<PAGE> 1
THE TRAVELERS VARIABLE
PRODUCTS FUNDS
SEMI-ANNUAL REPORTS
JUNE 30, 2000
[TRAVELERS GRAPHIC]
MANAGED ASSETS TRUST
HIGH YIELD BOND TRUST
CAPITAL APPRECIATION FUND
MONEY MARKET PORTFOLIO
THE TRAVELERS SERIES TRUST:
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
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SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
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DEAR SHAREHOLDER:
We are pleased to provide the semi-annual report for the Travelers Variable
Products Funds -- Managed Assets Trust, High Yield Bond Trust, Capital
Appreciation Fund, Money Market Portfolio ("Trust" or "Portfolio") and the
Travelers Series Trust -- U.S. Government Securities, Social Awareness Stock and
Utilities Portfolios ("Portfolio(s)") for the period ended June 30, 2000. The
information stated in this letter represents the opinion of the manager or
managers and is not intended to be a forecast of future events, a guarantee of
future results nor investment advice. Further, there is no assurance that
certain securities may remain in or out of the Trusts or Portfolios. This letter
briefly discusses general economic and market conditions.
A detailed comparison showing the growth of a hypothetical $10,000 invested in
each Portfolio since inception can be found in this report. Past performance is
not indicative of future results. We hope you find this report to be useful and
informative.
<TABLE>
<CAPTION>
The Performance of the Travelers Variable Products Funds* (December 31, 1999 - June 30, 2000)
<S> <C>
Managed Assets Trust.......................................... 2.66%
High Yield Bond Trust......................................... 1.20
Capital Appreciation Fund..................................... (1.02)
Money Market Portfolio........................................ 2.89
U.S. Government Securities Portfolio.......................... 5.16
Social Awareness Stock Portfolio.............................. (1.25)
Utilities Portfolio........................................... 6.29
</TABLE>
<TABLE>
<CAPTION>
MARKET SCHEDULE OF
SUBACCOUNT COMMENTARY INVESTMENTS
---------- ---------- -----------
<S> <C> <C>
Managed Assets Trust........................................ 2 8
High Yield Bond Trust....................................... 3 17
Capital Appreciation Fund................................... 3 23
Money Market Portfolio...................................... 4 25
U.S. Government Securities Portfolio........................ 36 40
Social Awareness Stock Portfolio............................ 36 41
Utilities Portfolio......................................... 37 44
</TABLE>
MARKET AND ECONOMIC OVERVIEW
Stocks declined in the second quarter of 2000, leaving many of the major indexes
down for the first half of the year as investors debated potential rate
increases by the Federal Reserve Board ("Fed"). Volatility continued to be a
major theme with both the Dow Jones Industrial Average ("DJIA")(1) and the
Nasdaq Composite Index ("Nasdaq")(2) registering record one-day point losses.
The breadth of the declines affected a wide range of stocks including many
small- and large-capitalization company stocks, growth stocks and value stocks.
(Growth stocks are shares of companies with historically strong and relatively
predictable earnings growth rates. Value stocks are shares of companies that are
believed to be undervalued but have positive longer-term business prospects.)
Momentum investing and dot.com stocks were out of favor replaced, in many cases,
by a renewed interest in companies that many investors believed may provide real
earnings and strong financials.
Concerns about higher interest rates peaked in mid-May, when the Fed raised
interest rates an additional 50 basis points.(3) The specter of rising rates was
a catalyst for the weak performance of all of the major indexes during the
period. The DJIA, which is made up of "Old Economy" companies, declined 8.44%
during the reporting period. (The "Old Economy" represents
---------------
* Please note that data represents past performance, which is not indicative of
future results. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
1 The DJIA is a price-weighted average of 30 actively traded blue-chip stocks.
An investor cannot invest directly in an index.
2 The Nasdaq is a market value-weighted index that measures all domestic and
non-U.S. based securities listed on the NASDAQ stock market. An investor
cannot invest directly in an index.
3 A basis point is 0.01% or one one-hundredth of a percent.
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SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
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more established, "blue-chip" companies.) The Standard & Poor's 500 Index ("S&P
500")(4) of large-company stocks fell 0.43%, while the Standard and Poor's
MidCap 400 Index(5) ("S&P MidCap 400") of medium-size company stocks and the
Russell 2000 Index(6) of small-company stocks advanced 8.97% and 3.04%,
respectively, for the six months ended June 30, 2000.
For the sixth consecutive time in the last year, the Fed acted to raise interest
rates in May to slow the U.S. economy, increasing the federal funds rate by 50
basis points to 6.5%. (The federal funds rate is the interest rate that banks
with excess reserves at a Fed district bank charge other banks that need
overnight loans. The fed funds rate, as it is called, often points to the
direction of U.S. interest rates.) The increase of the target overnight interest
rate marked its highest level in nine years and reflected Fed action intended to
address risks of an economy with higher inflationary pressures.
The Fed continued to stress its concern that there is a disparity in the growth
of demand and potential supply, which may foster inflation and jeopardize the
economy's performance. In theory, higher rates may potentially hurt stocks,
because slower growth often hinders profits at the same time that alternative
investments become more attractive. Accordingly, many interest-rate sensitive
stocks experienced price declines after the recent Fed decision.
In June, many investors were relieved after the Fed left interest rates
unchanged during its latest policy meeting. Although the central bank noted that
inflation risks persist, the decision made against more interest rate increases
was ruled out for the time being. Generally, monetary policy takes time to
filter through the economy and the full effect of higher interest rates may not
be felt for months.
MANAGED ASSETS TRUST
Managed Assets Trust ("Trust") seeks to provide a high total investment return
through a fully managed investment policy. For the six months ended June 30,
2000, the Trust returned 2.66%. In comparison, the Lehman Brothers Government/
Corporate Bond Index(7) returned 4.18% and the S&P 500 returned a negative 0.43%
for the same period. (Past performance is not indicative of future results.)
Signs that the economy is returning to a more moderate growth path enabled
financial markets to recover in late May and June after suffering for most of
the first two months of the second quarter. The recovery included both stock
markets and credit risk areas of the U.S. bond markets. These markets benefited
by investors sharply increasing the probability that the end of the Fed's
tightening is in sight. The bond markets' forecast for the future of short-term
interest rates has now returned to where they were at the beginning of the year.
Bonds outperformed stocks led by U.S. Treasuries, mortgage-backed securities and
municipal bonds in the second quarter of 2000. The Lehman Brothers
Government/Corporate Bond Index was up 1.45% in the quarter versus a negative
2.65% return for the S&P 500. Smaller capitalization stocks underperformed with
the Russell 2000 Index down 3.78% and the Nasdaq down in price by over 13%.
The Trust outperformed the benchmark by 13 basis points in the quarter (negative
0.89% versus negative 1.02% for the blend of 60% S&P 500, 40% Lehman Brothers
Government/Corporate Bond Index). The stock portion of the Trust's portfolio
underperformed the S&P 500 in the second quarter by 45 basis points but is still
ahead by 39 basis points for the six months ended June 30, 2000.
The speculation in the stock market has started to unwind. Many Internet and
technology stocks are down sharply from their highs earlier in the year and are
actually having layoffs. The market has not benefited as much from the recent
decline in interest rates because earning expectations are declining along with
the slowdown in the pace of economic growth. The managers feel that the internal
corrections the market is undergoing are healthy and reduce the risk of
substantial decline in the broad indices. The biggest risk to the market is
accelerated economic growth leading to their view that the Fed, in turn, has to
be more aggressive.
---------------
4 The S&P 500 is a market capitalization measure of 500 widely held common
stocks. An investor cannot invest directly in an index.
5 The S&P MidCap 400 is a market-value weighted index, consisting of 400
domestic stocks chosen for market size liquidating and industry group
representation. An investor cannot invest directly in an index.
6 The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index. An investor cannot invest directly in an
index.
7 The Lehman Brothers Government/Corporate Bond Index tracks the performance of
the overall bond market and is a broad measure of the performance of
government and corporate fixed-rate debt issues. An investor cannot invest
directly in an index.
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SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
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HIGH YIELD BOND TRUST
The High Yield Bond Trust ("Trust") seeks generous income. The assets of the
Trust will be invested in bonds which, as a class, sell at discounts from par
value and are typically higher-risk securities. For the six months ended June
30, 2000, the Trust returned 1.20%. In comparison, the Lehman Brothers Aggregate
Bond Index(8) posted a return of 3.99% for the same period. (Past performance is
not indicative of future results.)
Along with most credit sectors, the high yield market turned around in the
second quarter. The widening in spreads was proportional to risk, in general,
allowing lower-quality high yield issues to advance more strongly. At the
annualized pace thus far, however, the sector's performance was still poor based
on historical measures. Mutual fund flows into high yield investments picked up
at the end of quarter as well, but is still off for the year versus 1999.
Credit concerns have recently spilled from the high-tech industry, where
start-ups have been seeing a dry-up of venture capital and increased funding
costs, which has led to cash flow worries into mainstream markets such as the
finance and retail sectors. However, the default picture overall appears to be
somewhat unique, with increases in actual defaults accompanied by a decrease in
those that are close but have not yet defaulted.
The high yield sector for the year has been hit harder than any other sector of
the bond market, but in the second quarter, the high yield market performed
better than long-term corporate bonds and emerging market debt.
The managers think that if the current spread-tightening trend continues, there
is reason to believe that high yield bonds may continue to see more gains than
their investment grade counterparts,(9) due to a potential overreaction to
credit issues in the first five months of the year.
CAPITAL APPRECIATION FUND
The Capital Appreciation Fund ("Portfolio") seeks growth of capital through the
use of common stocks. Income is not an objective. The Portfolio invests
principally in common stocks of small to large companies that are expected to
experience wide fluctuations in price. For the six months ended June 30, 2000,
the Portfolio returned a negative 1.02%. In comparison, the S&P 500 returned a
negative 0.43% for the same period. (Past performance is not indicative of
future results.)
If one looks just on the surface, not much happened in the stock market in the
first half of 2000. The popular averages finished with only minor changes to the
downside. But scratch the surface, or better yet, ask any former day trader to
describe the period, and a far more fascinating and moreover, complex story
becomes evident. During the first two months of the year, speculative activity
in the stock market rivaled the greatest manias in history. After a blazing end
to the last century, many technology stocks continued to tear ahead, accompanied
by what the manager believes to be a sense of entitlement by people who were
convinced that their time had come to get rich merely by speculating in "New
Economy" stocks regardless of valuation or risk.
