio's average net assets. Trustees and officers of the Series Trust, who
are also officers and employees of Travelers Group Inc., or its subsidiaries,
receive no compensation directly from the Series Trust.
-60-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Portfolio were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO
------------------------------------
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
-------------- --------------
1995 1994
---- ----
<S> <C> <C>
Shares sold............................................... 238,230 655,046
Shares redeemed........................................... (405,985) (616,041)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized
gains................................................. 138,279 77,901
from net long-term realized gains...................... - 5,990
---------- ----------
Net....................................................... (29,476) 122,896
========== ==========
</TABLE>
<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK PORTFOLIO
------------------------------------
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
-------------- --------------
1995 1994
---- ----
<S> <C> <C>
Shares sold............................................... 134,600 122,407
Shares redeemed........................................... (14,480) (67,708)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized
gains................................................. 4,774 6,067
from net long-term realized gains...................... 6,139 1,517
---------- ----------
Net....................................................... 131,033 62,283
========== ==========
</TABLE>
<TABLE>
<CAPTION>
UTILITIES PORTFOLIO
------------------------------------
SIX MONTHS FEBRUARY 4,*
ENDED TO
JUNE 30, DECEMBER 31,
-------------- --------------
1995 1994
---- ----
<S> <C> <C>
Shares sold............................................... 442,983 754,802
Shares redeemed........................................... (102,536) (189,041)
Shares issued in reinvestment of distributions from
net investment income and net short-term realized gains 14,572 -
---------- ----------
Net....................................................... 355,019 565,761
========== ==========
</TABLE>
* Date operations commenced.
As of June 30, 1995, all outstanding shares of beneficial interest of each
Portfolio were owned by The Travelers Fund U for Variable Annuities, and/or The
Travelers Fund UL for Variable Life Insurance, both of which are separate
accounts of The Travelers.
5. SUBSEQUENT EVENT
On or about August 21, 1995, three Zero Coupon Bond Portfolios (Series 1998,
2000 and 2005) will be added as additional series of shares under the Series
Trust.
-61-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding throughout each period.)
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
SIX FOR THE JANUARY 24,**
MONTHS YEARS ENDED TO
ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- --------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $ 10.58 $ 11.63 $ 10.79 $ 10.00
Income from operations
Net investment income.............................. 0.32 0.60 0.57 0.53
Net gains or losses on securities (realized and
unrealized).................................... 1.21 (1.23) 0.44 0.26
--------- --------- --------- --------
Total from investment operations............... 1.53 (0.63) 1.01 0.79
Less distributions
Distributions from net investment income and
net short-term realized gains.................. (0.60) (0.39) (0.17) -
Distributions from net long-term realized gains.... - (0.03) - -
--------- --------- --------- --------
Total distributions............................ (0.60) (0.42) (0.17) -
Net asset value, end of period....................... $ 11.51 $ 10.58 $ 11.63 $ 10.79
========= ========= ========= ========
TOTAL RETURN*** 15.21% (5.64)% 9.48% 7.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)............. $26,330 $24,522 $25,520 $9,017
Ratio of expenses to average net assets ##........ 0.68%# 0.71% 0.58% 0.38%#
Ratio of net investment income to average net
assets ....................................... 5.96%# 5.56% 5.04% 4.72%#
Portfolio turnover rate........................... 13% 16% 51% 25%
</TABLE>
* The information set forth in Note 6 replaces the data presented in
prior periods as supplementary information.
** Date operations commenced.
*** Total return is determined by dividing the increase (decrease) in value
of a share during the period, after reflecting the reinvestment of
dividends declared during the period, by the beginning of period share
price. As described in Note 1, shares in the U.S. Government Securities
Portfolio are only sold to The Travelers separate accounts in
connection with the issuance of variable annuity and variable life
insurance contracts. The total return does not reflect the deduction of
any contract charges or fees assessed by The Travelers separate
accounts. For periods of less than one year, total returns are not
annualized.
# Annualized.
## The ratio of expenses to average net assets for 1992-1993 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
expenses to average net assets would have been 0.77% and 0.72% for the
year ended December 31, 1993 and the period ended December 31, 1992,
respectively. For the six months ended June 30, 1995 and the year ended
December 31, 1994, there was no expense reimbursement by The Travelers
in connection with the voluntary expense limitations described in
Note 3.
-62-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
7. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding throughout each period.)