Meanwhile, the vast majority of sound companies not perceived to be part of that
technology wave suffered from neglect, if not outright liquidation. With
business conditions favorable, executives were at a loss to explain the poor
performance of their stocks. In fact, it was a flow-of-funds matter, as
investors switched money out of conservative investments into more "aggressive"
vehicles. Simply put, the rapid flow of money into the tech-laden NASDAQ(10) in
search of fast, and ultimately unrealistic gains, sucked the life out of the
rest of the stock market.
But by mid-March 2000, the Fed had raised interest rates enough to bite, and
with prices of many speculative stocks in the stratosphere, and market
capitalizations (i.e., the number of shares multiplied by the stock price) at
levels never seen before, there was not enough money to send them higher. Prices
weakened a bit, and recovered to within the heights seen in mid-March, and
started slipping again. Like the aftermath of a wild party, people who had known
nothing but good times, woke up feeling a bit queasy. Selling began slowly, but
picked up steam as panic began to replace greed, and by mid-April, only a month
after setting new highs, the Nasdaq declined 40%. By any historic standard that
should be considered a crash. In comparison, the bear market of 1973-1974 took
two years to decline 40%.
---------------
8 The Lehman Brothers Aggregate Bond Index is a broad based measure of the
performance of taxable bonds in the U.S. market with maturities of at least
one year. An investor cannot invest directly in an index.
9 Investment grade bonds are rated AAA to BBB by major credit rating agencies.
10 The NASDAQ is a computerized system that provides brokers and dealers with
price quotations for securities traded over the counter as well as for many
New York Stock Exchange listed securities.
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SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
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The manager has written in the past that it was a matter of if, and not when,
technology stocks would break. According to the manager, the consequences for
the overall market were dependent on whether money would then flow into the
previously neglected industrial and financial stocks. For a brief moment in
April, the picture appeared bright, as so-called "Old Economy" stocks rallied.
However, in June, Nasdaq began to recover, and most other stocks started
slipping. On balance, then, the overall market lost a bit of ground in the first
six months, but the internal rotation was intense and rapid, making it very
difficult to achieve much progress. In fact, the rapid rotation made it
relatively easy to lose money, as many stocks simply evaporated after momentum
broke. There were some big declines in stocks with household names and
widespread ownership.
The manager believes it is important to view the stock market with some
historical perspective. After several years of significantly above-average
gains, a flat or even declining market should not be viewed as a disaster.
Earnings did not keep pace with gains in stock prices over the past few years.
Therefore, a period during which earnings and dividends play catch-up would be a
reasonable scenario to expect. That may be preferable to a general
teeth-rattling decline that took the market to less excessive valuations.
Interestingly, for the first time in recent memory, the strong U.S. economy,
coupled with investor neglect of so many stocks, has created what the manager
thinks are many outstanding values, particularly in the industrial sector. The
series of interest rate rises by the Fed has caused people to wonder if we will
have to suffer a "hard landing," otherwise known as a steep recession.
In the manager's opinion, it is more likely that the Fed has engineered a "soft
landing" or slowdown, rather than sending the U.S. economy into a slump. It
seems possible that if that outcome becomes more widely accepted, money could
flow into some of the very inexpensive stocks that have become available. At any
rate, those areas of neglect now seem to have a much more favorable risk-reward
ratio than many of the high fliers, which even having come down, still sell at
price-to-earnings ("P/E") or price-to-revenue ratios(11) that are way too high
for comfort.
Throughout the first six months of 2000, the manager attempted to increase the
Portfolio's holdings in what the manager viewed as good companies when their
stocks were down, and trim positions when they got particularly expensive. The
manager did use the extreme weakness in Microsoft after the antitrust ruling to
add to the position of the portfolio.
MONEY MARKET PORTFOLIO
The Money Market Portfolio ("Portfolio") seeks to provide shareholders with high
current income from short-term money market instruments while emphasizing
preservation of capital and maintaining a high degree of liquidity. The
Portfolio pursues this objective by investing in securities maturing in one year
or less. For the six months ended June 30, 2000, the Portfolio returned 2.89%.
(Past performance is not indicative of future results.)
Please note that the investment in the Portfolio is not insured or guaranteed by
the Federal Deposit Insurance Corporation ("FDIC") or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.
The Portfolio's average maturity was kept short at 20 days and gradually
lengthened to 30 days in order to capture higher yields. Currently, the
manager's target will be to keep the average life of the Portfolio at about 35
days. The manager believes that a peak in short-term interest rates may occur
later on this year or early in 2001 and will extend accordingly.
---------------
11 The P/E ratio is the price of a stock divided by its earnings per share. The
price-to-revenue ratio is the price of a stock divided by its revenues.
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SEMI-ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
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In closing, we would like to thank you for your investment in Managed Assets
Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market
Portfolio.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
July 27, 2000
5
<PAGE> 7
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PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ 2.66%
Year Ended 6/30/00 9.73%
Five Years Ended 6/30/00 16.69%
Ten Years Ended 6/30/00 13.48%
CUMULATIVE TOTAL RETURN
-----------------------
6/30/90 through 6/30/00 254.22%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
</TABLE>
This chart assumes an initial investment of $10,000 made on June 30, 1990,
assuming reinvestment of dividends, through June 30, 2000. The Lehman Brothers
Government/Corporate Bond Index is a weighted composite of the Lehman Brothers
Government Bond Index, which is a broad-based index of all public debt
obligations of the U.S. Government and its agencies and has an average maturity
of nine years and the Lehman Brothers Corporate Bond Index, which is comprised
of all public fixed-rate non-convertible investment grade domestic corporate
debt, excluding collateralized mortgage obligations. The Consumer Price Index is
a measure of the average change in prices over time in a fixed market basket of
goods and services. The Standard & Poor's 500 Index is an unmanaged index
composed of 500 widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange and over-the-counter market.
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT/CORPORATE STANDARD & POOR'S
MANAGED ASSETS TRUST BOND INDEX CONSUMER PRICE INDEX 500 INDEX
-------------------- -------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/90 10,366 10,573 10,300 9,400
12/91 12,616 12,278 10,615 12,258
12/92 13,265 13,209 10,923 13,191
12/93 14,502 14,666 11,223 14,517
12/94 14,177 14,151 11,524 14,708
12/95 18,022 16,874 11,816 17,933
12/96 20,605 17,363 12,208 22,048
12/97 24,875 19,057 12,415 29,403
12/98 30,209 20,862 12,615 37,854
12/99 34,504 19,948 12,991 45,815
6/00 35,422 20,782 13,300 45,618
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
--------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- HIGH YIELD BOND TRUST AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ 1.20%
Year Ended 6/30/00 1.30%
Five Years Ended 6/30/00 9.49%
Ten Years Ended 6/30/00 10.20%
CUMULATIVE TOTAL RETURN
-----------------------
6/30/90 through 6/30/00 164.04%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
</TABLE>
This chart assumes an initial investment of $10,000 made on June 30, 1990,
assuming reinvestment of dividends, through June 30, 2000. The Lehman Brothers
Aggregate Bond Index, an unmanaged index, is composed of the Lehman Brothers
Intermediate Government/Corporate Bond Index and the Mortgage Backed Securities
Index and includes treasury issues, agency issues, corporate bond issues and
mortgage-backed securities. The Consumer Price Index is a measure of the average
change in prices over time in a fixed market basket of goods and services. The
First Boston High Yield Index Top Tier is a broad-based market measure of high
yield bonds, commonly known as "junk bonds."
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS FIRST BOSTON HIGH
HIGH YIELD BOND TRUST AGGREGATE BOND INDEX CONSUMER PRICE INDEX YIELD INDEX TOP TIER
--------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/90 9,347 10,896 10,610 10,093
12/91 11,786 12,640 10,935 12,402
12/92 13,337 13,574 11,252 13,485
12/93 15,057 14,898 11,561 15,591
12/94 15,013 14,463 11,871 15,562
12/95 17,336 17,135 12,172 18,469
12/96 20,118 17,757 12,576 20,449
12/97 23,450 19,470 12,789 23,031
12/98 24,987 21,162 12,994 23,098
12/99 26,092 20,989 13,382 24,125
6/00 26,404 21,826 13,700 24,367
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
6
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PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ (1.02)%
Year Ended 6/30/00 30.97%
Five Years Ended 6/30/00 35.17%
Ten Years Ended 6/30/00 23.63%
CUMULATIVE TOTAL RETURN
-----------------------
6/30/90 through 6/30/00 734.02%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
</TABLE>
This chart assumes an initial investment of $10,000 made on June 30, 1990,
assuming reinvestment of dividends, through June 30, 2000. The Standard & Poor's
500 Index is an unmanaged index composed of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and over-the-counter
market. The Russell 2000 Index is a capitalization weighted total return index
which is comprised of 2,000 of the smallest capitaled U.S. domiciled companies
with less than average growth orientation whose common stock is traded in the
United States of the New York Stock Exchange, American Stock Exchange and
NASDAQ. The Consumer Price Index is a measure of the average change in prices
over time in a fixed market basket of goods and services.
[LINE GRAPH]
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STANDARD & POOR'S
FUND 500 INDEX RUSSELL 2000 INDEX CONSUMER PRICE INDEX
-------------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C>
6/90 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/90 8,838 9,400 7,936 10,300
12/91 11,945 12,258 11,591 10,615
12/92 14,048 13,191 13,724 10,923
12/93 16,168 14,517 16,315 11,223
12/94 15,398 14,708 6,770 11,524
12/95 20,997 17,933 8,696 11,816
12/96 26,920 22,048 10,131 12,208
12/97 33,958 29,423 12,397 12,415
12/98 54,886 37,879 12,082 12,615
12/99 84,258 45,846 14,649 12,991
6/00 83,402 45,649 15,094 13,300
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.
7
<PAGE> 9
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SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 59.5%
-----------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 3.5%
8,400 Bed Bath & Beyond Inc.+..................................... $ 304,500
7,300 Best Buy Co., Inc.+......................................... 461,725
8,000 Circuit City Stores, Inc. .................................. 265,500
10,827 CVS Corp. .................................................. 433,080
33,795 Home Depot, Inc. ........................................... 1,687,638
8,900 Interpublic Group of Cos., Inc. ............................ 382,700
10,000 Kohl's Corp.+............................................... 556,250
30,200 The Limited, Inc. .......................................... 653,075
14,100 Lowe's Cos., Inc. .......................................... 578,981
11,800 McDonald's Corp. ........................................... 388,662
6,000 Omnicom Group Inc. ......................................... 534,375
21,710 Sears, Roebuck & Co. ....................................... 708,289
10,827 Target Corp. ............................................... 627,966
2,739 Visteon Corp.+.............................................. 33,207
24,600 Walgreen Co. ............................................... 791,812
66,460 Wal-Mart Stores, Inc. ...................................... 3,829,774
-----------------------------------------------------------------------------------------------------
12,237,534
-----------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 3.7%
28,700 ACNielsen Corp.+............................................ 631,400
7,200 Adolph Coors Co., Class B Shares............................ 435,600
10,727 Anheuser-Busch Cos., Inc. .................................. 801,173
4,600 Avery Dennison Corp. ....................................... 308,775
9,000 Bestfoods................................................... 623,250
43,300 Cendant Corp.+.............................................. 606,200
42,605 Coca-Cola Co. .............................................. 2,447,125
14,684 Colgate-Palmolive Co. ...................................... 879,205
14,364 Kimberly-Clark Corp. ....................................... 824,134
22,080 PepsiCo, Inc. .............................................. 981,180
47,015 Philip Morris Cos. Inc. .................................... 1,248,836
27,532 Procter & Gamble Co. ....................................... 1,576,207
16,262 Safeway Inc.+............................................... 733,823
15,844 SYSCO Corp. ................................................ 667,428
-----------------------------------------------------------------------------------------------------
12,764,336
-----------------------------------------------------------------------------------------------------
ENTERTAINMENT/MEDIA -- 2.3%
4,842 Clear Channel Communications, Inc.+......................... 363,150
14,200 Comcast Corp., Special Class A Shares....................... 575,100
7,511 Gannett Co., Inc. .......................................... 449,252
10,161 The New York Times Co., Class A Shares...................... 401,360
7,700 The Seagram Co. Ltd. ....................................... 446,600
24,422 Time Warner Inc. ........................................... 1,856,072
12,500 Tribune Co. ................................................ 437,500
26,786 Viacom Inc., Class B Shares+................................ 1,826,470
41,595 The Walt Disney Co. ........................................ 1,614,406
-----------------------------------------------------------------------------------------------------
7,969,910
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 10
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL -- 5.5%
29,649 American Express Co. ....................................... $ 1,545,454
21,876 Bank of America Corp. ...................................... 940,668
16,500 Bank of New York Co., Inc. ................................. 767,250
21,121 Bank One Corp. ............................................. 561,027
11,600 Bear Stearns Cos. Inc. ..................................... 482,850
8,108 Capital One Financial Corp. ................................ 361,819
18,900 Charles Schwab Corp. ....................................... 635,513
25,002 Chase Manhattan Corp. ...................................... 1,151,655
4,908 Equity Residential Properties Trust......................... 225,768
18,052 Fannie Mae.................................................. 942,089
4,300 Fifth Third Bancorp......................................... 271,975
18,600 Firstar Corp. .............................................. 391,762
23,523 FleetBoston Financial Corp. ................................ 799,787
14,250 Freddie Mac................................................. 577,125
14,200 Household International, Inc. .............................. 590,187
2,313 J.P. Morgan & Co. .......................................... 254,719
10,481 Lehman Brothers Holdings Inc. .............................. 991,110
23,800 MBNA Corp. ................................................. 645,575
12,775 Merrill Lynch & Co., Inc. .................................. 1,469,125
28,682 Morgan Stanley Dean Witter & Co. ........................... 2,387,776
13,200 National City Corp. ........................................ 225,225
9,600 Paine Webber Group Inc. .................................... 436,800
6,500 Providian Financial Corp. .................................. 585,000
4,948 State Street Corp. ......................................... 524,797
8,900 T. Rowe Price Associates, Inc. ............................. 378,250
24,700 Wells Fargo & Co. .......................................... 957,125
-----------------------------------------------------------------------------------------------------
19,100,431
-----------------------------------------------------------------------------------------------------
HEALTH CARE -- 6.2%
16,046 Abbott Laboratories......................................... 715,050
10,900 Allergan, Inc. ............................................. 812,050
21,613 American Home Products Corp. ............................... 1,269,764
4,900 Baxter International Inc. .................................. 344,531
36,596 Bristol-Myers Squibb Co. ................................... 2,131,717
5,400 Cardinal Health, Inc. ...................................... 399,600
21 Crescendo Pharmaceuticals Corp.+............................ 423
12,704 Eli Lilly & Co. ............................................ 1,268,812
18,400 HCA - The Healthcare Corp. ................................. 558,900
25,211 Johnson & Johnson........................................... 2,568,370
17,266 Medtronic, Inc. ............................................ 860,063
44,138 Merck & Co., Inc. .......................................... 3,382,074
106,891 Pfizer Inc. ................................................ 5,130,768
20,492 Pharmacia Corp. ............................................ 1,059,180
24,368 Schering-Plough Corp. ...................................... 1,230,584
-----------------------------------------------------------------------------------------------------
21,731,886
-----------------------------------------------------------------------------------------------------
INSURANCE -- 2.3%
9,000 Aetna Inc. ................................................. 577,688
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 11
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE -- 2.3% (CONTINUED)
21,754 The Allstate Corp. ......................................... $ 484,027
5,481 Ambac Financial Group, Inc. ................................ 300,427
3,800 American General Corp. ..................................... 231,800
24,630 American International Group, Inc. ......................... 2,894,025
7,900 CIGNA Corp. ................................................ 738,650
12,800 Cincinnati Financial Corp. ................................. 402,400
12,500 Lincoln National Corp. ..................................... 451,562
4,100 Marsh & McLennan Cos., Inc. ................................ 428,194
6,900 MBIA, Inc. ................................................. 332,494
25,000 MetLife, Inc.+.............................................. 526,562
11,400 MGIC Investment Corp. ...................................... 518,700
-----------------------------------------------------------------------------------------------------
7,886,529
-----------------------------------------------------------------------------------------------------
MATERIALS & PROCESSING -- 1.0%
3,300 Alcan Aluminum Ltd. ........................................ 102,300
15,940 Alcoa Inc. ................................................. 462,260
12,300 Barrick Gold Corp. ......................................... 223,706
12,657 The Dow Chemical Co. ....................................... 382,083
16,422 E.I. du Pont de Nemours & Co. .............................. 718,463
8,384 Georgia-Pacific Group....................................... 220,080
8,302 International Paper Co. .................................... 247,503
5,106 The Mead Corp. ............................................. 128,927
2,700 Nucor Corp. ................................................ 89,606
4,200 Phelps Dodge Corp. ......................................... 156,188
2,600 Praxair, Inc. .............................................. 97,337
7,400 Rohm & Haas Co. ............................................ 255,300
2,000 Union Carbide Corp. ........................................ 99,000
19,200 W.R. Grace & Co.+........................................... 232,800
3,635 Weyerhaeuser Co. ........................................... 156,305
-----------------------------------------------------------------------------------------------------
3,571,858
-----------------------------------------------------------------------------------------------------
OIL/ENERGY -- 3.6%
6,600 Apache Corp. ............................................... 388,163
5,400 Baker Hughes Inc. .......................................... 172,800
10,984 Chevron Corp. .............................................. 931,581
9,962 Conoco Inc., Class B Shares................................. 244,692
13,288 Enron Corp. ................................................ 857,076
57,397 Exxon Mobil Corp. .......................................... 4,505,636
7,810 Halliburton Co. ............................................ 368,534
6,500 Kerr-McGee Corp. ........................................... 383,094
6,700 Occidental Petroleum Corp. ................................. 141,119
4,300 Phillips Petroleum Co. ..................................... 217,956
34,134 Royal Dutch Petroleum Co. ADR............................... 2,101,374
8,938 Schlumberger Ltd. .......................................... 666,998
8,700 Texaco Inc. ................................................ 463,275
4,500 Tosco Corp. ................................................ 127,406
4,850 Transocean Sedco Forex Inc. ................................ 259,159
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 12
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL/ENERGY -- 3.6% (CONTINUED)
5,000 USX-Marathon Group Inc. .................................... $ 125,312
12,054 The Williams Cos., Inc. .................................... 502,541
-----------------------------------------------------------------------------------------------------
12,456,716
-----------------------------------------------------------------------------------------------------
PRODUCER DURABLES -- 4.6%
6,407 Agilent Technologies, Inc.+................................. 472,516
5,500 Ball Corp. ................................................. 177,031
4,200 Black & Decker Corp. ....................................... 165,113
3,867 Caterpillar Inc. ........................................... 130,995
6,000 Eastman Kodak Co. .......................................... 357,000
4,154 Emerson Electric Co. ....................................... 250,798
8,600 FedEx Corp.+................................................ 326,800
164,402 General Electric Co. ....................................... 8,713,306
16,336 Honeywell International Inc. ............................... 550,327
10,400 Ingersoll-Rand Co. ......................................... 418,600
8,500 Johnson Controls, Inc. ..................................... 436,156
12,565 Masco Corp. ................................................ 226,955
3,700 Minnesota Mining & Manufacturing Co. ....................... 305,250
10,200 PE Corp. - PE Biosystems Group.............................. 671,925
9,159 PerkinElmer, Inc. .......................................... 605,639
14,800 Solectron Corp.+............................................ 619,750