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SIX FOR THE
MONTHS YEARS ENDED MAY 1,** TO
ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, (DERIVED FROM AUDITED FINANCIAL INFORMATION)
-------- --------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $ 11.05 $11.64 $ 10.95 $ 10.00
Income from operations
Net investment income.............................. 0.08 0.16 0.17 0.16
Net gains or losses on securities (realized and
unrealized).................................... 2.05 (0.45) 0.65 0.79
-------- ------- -------- --------
Total from investment operations............... 2.13 (0.29) 0.82 0.95
Less distribution
Distribution from net investment income and
net short-term realized gains.................. (0.14) (0.24) (0.13) -
Distribution from net long-term realized gains..... (0.18) (0.06) - -
-------- ------- -------- --------
Total distribution............................. (0.32) (0.30) (0.13) -
Net asset value, end of period...................... $ 12.86 $11.05 $ 11.64 $ 10.95
======== ======= ======== ========
TOTAL RETURN*** 19.77% (2.69)% 7.55% 9.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)............. $6,199 $3,879 $3,361 $1,394
Ratio of expenses to average net assets ##........ 1.25%# 1.25% 1.05% 0.71%#
Ratio of net investment income to average net
assets........................................ 1.30%# 1.43% 1.50% 2.22%#
Portfolio turnover rate........................... 51% 137% 60% 56%
</TABLE>
* The information set forth in Note 7 replaces the data presented in prior
periods as supplementary information.
** Date operations commenced.
*** Total return is determined by dividing the increase (decrease) in value
of a share during the period, after reflecting the reinvestment of
dividends declared during the period, by the beginning of period share
price. As described in Note 1, shares in the Social Awareness Stock
Portfolio are only sold to The Travelers separate accounts in connection
with the issuance of variable annuity contracts. The total return does
not reflect the deduction of any contract charges or fees assessed by The
Travelers separate accounts. For periods of less than one year, total
returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1992-1995 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
expenses to average net assets would have been 2.49%, annualized for the
six months ended June 30, 1995 and 3.34%, 3.73% and 2.19% for the years
ended December 31, 1994, 1993 and the period ended December 31, 1992,
respectively.
-63-
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
8. FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout each period.)
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
FEBRUARY 4,*
TO
DECEMBER 31,
SIX MONTHS (DERIVED FROM
ENDED AUDITED FINANCIAL
JUNE 30, INFORMATION)
------------------ ------------------
1995 1994
---- ----
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $ 10.17 $ 10.00
Income from operations
Net investment income.............................. 0.24 0.35
Net gains or losses on securities (realized and
unrealized).................................... 0.93 (0.18)
----------- ------------
Total from investment operations............... 1.17 0.17
Less distribution
Distribution from net investment income and
net short-term realized gains.................. (0.24) -
----------- ------------
Total distribution.......................... (0.24) -
Net asset value, end of period....................... $ 11.10 $ 10.17
=========== ============
TOTAL RETURN** 11.69% 1.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).............. $10,221 $5,757
Ratio of expenses to average net assets ##......... 1.25%# 1.25%#
Ratio of net investment income to average net
assets............................................ 4.63%# 3.86%#
Portfolio turnover rate............................ 11% 32%
</TABLE>
* Date operations commenced.
** Total return is determined by dividing the increase (decrease) in value
of a share during the period, after reflecting the reinvestment of
dividends declared during the period, by the beginning of period share
price. As described in Note 1, shares in the Utilities Portfolio are only
sold to The Travelers separate accounts in connection with the issuance
of variable annuity and variable life insurance contracts. The total
return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts. For periods of less than one
year, total returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1994-1995 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
expenses to average net assets would have been 1.79% and 3.49% annualized
for the periods ended June 30, 1995, and December 31, 1994, respectively.
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<PAGE> 67
Investment Advisers
-------------------
(CAPITAL APPRECIATION FUND)
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Hartford, Connecticut
(MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CASH INCOME TRUST AND
U.S. GOVERNMENT SECURITIES PORTFOLIO)
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
(SOCIAL AWARENESS STOCK PORTFOLIO AND UTILITIES PORTFOLIO)
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
New York, New York
Independent Accountants
-----------------------
COOPERS & LYBRAND, L.L.P.
Hartford, Connecticut
Custodian
THE CHASE MANHATTAN BANK, N.A.
New York, New York
The financial information included herein has been taken from the records of
Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Cash
Income Trust, U.S. Government Securities Portfolio, Social Awareness Stock
Portfolio and Utilities Portfolio. This financial information has not been
audited by the Funds' independent accountants, who therefore express no opinion
concerning its accuracy. However, it is management's opinion that all proper
adjustments have been made.
This report is prepared for the general information of contract owners and is
not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital
Appreciation Fund, Cash Income Trust, U.S. Government Securities Portfolio,
Social Awareness Stock Portfolio or Utilities Portfolio. It should not be used
in connection with any offer except in conjunction with the Prospectuses for
the Variable Annuity and Variable Universal Life Insurance products
offered by The Travelers Insurance Company and the Prospectuses for the
underlying mutual funds, which collectively contain all pertinent information,
including the applicable selling commissions.
VG-181 (S/A) (6-95) printed in U.S.A.