37,146 Tyco International Ltd. .................................... 1,759,792
-----------------------------------------------------------------------------------------------------
16,187,953
-----------------------------------------------------------------------------------------------------
TECHNOLOGY -- 21.9%
10,800 ADC Telecommunications, Inc.+............................... 905,850
5,100 Adobe Systems Inc. ......................................... 663,000
6,700 Advanced Micro Devices, Inc.+............................... 517,575
8,200 Altera Corp.+............................................... 835,888
36,736 America Online, Inc.+....................................... 1,937,824
21,440 Amgen Inc.+................................................. 1,506,160
10,900 Analog Devices, Inc.+....................................... 828,400
11,800 Apple Computer, Inc.+....................................... 618,025
17,126 Applied Materials, Inc.+.................................... 1,552,044
10,800 AT&T Wireless Group+........................................ 301,050
6,900 Automatic Data Processing, Inc. ............................ 369,581
4,400 Biogen, Inc.+............................................... 283,800
19,243 The Boeing Co. ............................................. 804,598
3,900 Broadcom Corp., Class A Shares+............................. 853,856
113,528 Cisco Systems, Inc.+........................................ 7,216,124
28,082 Compaq Computer Corp. ...................................... 717,846
7,700 Computer Associates International, Inc. .................... 394,144
5,600 Comverse Technology, Inc.+.................................. 520,800
7,800 Corning Inc. ............................................... 2,105,025
29,984 Dell Computer Corp.+........................................ 1,478,586
31,516 EMC Corp.+.................................................. 2,424,762
13,200 First Data Corp. ........................................... 655,050
11,500 Global Crossing Ltd.+....................................... 302,594
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 13
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 21.9% (CONTINUED)
18,300 Hewlett-Packard Co. ........................................ $ 2,285,212
56,086 Intel Corp. ................................................ 7,497,997
31,488 International Business Machines Corp. ...................... 3,449,904
8,200 L-3 Communications Holdings, Inc.+.......................... 467,912
26,500 Lockheed Martin Corp. ...................................... 657,531
8,900 LSI Logic Corp.+............................................ 481,712
54,345 Lucent Technologies Inc. ................................... 3,219,941
15,100 Micron Technology, Inc.+.................................... 1,329,744
85,434 Microsoft Corp.+............................................ 6,834,720
35,170 Motorola, Inc. ............................................. 1,022,128
7,700 Network Appliance, Inc.+.................................... 619,850
22,200 Nextel Communications, Inc.+................................ 1,358,362
51,800 Nortel Networks Corp. ...................................... 3,535,350
49,530 Oracle Corp.+............................................... 4,163,616
12,500 QUALCOMM Inc.+.............................................. 750,000
4,800 Siebel Systems, Inc.+....................................... 785,100
23,952 Sprint PCS Group+........................................... 1,425,144
27,900 Sun Microsystems, Inc.+..................................... 2,537,156
6,658 Tellabs, Inc.+.............................................. 455,657
6,300 Teradyne, Inc.+............................................. 463,050
28,068 Texas Instruments Inc. ..................................... 1,927,921
14,322 United Technologies Corp. .................................. 843,208
5,300 VERITAS Software Corp.+..................................... 598,983
9,100 Xilinx, Inc.+............................................... 751,319
8,210 Yahoo! Inc.+................................................ 1,017,014
-----------------------------------------------------------------------------------------------------
76,271,113
-----------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
1,874 AMR Corp.+.................................................. 49,544
5,900 Delta Air Lines, Inc. ...................................... 298,319
20,917 Ford Motor Co. ............................................. 899,431
9,642 General Motors Corp. ....................................... 559,838
11,100 Harley-Davidson, Inc. ...................................... 427,350
-----------------------------------------------------------------------------------------------------
2,234,482
-----------------------------------------------------------------------------------------------------
UTILITIES -- 4.3%
13,000 AES Corp.+.................................................. 593,125
6,669 ALLTEL Corp. ............................................... 413,061
63,388 AT&T Corp. ................................................. 2,004,650
32,414 Bell Atlantic Corp.++ ...................................... 1,647,036
24,618 BellSouth Corp. ............................................ 1,049,342
20,600 FirstEnergy Corp. .......................................... 481,525
7,025 FPL Group, Inc. ............................................ 347,738
9,573 GTE Corp.++ ................................................ 595,919
7,100 The Montana Power Co. ...................................... 250,719
13,900 PECO Energy Co. ............................................ 560,344
61,546 SBC Communications Inc. .................................... 2,661,867
7,073 The Southern Co. ........................................... 164,890
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 14
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES -- 4.3% (CONTINUED)
17,906 Sprint Corp. ............................................... $ 913,206
11,723 U.S. West, Inc. ............................................ 1,005,247
50,353 WorldCom, Inc.+............................................. 2,309,921
-----------------------------------------------------------------------------------------------------
14,998,590
-----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $151,753,637)................... 207,411,338
-----------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 1.3%
-----------------------------------------------------------------------------------------------------
ENERGY -- 0.2%
5,977 El Paso Energy Capital Trust, 4.750%........................ 384,769
5,924 Newfield Financial Trust, 6.500%............................ 364,326
-----------------------------------------------------------------------------------------------------
749,095
-----------------------------------------------------------------------------------------------------
FINANCIAL -- 0.8%
10,000 CalEnergy Capital II, 6.250%................................ 415,000
6,000 Equity Office Properties Trust, 5.250%...................... 253,500
18,564 Equity Residential Properties Trust, 7.250%................. 408,408
2,000 FINOVA Finance Trust, 5.500%................................ 48,000
12,000 General Growth Properties, Inc., 7.250%..................... 261,000
12,000 National Australia Bank Ltd., 7.875%........................ 339,750
3,220 New Plan Excel Realty Trust, 8.500%......................... 71,645
6,000 Newell Financial Trust, 5.250%.............................. 225,750
9,000 Reckson Associates Realty Corp., 7.625%..................... 199,688
5,000 Tosco Financing Trust, 5.750%............................... 238,750
2,245 Union Pacific Capital Trust, 6.250%......................... 86,713
-----------------------------------------------------------------------------------------------------
2,548,204
-----------------------------------------------------------------------------------------------------
INDUSTRIAL -- 0.1%
4,000 Amcor Ltd., 7.250%.......................................... 148,000
4,000 Canadian National Railway Co., 5.250%....................... 180,000
-----------------------------------------------------------------------------------------------------
328,000
-----------------------------------------------------------------------------------------------------
UTILITIES -- 0.2%
6,000 AES Trust VII, 6.000%....................................... 354,750
5,999 Calpine Capital Trust II, 5.500%............................ 434,948
-----------------------------------------------------------------------------------------------------
789,698
-----------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $4,505,589)...... 4,414,997
-----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS & NOTES -- 14.7%
-----------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 2.9%
$ 5,000,000 A+ Daimler Chrysler NA Holdings, 7.750% due 6/15/05............ 5,050,000
5,000,000 A Lowes Cos., Inc., Notes, 8.250% due 6/1/10.................. 5,118,750
-----------------------------------------------------------------------------------------------------------------
10,168,750
-----------------------------------------------------------------------------------------------------------------
FINANCIAL -- 5.4%
5,000,000 A Bank One Corp., Notes, 5.625% due 2/17/04................... 4,712,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 15
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL -- 5.4% (CONTINUED)
Ford Motor Credit Co., Notes:
$ 5,000,000 A 5.750% due 2/23/04........................................ $ 4,706,250
5,000,000 A 7.500% due 3/15/05........................................ 4,975,000
5,000,000 BBB Nationwide Health Properties, Inc., Notes, 6.900% due
10/1/37................................................... 4,412,500
-----------------------------------------------------------------------------------------------------------------
18,806,250
-----------------------------------------------------------------------------------------------------------------
INDUSTRIAL -- 2.3%
5,000,000 A+ Caterpillar Financial Services Corp., Notes, 6.875% due
8/1/04.................................................... 4,918,750
3,000,000 BBB CSX Corp., Notes, 6.950% due 5/1/27......................... 2,958,750
-----------------------------------------------------------------------------------------------------------------
7,877,500
-----------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 2.7%
5,000,000 BBB+ Computer Associates International, Inc., Notes, 6.375% due
4/15/05................................................... 4,687,500
5,000,000 A Xerox Corp., Notes, 6.250% due 11/15/26..................... 4,693,750
-----------------------------------------------------------------------------------------------------------------
9,381,250
-----------------------------------------------------------------------------------------------------------------
UTILITIES -- 1.4%
5,000,000 AA- BellSouth Capital Funding Corp., Notes, 6.040% due
11/15/26.................................................. 4,912,500
-----------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES (Cost -- $52,056,662)......... 51,146,250
-----------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 1.6%
-----------------------------------------------------------------------------------------------------------------
ENERGY -- 0.1%
Diamond Offshore Drilling, Inc., Sub. Notes:
101,000 A- 3.750% due 2/15/07........................................ 105,293
300,000 A- Zero coupon due 6/6/20 (b)................................ 140,625
300,000 BBB+ Global Marine Inc., Debentures, zero coupon due 6/23/20 (b). 149,250
175,000 A Transocean Sedco Forex Inc., Debentures, zero coupon due
5/24/20................................................... 105,000
-----------------------------------------------------------------------------------------------------------------
500,168
-----------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/MEDIA -- 0.3%
150,000 BBB- AT&T Corp. - Liberty Media Group, Debentures, 4.000% due
11/15/29.................................................. 215,625
150,000 BBB- Clear Channel Communications, Inc., Unsecured Notes, 1.500%
due 12/1/02............................................... 147,000
350,000 BBB+ Cox Communications, Inc., Notes, 0.425% due 4/19/20......... 183,750
500,000 BBB- Scholastic Corp., Sub. Notes, 5.000% due 8/15/05............ 495,625
-----------------------------------------------------------------------------------------------------------------
1,042,000
-----------------------------------------------------------------------------------------------------------------
FINANCIAL -- 0.5%
Bell Atlantic Financial Services, Bonds:
297,000 A+ 5.750% due 4/1/03......................................... 289,946
345,000 A+ 4.250% due 9/15/05 (b).................................... 419,606
400,000 BBB- Elan International Finance Ltd., Company Guaranteed,
zero coupon due 12/14/18.................................. 294,000
300,000 A- Hellenic Finance, 2.000% due 7/15/03........................ 280,500
300,000 Baa3* Security Capital U.S. Realty, Bonds, 2.000% due 5/22/03..... 235,500
-----------------------------------------------------------------------------------------------------------------
1,519,552
-----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 16
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE -- 0.1%
$ 146,000 BBB- Athena Neurosciences, Inc., Notes, 4.750% due 11/15/04...... $ 205,495
300,000 NR Roche Holding AG, Notes, zero coupon due 1/19/15............ 277,500
-----------------------------------------------------------------------------------------------------------------
482,995
-----------------------------------------------------------------------------------------------------------------
INDUSTRIAL -- 0.4%
181,000 Aa2* GVC Corp. Ltd., Bonds, zero coupon due 5/21/02 (b).......... 217,200
300,000 AA- Indian Petrochemicals Corp. Ltd., Bonds, 2.500% due 3/11/02
(b)....................................................... 309,750
300,000 BB+ Interim Services Inc., Sub. Notes, 4.500% due 6/1/05........ 231,375
124,000 BBB+ Koninklijke Ahold, Sub. Notes, 3.000% due 9/30/03........... 62,102
431,000 BB+ Lennar Corp., Notes, zero coupon due 7/29/18................ 176,171
500,000 BBB Solectron Corp., Notes, zero coupon due 5/8/20.............. 317,500
100,000 BBB Thermo Electron Corp., Sub. Debentures, 4.250% due 1/1/03... 92,375
100,000 BBB+ Thermo Instrument Systems Inc., Company Guaranteed, 4.000%
due 1/15/05............................................... 86,376
-----------------------------------------------------------------------------------------------------------------
1,492,849
-----------------------------------------------------------------------------------------------------------------
UTILITIES -- 0.2%
600,000 A- Potomac Electric Power Co., Debentures, 5.000% due 9/1/02... 562,500
-----------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $5,326,622)...... 5,600,064
-----------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.6%
5,000,000 PP&L Transition Bond Co. LLC, 7.050% due 6/25/09......................... 4,961,625
713,398 Wilmington Trust, 9.250% due 1/2/07...................................... 714,221
-----------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost -- $5,712,937)................................................... 5,675,846
-----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 17.5%
15,722,300 U.S. Treasury Notes, 3.625% due 1/15/08.................................. 15,250,631
10,000,000 U.S. Treasury Bonds, 11.750% due 2/15/10................................. 12,081,200
4,500,000 U.S. Treasury Bonds, 12.000% due 8/15/13................................. 6,082,020
6,279,240 U.S. Treasury Bonds, 3.625% due 4/15/28.................................. 5,990,772
21,626,850 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29.................. 21,572,783
-----------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $59,493,189).................. 60,977,406
-----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 3.0%
Federal Home Loan Mortgage Corp. (FHLMC):
58,816 8.500% due 9/1/02...................................................... 59,477
1,321,921 8.000% due 9/1/04...................................................... 1,336,792
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 17
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 3.0% (CONTINUED)
Federal National Mortgage Association (FNMA):
$ 70,030 8.500% due 3/1/05...................................................... $ 71,452
2,779,673 6.000% due 1/1/13...................................................... 2,631,128
886,956 6.500% due 12/1/27..................................................... 836,506
983,250 6.000% due 3/1/28...................................................... 899,979
159,168 6.000% due 4/1/28...................................................... 145,688
129,464 5.500% due 5/1/28...................................................... 114,210
473,141 6.000% due 5/1/28...................................................... 433,071
849,124 5.500% due 6/1/28...................................................... 749,080
404,054 6.000% due 6/1/28...................................................... 369,835
429,745 6.000% due 7/1/28...................................................... 393,351
1,085,037 5.500% due 8/1/28...................................................... 957,198
1,155,235 6.000% due 8/1/28...................................................... 1,057,397
Government National Mortgage Association (GNMA):
128,250 9.000% due 11/15/19.................................................... 132,578
77,507 9.500% due 1/15/20..................................................... 80,632
64,012 9.500% due 3/15/20..................................................... 66,592
145,215 7.500% due 5/15/23..................................................... 144,261
-----------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $11,056,389)..................... 10,479,227
-----------------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $289,905,025)............................. 345,705,128
-----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
2,934,000 Morgan Stanley Dean Witter & Co., 6.500% due 7/3/00; Proceeds at
maturity -- $2,935,589; (Fully collateralized by U.S. Treasury Bonds,
8.500% due 2/15/20; Market value -- $2,993,205) (Cost -- $2,934,000)... 2,934,000
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $292,839,025**)....................... $348,639,128
-----------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged.
The surviving company was renamed Verizon Communications.
(a) All ratings are by Standard & Poor's Ratings Service, except
for those which are identified by an asterisk (*), are rated
by Moody's Investors Service, Inc.
(b) Security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in
transactions that are exempt from registration, normally to
qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See page 22 for definitions of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 18
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS & NOTES -- 72.7%
-----------------------------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL -- 2.0%
$ 475,000 B- Advance Stores Co., Inc., Company Guaranteed, 10.250% due
4/15/08................................................... $ 394,250
150,000 BB Federal-Mogul Corp., Notes, 7.375% due 1/15/06.............. 109,125
120,000 BB- Lear Corp., Sub. Notes, 8.250% due 2/1/02................... 118,200
-----------------------------------------------------------------------------------------------------
621,575
-----------------------------------------------------------------------------------------------------
BUILDING - RESIDENTIAL/COMMERCIAL -- 0.2%
75,000 BB+ Lennar Corp., Sr. Notes, 9.950% due 5/1/10.................. 74,250
-----------------------------------------------------------------------------------------------------
CASINO HOTELS -- 1.4%
ITT Corp., Notes:
180,000 BB+ 6.250% due 11/15/00....................................... 178,650
75,000 BB+ 6.750% due 11/15/05....................................... 67,875
Venetian Casino Resort LLC/Las Vegas Sands, Inc., Company
Guaranteed:
135,000 B- 12.250% due 11/15/04...................................... 137,025
50,000 CCC+ Step bond to yield 10.000% due 11/15/05................... 47,500
-----------------------------------------------------------------------------------------------------
431,050
-----------------------------------------------------------------------------------------------------
CHEMICALS -- 1.8%
100,000 B+ Acetex Corp., Company Guaranteed, 9.750% due 10/1/03........ 94,500
Lyondell Chemical Co.:
225,000 BB Secured, 9.875% due 5/1/07................................ 222,750
225,000 B+ Sr. Sub. Notes, 10.875% due 5/1/09........................ 224,438
-----------------------------------------------------------------------------------------------------
541,688
-----------------------------------------------------------------------------------------------------
CONTAINERS - PAPER/PLASTIC -- 0.2%
50,000 B Huntsman Packaging Corp., 13.000% due 6/1/10#............... 51,750
-----------------------------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.4%
225,000 B- Aviation Sales Co., Company Guaranteed, 8.125% due
2/15/08................................................... 131,625
-----------------------------------------------------------------------------------------------------
ELECTRONICS -- 1.4%
300,000 B+ Flextronics International Ltd., Sr. Sub. Notes, 8.750% due
10/15/07.................................................. 285,000
140,000 B Hadco Corp., Company Guaranteed, 9.250% due 6/15/08......... 141,750
-----------------------------------------------------------------------------------------------------
426,750
-----------------------------------------------------------------------------------------------------
ENERGY -- 2.6%
400,000 BB Pride International, Inc., Sr. Notes, 10.000% due 6/1/09.... 414,000
135,000 BBB- PSE&G Energy Holdings, Inc., Sr. Notes, 10.000% due 10/1/09
(b)....................................................... 141,919
250,000 BBB- Tucson Electric Power Co., Collateral Trust, 7.500% due
8/1/08 (b)................................................ 231,250
-----------------------------------------------------------------------------------------------------
787,169
-----------------------------------------------------------------------------------------------------
FOOD & DRUG -- 1.3%
175,000 B Archibald Candy Corp., Company Guaranteed, 10.250% due
7/1/04.................................................... 127,750
300,000 B- Duane Reade Inc., Company Guaranteed, 9.250% due 2/15/08.... 267,000
-----------------------------------------------------------------------------------------------------
394,750
-----------------------------------------------------------------------------------------------------
FORESTRY -- 1.1%
350,000 B+ Millar Western Forest Products, Sr. Notes, 9.875% due
5/15/08................................................... 329,000
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 19
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
GAMING/LEISURE -- 7.3%
$ 500,000 B- Bally Total Fitness Holding Corp., Sr. Sub. Notes, 9.875%
due 10/15/07.............................................. $ 455,000
350,000 BB+ Harrah's Operating Co. Inc., Company Guaranteed, 7.875% due
12/15/05.................................................. 329,875
275,000 B Isle of Capri Casinos, Inc., Company Guaranteed, 8.750% due
4/15/09................................................... 255,750
Park Place Entertainment Corp., Sr. Sub. Notes:
450,000 BB+ 7.875% due 12/15/05....................................... 424,125
75,000 NR 9.375% due 2/15/07........................................ 75,188
175,000 B+ Prime Hospitality Corp., Sr. Sub. Notes, 9.750% due
4/1/07.................................................... 169,750
Station Casinos, Inc., Sr. Sub. Notes:
410,000 B+ 10.125% due 3/15/06....................................... 417,175
100,000 B+ 9.875% due 7/1/10......................................... 100,750
-----------------------------------------------------------------------------------------------------
2,227,613
-----------------------------------------------------------------------------------------------------
HEALTH CARE -- 2.8%
225,000 BB+ HCA - The Healthcare Corp., Notes, 7.000% due 7/1/07........ 199,405
250,000 BBB- HEALTHSOUTH Corp., Sr. Sub. Notes, 9.500% due 4/1/01........ 251,250
275,000 BB+ Tenet Healthcare Corp., Sr. Notes, 9.250% due 9/1/10 (b).... 278,438
125,000 B- Unilab Corp., Sr. Sub. Notes, 12.750% due 10/1/09........... 129,375
-----------------------------------------------------------------------------------------------------
858,468
-----------------------------------------------------------------------------------------------------
HOUSING -- 1.3%
250,000 B- Atrium Cos., Inc., Company Guaranteed, 10.500% due 5/1/09... 211,875
225,000 BB- Beazer Homes USA, Inc., Company Guaranteed, 8.875% due
4/1/08.................................................... 202,500
-----------------------------------------------------------------------------------------------------
414,375
-----------------------------------------------------------------------------------------------------
INFORMATION/TECHNOLOGY -- 1.7%
175,000 B- Anteon Corp., 12.000% due 5/15/09........................... 158,813
Viasystems Group, Inc., Sr. Sub. Notes:
225,000 B 9.750% due 6/1/07......................................... 195,750
175,000 B Series B, 9.750% due 6/1/07............................... 152,250
-----------------------------------------------------------------------------------------------------
506,813
-----------------------------------------------------------------------------------------------------
MANUFACTURING -- 3.7%
175,000 B+ American Axle & Manufacturing Holdings, Inc., Company
Guaranteed, 9.750% due 3/1/09............................. 164,063
450,000 B BGF Industries, Inc., Sr. Sub. Notes, 10.250% due 1/15/09... 418,500
350,000 B- Cherokee International LLC, Sr. Sub. Notes, 10.500% due
5/1/09.................................................... 303,625
300,000 B- TransDigm Inc., Company Guaranteed, 10.375% due 12/1/08..... 259,500
-----------------------------------------------------------------------------------------------------
1,145,688
-----------------------------------------------------------------------------------------------------
MEDIA/ENTERTAINMENT -- 11.2%
100,000 B2* Adelphia Communications Corp., Sr. Notes, 8.125% due
7/15/03................................................... 94,750
50,900 NR AMFM Inc., Debentures, 12.625% due 10/31/06................. 59,680
75,000 B- Carmike Cinemas, Inc., Company Guaranteed, 9.375% due
2/1/09.................................................... 41,438
Chancellor Media Corp., Company Guaranteed:
400,000 B 9.000% due 10/1/08........................................ 413,000
150,000 B+ 8.000% due 11/1/08........................................ 151,313
275,000 B- Paxson Communications Corp., Sr. Sub. Notes, 11.625% due
10/1/02................................................... 282,563
500,000 CCC+ Pegasus Media & Communications, Inc., Sr. Sub. Notes,
12.500% due 7/1/05........................................ 535,000
175,000 B- Phoenix Color Corp., Company Guaranteed, 10.375% due
2/1/09.................................................... 158,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 20
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MEDIA/ENTERTAINMENT -- 11.2% (CONTINUED)
$ 250,000 CCC- Production Resource Group LLC, Sr. Sub. Notes, 11.500% due
1/15/08................................................... $ 38,125
425,000 B+ Telewest Communications PLC, Debentures, step bond to yield
11.000% due 10/1/07....................................... 404,813
Telewest Communications PLC, Sr. Discount Notes, step bond
to yield:
225,000 B+ 9.250% due 4/15/09........................................ 122,063
300,000 B+ 11.375% due 2/1/10........................................ 161,250
375,000 B- T/SF Communications Corp., Company Guaranteed, 10.375% due
11/1/07................................................... 350,625
500,000 B- United International Holdings Inc., Sr. Discount Notes, step
bond to yield 10.750% due 2/15/08......................... 352,500
300,000 B United Pan-Europe Communications NV, Sr. Notes, 11.250% due
2/1/10.................................................... 268,500
-----------------------------------------------------------------------------------------------------
3,433,995
-----------------------------------------------------------------------------------------------------
METALS/MINERALS -- 2.0%
500,000 B- Diamond Holdings PLC, Company Guaranteed, 9.125% due
2/1/08.................................................... 465,000
175,000 B+ National Steel Corp., First Mortgage, 9.875% due 3/1/09..... 147,000
-----------------------------------------------------------------------------------------------------
612,000
-----------------------------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURER -- 1.5%
100,000 B- Desa International Inc., Company Guaranteed, 9.875% due
12/15/07.................................................. 80,500
75,000 B Jostens, Inc., 12.750% due 5/1/10#.......................... 74,250
175,000 CCC+ Samsonite Corp., Sr. Sub. Notes, 10.750% due 6/15/08........ 147,000
150,000 B- Tekni-Plex, Inc., Sr. Sub. Notes, 12.750% due 6/15/10 (b)... 150,750
-----------------------------------------------------------------------------------------------------
452,500
-----------------------------------------------------------------------------------------------------
OIL & GAS DRILLING -- 1.0%
Cross Timbers Oil Co., Sr. Sub. Notes:
125,000 B 9.250% due 4/1/07......................................... 122,188
100,000 B 8.750% due 11/1/09........................................ 95,500
R&B Falcon Corp., Sr. Notes:
50,000 B+ 6.500% due 4/15/03........................................ 46,500
50,000 B+ 6.750% due 4/15/05........................................ 45,250
-----------------------------------------------------------------------------------------------------
309,438
-----------------------------------------------------------------------------------------------------
RETAIL -- 5.4%
390,000 B Advance Glassfiber Yarns LLC, Sr. Sub. Notes, 9.875% due
1/15/09................................................... 358,800
575,000 CCC+ J. Crew Operating Corp., Sr. Sub. Notes, 10.375% due
10/15/07.................................................. 474,375
500,000 BB+ Kmart Corp., Medium Term Notes, 7.900% due 12/14/00......... 497,500
25,000 BB- Levi Strauss & Co., Notes, 7.000% due 11/1/06............... 19,125
150,000 B Pantry Inc., Company Guaranteed, 10.250% due 10/15/07....... 142,500
175,000 BB+ Saks Inc., Company Guaranteed, 8.250% due 11/15/08.......... 155,324
-----------------------------------------------------------------------------------------------------
1,647,624
-----------------------------------------------------------------------------------------------------
SERVICES -- 3.4%
250,000 B- Advance Holding Corp., Debentures, step bond to yield
12.875% due 4/15/09....................................... 106,250
555,000 B AFC Enterprises, Sr. Sub. Notes, 10.250% due 5/15/07........ 541,123
310,896 B FRD Acquisition Co., Sr. Notes, 12.500% due 7/15/04......... 116,585
300,000 B- Williams Scotsman, Inc., Company Guaranteed, 9.875% due
6/1/07.................................................... 274,500
-----------------------------------------------------------------------------------------------------
1,038,458
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 21
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS -- 11.4%
$ 125,000 B CapRock Communications Corp., Sr. Notes, 11.500% due
5/1/09.................................................... $ 113,125
350,000 B- Centennial Communications Corp., Sr. Sub. Notes, 10.750% due
12/15/08.................................................. 341,687
1,000,000 B+ Charter Communications Holdings LLC, Sr. Discount Notes,
step bond to yield 9.920% due 4/1/11...................... 570,000
Classic Cable Inc.:
225,000 B- Company Guaranteed, 9.375% due 8/1/09..................... 197,438
175,000 NR Sr. Sub. Notes, 10.500% due 3/1/10........................ 162,313
150,000 NR Dobson Communications Corp., Sr. Notes, 10.875% due
7/1/10.................................................... 151,500
Exodus Communications, Inc., Sr. Notes:
300,000 B 10.750% due 12/15/09...................................... 291,000
100,000 B 11.625% due 7/15/10....................................... 100,750
100,000 BB Global Crossing Ltd., Company Guaranteed, 9.500% due
11/15/09.................................................. 97,000
300,000 B Level 3 Communications, Inc., Sr. Notes, 9.125% due
5/1/08.................................................... 270,750
325,000 B+ McLeodUSA Inc., Sr. Notes, 8.125% due 2/15/09............... 294,125
100,000 B Nextel Communications, Inc., Sr. Notes, 9.375% due
11/15/09.................................................. 96,000
500,000 B- NTL Inc., Sr. Notes, step bond to yield 9.750% due 4/1/08... 313,750
175,000 B- Primus Telecommunications Group, Inc., Sr. Notes, 12.750%
due 10/15/09.............................................. 140,875
300,000 BBB+ Qwest Communications International Inc., Sr. Discount Notes,
step bond to yield 8.290% due 2/1/08...................... 237,000
150,000 B- Viatel, Inc., Sr. Notes, 11.500% due 3/15/09................ 114,750
-----------------------------------------------------------------------------------------------------
3,492,063
-----------------------------------------------------------------------------------------------------
TEXTILES -- 4.8%
600,000 B+ Avondale Mills, Inc., Company Guaranteed, 10.250% due
5/1/06.................................................... 567,000
175,000 B Dan River Inc., Sr. Sub. Notes, 10.125% due 12/15/03........ 170,625
125,000 B Norton Co., Company Guaranteed, 12.500% due 6/1/05.......... 112,500
215,000 B- Supreme International Corp., Company Guaranteed, 12.250% due
4/1/06.................................................... 205,325
425,000 B- Tropical Sportswear International Corp., Company Guaranteed,
11.000% due 6/15/08....................................... 410,125
-----------------------------------------------------------------------------------------------------
1,465,575
-----------------------------------------------------------------------------------------------------
TRANSPORTATION -- 2.8%
325,000 B Atlas Air, Inc., Sr. Notes, 10.750% due 8/1/05.............. 331,905
125,000 BB- Continental Airlines, Inc., Sr. Notes, 9.500% due
12/15/01.................................................. 127,967
400,000 B- Pacer International, Inc., Company Guaranteed, 11.750% due
6/1/07.................................................... 401,000
-----------------------------------------------------------------------------------------------------
860,872
-----------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES (Cost -- $23,948,183)......... 22,255,089
-----------------------------------------------------------------------------------------------------
FOREIGN CORPORATE BOND -- 0.8%
-----------------------------------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 0.8%
250,000 B CHC Helicopter Corp., 11.750% due 7/15/07
(Cost -- $231,523)........................................ 237,254
-----------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------------------
COMMON STOCK -- 0.1%
-----------------------------------------------------------------------------------------------------
HOTELS & MOTELS -- 0.1%
2,250 Prime Hospitality Corp.+ (Cost -- $19,140).................. 21,234
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK -- 4.0%
--------------------------------------------------------------------------------------------------
ENERGY -- 0.7%
2,299 R&B Falcon Corp., 13.875%................................... $ 260,470
--------------------------------------------------------------------------------------------------
INDUSTRIAL -- 0.2%
3,500 Eagle-Picher Industries, Inc., 11.750% Exchangeable
3/1/08.................................................... 88,375
--------------------------------------------------------------------------------------------------
MEDIA/ENTERTAINMENT -- 0.5%
-- Paxson Communications Corp., 12.500% Exchangeable
10/31/06.................................................. 86
--------------------------------------------------------------------------------------------------
TECHNOLOGY -- 0.4%
9,367 Viasystems Group, Inc., Series B, 8.000%+................... 168,611
--------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.2%
5,500 Global Crossing Ltd., 10.500%............................... 532,125
1,850 Rural Cellular Corp., 12.250%............................... 176,213
--------------------------------------------------------------------------------------------------
708,338
--------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $1,114,943).................. 1,225,880
--------------------------------------------------------------------------------------------------
WARRANTS -- 0.3%
2,000 R&B Falcon Corp., Expire 5/1/09 (b)+ (Cost -- $18,868)...... 100,000
--------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $25,332,657)................. 23,839,457
--------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 22.1%
$6,767,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at
maturity -- $6,770,694; (Fully collateralized by U.S.
Treasury Notes, 6.250% due 1/31/02;
Market value -- $6,902,898) (Cost -- $6,767,000)............ 6,767,000
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $32,099,657**)........... $30,606,457
--------------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except for those which
are identified by an asterisk (*), are rated by Moody's Investors Service,
Inc.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
# Security has been issued with attached warrants.
+ Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 22 for definition of bond ratings.
SUMMARY OF BONDS BY COMBINED RATINGS
<TABLE>
<CAPTION>
STANDARD & % OF TOTAL CORPORATE
MOODY'S AND/OR POOR'S BONDS & NOTES
<S> <C> <C>
-------------------------------------------------
Baa BBB 3.9%
Ba BB 15.8
B B 72.7
Caa CCC 5.6
NR NR 2.0
-------------------------------------------------
100.0%
-------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 23
--------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"C" may be modified by the addition of a plus (+) or a minus (-) sign to show
relative standings within the major rating categories.
<TABLE>
<S> <C> <C>
AAA -- Bonds rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issue
only in a small degree.
A -- Bonds rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as
and CCC predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. "BB" represents a lower degree of
speculation than "B", and "CCC" the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
C -- The rating "C" is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated "D" are in default, and payment of interest
and/or repayment of principal is in arrears.
</TABLE>
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3
may be applied to each generic rating from "Aa" to "C", where 1 is the highest
and 3 the lowest rating within its generic category.
<TABLE>
<S> <C> <C>
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa -- Bonds rated "Baa" are considered to be medium grade
obligations; that is, they are neither highly protected nor
poorly secured. Interest payment and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack
outstanding investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long
period of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be
in default, or present elements of danger may exist with
respect to principal or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have
other marked shortcomings.
C -- Bonds rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
</TABLE>
22
<PAGE> 24
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 88.3%
-------------------------------------------------------------------------------------------
ADVERTISING -- 1.2%
676,770 DoubleClick Inc.+........................................... $ 25,801,856
-------------------------------------------------------------------------------------------
BEVERAGE -- 1.4%
534,040 Coca-Cola Co. .............................................. 30,673,923
-------------------------------------------------------------------------------------------
COMMUNICATIONS -- 5.0%
597,710 3Com Corp.+................................................. 34,443,039
662,825 Nextel Communications, Inc.+................................ 40,556,605
519,710 Nortel Networks Corp........................................ 35,470,207
-------------------------------------------------------------------------------------------
110,469,851
-------------------------------------------------------------------------------------------
COMPUTERS -- 4.6%
1,414,190 Apple Computer, Inc.+....................................... 74,068,201
561,730 Dell Computer Corp.+........................................ 27,700,311
-------------------------------------------------------------------------------------------
101,768,512
-------------------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS -- 7.3%
1,491,195 General Electric Co. ....................................... 79,033,335
1,080,580 Time Warner Inc. ........................................... 82,124,080
-------------------------------------------------------------------------------------------
161,157,415
-------------------------------------------------------------------------------------------
DRUGS & HEALTH CARE -- 5.4%
1,036,100 MedImmune, Inc.+............................................ 76,671,400
877,155 Pfizer Inc. ................................................ 42,103,440
-------------------------------------------------------------------------------------------
118,774,840
-------------------------------------------------------------------------------------------
ELECTRONICS -- 10.5%
702,720 EMC Corp.+.................................................. 54,065,520
404,160 General Motors Corp., Class H Shares+....................... 35,465,040
2,036,520 Texas Instruments Inc. ..................................... 139,883,468
-------------------------------------------------------------------------------------------
229,414,028
-------------------------------------------------------------------------------------------
ENTERTAINMENT -- 0.0%
84 Acclaim Entertainment, Inc.+................................ 47
-------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 8.6%
2,171,760 Charles Schwab Corp......................................... 73,025,430
1,400,000 Morgan Stanley Dean Witter & Co............................. 116,550,000
-------------------------------------------------------------------------------------------
189,575,430
-------------------------------------------------------------------------------------------
INSURANCE -- 1.9%
355,191 American International Group, Inc........................... 41,734,972
-------------------------------------------------------------------------------------------
INTERNET -- 12.1%
1,857,200 America Online, Inc.+....................................... 97,967,300
2,032,980 Cisco Systems, Inc.+........................................ 129,221,291
309,510 Yahoo! Inc.+................................................ 38,340,551
-------------------------------------------------------------------------------------------
265,529,142
-------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 25
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL -- 1.9%
842,957 Home Depot, Inc............................................. $ 42,095,190
-------------------------------------------------------------------------------------------
SOFTWARE -- 14.5%
445,900 Intuit Inc.+................................................ 18,449,113
476,215 Microsoft Corp.+............................................ 38,097,200
1,927,710 VERITAS Software Corp.+..................................... 217,861,350
1,029,095 Vodafone AirTouch PLC....................................... 42,643,124
-------------------------------------------------------------------------------------------
317,050,787
-------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 13.9%
501,805 Level 3 Communications, Inc.+............................... 44,158,840
2,956,160 Nokia Oyj, Sponsored ADR.................................... 147,623,240
1,608,175 Sprint PCS Group+........................................... 95,686,412
292,205 Telefonos de Mexico SA de CV................................ 16,692,211
-------------------------------------------------------------------------------------------
304,160,703
-------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $1,064,379,572)................. 1,938,206,696
-------------------------------------------------------------------------------------------
FOREIGN STOCK -- 0.8%
-------------------------------------------------------------------------------------------
UNITED KINGDOM -- 0.8%
4,101,991 Vodafone AirTouch PLC (Cost -- $20,556,905)................. 16,642,701
-------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $1,084,936,477).............. 1,954,849,397
-------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 10.9%
$238,479,000 Morgan Stanley Dean Witter & Co., 6.500% due 7/3/00;
Proceeds at maturity -- $230,608,176; (Fully collateralized by
U.S. Treasury Bonds, 9.250% due 2/15/16; Market value --
$243,294,920) (Cost -- $238,479,000).................. 238,479,000
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $1,323,415,477**)........ $2,193,328,397
-------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 26
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL PAPER -- 93.2%
$4,300,000 Alcoa Inc. matures 7/18/00.................................. 6.60 % $ 4,288,265
5,000,000 American Express Credit Corp. matures 7/6/00................ 6.71 4,997,208
5,000,000 Asset Securitization Corp. matures 7/21/00.................. 6.58 4,983,675
3,300,000 Becton, Dickinson & Co. matures 8/1/00...................... 6.61 3,282,615
5,400,000 Bell Atlantic Financial Corp. matures 7/19/00............... 6.62 5,384,280
5,000,000 The Coca-Cola Co. matures 7/12/00........................... 6.60 4,991,800
5,000,000 Delaware Funding Corp. matures 7/7/00....................... 6.57 4,996,372
5,100,000 Electronic Data Systems Corp. matures 7/5/00................ 6.96 5,098,031
4,500,000 Exxon Asset Management matures 7/3/00....................... 6.90 4,500,000
5,250,000 Ford Motor Credit Co. matures 7/7/00........................ 6.58 5,246,173
3,000,000 The Gap, Inc. matures 8/15/00............................... 6.61 2,976,529
5,000,000 General Dynamics Corp. matures 7/12/00...................... 6.54 4,991,875
5,250,000 General Electric Capital Corp. matures 7/27/00.............. 6.58 5,227,110
5,000,000 General Motors Acceptance Corp. matures 7/14/00............. 6.55 4,990,054
5,370,000 Household Finance Corp. matures 7/3/00...................... 6.90 5,370,000
5,000,000 Morgan Stanley Dean Witter & Co. matures 7/25/00............ 6.62 4,979,894
5,000,000 Newell Co. matures 7/5/00................................... 6.54 4,998,192
5,000,000 Potomac Electric Power Co. matures 7/10/00.................. 6.54 4,993,681
4,600,000 Providian Master Trust matures 7/14/00...................... 6.60 4,590,765
5,300,000 Prudential Funding Co. matures 7/5/00....................... 6.60 5,298,060
3,000,000 Transamerica Finance Corp. matures 7/26/00.................. 6.64 2,987,350
5,000,000 Union Bank of Switzerland matures 7/5/00.................... 6.76 4,998,125
---------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost -- $104,170,054)............... 104,170,054
---------------------------------------------------------------------------------------------------------------
FOREIGN CORPORATE NOTE -- 4.1%
4,600,000 The Goldman Sachs Group, Inc. matures 7/10/00 6.62
(Cost -- $4,594,097)........................................ 4,594,097
---------------------------------------------------------------------------------------------------------------
MEDIUM-TERM NOTE -- 2.7%
3,000,000 Associates Corp. of North America matures 6/15/01 6.77
(Cost -- $3,000,000)........................................ 3,000,000
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $111,764,151**).......... $111,764,151
---------------------------------------------------------------------------------------------------------------
</TABLE>
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 27
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2000
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL MONEY
ASSETS BOND APPRECIATION MARKET
TRUST TRUST FUND PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at cost........................... $289,905,025 $25,332,657 $1,084,936,477 $111,764,151
Repurchase agreements, at cost................. 2,934,000 6,767,000 238,479,000 --
-------------------------------------------------------------------------------------------------------------
Investments, at value.......................... $345,705,128 $23,839,457 $1,954,849,397 $111,764,151
Repurchase agreements, at value................ 2,934,000 6,767,000 238,479,000 --
Cash........................................... 286 652 986 78,077
Dividends and interest receivable.............. 2,208,803 531,895 345,758 2,987
Receivable for securities sold................. 71,700 560,048 -- --
-------------------------------------------------------------------------------------------------------------
TOTAL ASSETS................................... 350,919,917 31,699,052 2,193,675,141 111,845,215
-------------------------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable............... 142,138 12,959 1,373,294 15,389
Administration fees payable.................... 17,093 1,099 109,387 10,751
Payable for securities purchased............... -- 632,495 -- --
Dividends payable.............................. -- -- -- 326,162
Accrued expenses............................... 63,348 15,399 50,106 33,178
-------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.............................. 222,579 661,952 1,532,787 385,480
-------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS................................. $350,697,338 $31,037,100 $2,192,142,354 $111,459,735
-------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital................................ $275,828,754 $32,876,799 $1,326,725,706 $111,459,179
Undistributed net investment income (loss)..... 4,003,642 1,313,344 (387,275) 343
Accumulated net realized gain (loss) from
security transactions, futures contracts and
foreign currencies.......................... 15,064,839 (1,654,533) (4,117,460) 213
Net unrealized appreciation (depreciation) of
investments and foreign currencies.......... 55,800,103 (1,498,510) 869,921,383 --
-------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS................................. $350,697,338 $31,037,100 $2,192,142,354 $111,459,735
-------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING............................... 18,732,018 3,532,587 21,096,423 111,459,179
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE....................... $18.72 $8.79 $103.91 $1.00
-------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 28
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL MONEY
ASSETS BOND APPRECIATION MARKET
TRUST TRUST FUND PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................ $ 3,784,296 $ 1,407,103 $ 6,262,929 $3,335,367
Dividends........................................... 1,227,744 28,875 2,267,359 --
Less: Foreign withholding tax....................... (6,164) -- (186,714) --
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME............................. 5,005,876 1,435,978 8,343,574 3,335,367
-------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)................... 844,646 76,309 7,956,694 175,448
Administration fees (Note 3)........................ 101,357 9,157 636,536 32,561
Audit and legal..................................... 16,409 13,227 17,469 14,275
Shareholder communications.......................... 15,058 4,972 62,938 7,956
Custody............................................. 10,786 4,525 25,690 6,039
Shareholder and system servicing fees............... 7,603 7,636 7,450 8,010
Pricing service fees................................ 2,932 4,226 -- --
Trustees' fees...................................... 1,989 2,074 1,989 2,088
Registration fees................................... -- -- 33,800 --
Other............................................... 994 497 3,179 3,877
-------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES...................................... 1,001,774 122,623 8,745,745 250,254
Less: Expense reimbursement......................... -- -- -- (35,110)
-------------------------------------------------------------------------------------------------------------
NET EXPENSES........................................ 1,001,774 122,623 8,745,745 215,144
-------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS).......................... 4,004,102 1,313,355 (402,171) 3,120,223
-------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCIES (NOTES 4 AND
6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities*)................................... 14,231,791 (302,756) 5,957,151 213
Futures contracts................................ 621,238 -- -- --
Foreign currency transactions.................... -- -- 15,330 --
-------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)............................ 14,853,029 (302,756) 5,972,481 213
-------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of period.............................. 65,550,577 (836,216) 905,748,863 --
End of period.................................... 55,800,103 (1,498,510) 869,921,383 --
-------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION)...................................... (9,750,474) (662,294) (35,827,480) --
-------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS
AND FOREIGN CURRENCIES.............................. 5,102,555 (965,050) (29,854,999) 213
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS..... $ 9,106,657 $ 348,305 $(30,257,170) $3,120,436
-------------------------------------------------------------------------------------------------------------
</TABLE>
* Except for Money Market Portfolio where the net realized gains are only from
the sale of short-term securities.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 29
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL MONEY
ASSETS BOND APPRECIATION MARKET
TRUST TRUST FUND PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).................. $ 4,004,102 $ 1,313,355 $ (402,171) $ 3,120,223
Net realized gain (loss)...................... 14,853,029 (302,756) 5,972,481 213
Change in net unrealized appreciation
(depreciation)............................. (9,750,474) (662,294) (35,827,480) --
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS................................. 9,106,657 348,305 (30,257,170) 3,120,436
-------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income......................... (6,657,840) (2,577,225) (753,152) (3,119,880)
Net realized gains............................ (40,976,421) -- (76,133,308) --
-------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................... (47,634,261) (2,577,225) (76,886,460) (3,119,880)
-------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares.............. 11,660,951 3,800,885 321,919,572 425,275,568
Net asset value of shares issued for
reinvestment of dividends.................. 47,634,261 2,577,225 76,886,460 3,048,691
Cost of shares reacquired..................... (9,508,224) (3,428,682) (14,681,219) (436,834,964)
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS......................... 49,786,988 2,949,428 384,124,813 (8,510,705)
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS............... 11,259,384 720,508 276,981,183 (8,510,149)
NET ASSETS:
Beginning of period........................... 339,437,954 30,316,592 1,915,161,171 119,969,884
-------------------------------------------------------------------------------------------------------------
END OF PERIOD*................................ $350,697,338 $31,037,100 $2,192,142,354 $ 111,459,735
-------------------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net
investment income of:......................... $4,003,642 $1,313,344 $(387,275) $343
-------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 30
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL MONEY
ASSETS BOND APPRECIATION MARKET
TRUST TRUST FUND PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income......................... $ 6,636,925 $ 2,585,031 $ 915,746 $ 3,230,152
Net realized gain (loss)...................... 40,472,567 (471,386) 66,040,552 (256)
Change in net unrealized appreciation
(depreciation)............................. (5,721,663) (884,302) 540,542,954 --
-------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS........ 41,387,829 1,229,343 607,499,252 3,229,896
-------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income......................... (5,732,184) (2,318,362) (1,059,153) (3,229,896)
Net realized gains............................ (17,063,313) -- (30,268,189) --
-------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................... (22,795,497) (2,318,362) (31,327,342) (3,229,896)
-------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares.............. 33,514,225 7,595,331 470,330,702 388,474,577
Net asset value of shares issued for
reinvestment of dividends.................. 22,795,497 2,318,362 31,327,342 3,049,209
Cost of shares reacquired..................... (11,645,774) (6,596,523) (53,529,706) (313,623,231)
-------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS............................... 44,663,948 3,317,170 448,128,338 77,900,555
-------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS.......................... 63,256,280 2,228,151 1,024,300,248 77,900,555
NET ASSETS:
Beginning of year............................. 276,181,674 28,088,441 890,860,923 42,069,329
-------------------------------------------------------------------------------------------------------------
END OF YEAR*.................................. $339,437,954 $30,316,592 $1,915,161,171 $ 119,969,884
-------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income
of:........................................... $6,657,380 $2,577,214 $752,718 --
-------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 31
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund
and Money Market Portfolio (collectively, "Fund(s)") are each a Massachusetts
business trust registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment companies. Shares of the Funds
are offered only to insurance company separate accounts that fund certain
variable annuity and variable life insurance contracts.
The significant accounting policies consistently followed by the Funds are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities for which no sales price were reported and U.S. government and agency
obligations are valued at the mean between the last reported bid and asked
prices or on the basis of quotations received from reputable brokers or other
recognized sources; (c) securities for which market quotations are not available
will be valued in good faith at fair value by or under the direction of the
Board of Trustees; (d) securities maturing within 60 days are valued at cost
plus accreted discount, or minus amortized premium, which approximates value;
(e) securities, other than U.S. government agencies and obligations, that have a
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity; (f) interest income, adjusted
for amortization of premium and accretion of discount, is recorded on the
accrual basis and dividend income is recorded on the ex-dividend date; foreign
dividends are recorded on the ex-dividend date or as soon as practical after the
Fund determines the existence of a dividend declaration after exercising
reasonable due diligence; (g) gains or losses on the sale of securities are
calculated by using the specific identification method; (h) dividends and
distributions to shareholders are recorded on the ex-dividend date; (i) the
accounting records of the Fund are maintained in U.S. dollars. All assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
on the date of valuation. Purchases and sales of securities and income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian; (j) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At December 31, 1999,
reclassifications were made to the capital accounts of the Managed Assets Trust,
High Yield Bond Trust and Capital Appreciation Fund to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, for the High Yield Bond Trust, a portion of
accumulated net realized loss amounting to $748,206 was reclassified to paid-in
capital. Net investment income, net realized gains and net assets were not
affected by this change; (k) the Funds intend to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; and (l)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. DIVIDENDS
Money Market Portfolio declares and records a dividend of substantially all
of its net investment income on each business day. Such dividends are paid or
reinvested on the payable date.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS
Travelers Asset Management International Company LLC ("TAMIC"), an indirect
wholly owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
manager and advisor to the Managed Assets Trust ("MAT"), High Yield Bond Trust
("HYBT"), Capital Appreciation Fund ("CAF") and Money Market Portfolio ("MMP").
MAT, CAF and MMP pay TAMIC an investment management and advisory fee calculated
at the annual rate of 0.50%, 0.75% and 0.3233%, respectively of its average
daily net assets. HYBT pays TAMIC an investment management and advisory fee
calculated at an annual rate of 0.50% on the first $50,000,000, 0.40% on the
next $100,000,000, 0.30% on the next $100,000,000 and 0.25% on the amount over
$250,000,000 of its average daily net assets. This fee is calculated daily and
paid monthly.
TAMIC has a sub-advisory agreement with The Travelers Investment Management
Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary of Citigroup.
Pursuant to the sub-advisory agreement, TIMCO is responsible for the day-to-day
portfolio operations and investment decisions for MAT. As a result, TAMIC pays
TIMCO, as sub-advisor, 0.25% of the average daily net assets of MAT.
30
<PAGE> 32
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
TAMIC also has a sub-advisory agreement with Janus Capital Corporation
("Janus"). Pursuant to the sub-advisory agreement, Janus is responsible for the
day-to-day portfolio operations and investment decisions for CAF. As a result,
TAMIC pays Janus, as sub-advisor, 0.55% of the average daily net assets of CAF.
Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Funds. The Funds pay Travelers Insurance an administration fee calculated
at an annual rate of 0.06% of its average daily net assets. Travelers Insurance
has entered into a sub-administrative services agreement with SSB Citi Fund
Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney Holdings Inc.
("SSBH"). Travelers Insurance pays SSBC, as sub-administrator, a fee calculated
at an annual rate of 0.06% for the average daily net assets of each Fund. This
fee is calculated daily and paid monthly.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney
Private Trust Company, another subsidiary of Citigroup, acts as the Funds
transfer agent. CFTC receives account fees and asset-based fees that vary
according to the size and type of account. During the six months ended June 30,
2000, MAT, HYBT, CAF and MMP each paid transfer agent fees of $2,500 to CFTC.
For the six months ended June 30, 2000, Travelers Insurance reimbursed
expenses of $35,110 for MMP.
For the six months ended June 30, 2000, Salomon Smith Barney Inc. and its
affiliates received brokerage commissions of $12,157.
One Trustee and all officers of the Funds are employees of Citigroup or its
subsidiaries.
4. INVESTMENTS
During the six months ended June 30, 2000, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases................................................... $98,911,958 $11,285,838 $420,743,788
-------------------------------------------------------------------------------------------------------
Sales....................................................... 92,719,134 10,227,751 131,698,183
--------------------------------------------------------------------------------
</TABLE>
At June 30, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation............................... $ 66,208,499 $ 462,263 $969,493,637
Gross unrealized depreciation............................... (10,408,396) (1,955,463) (99,580,717)
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation).................. $ 55,800,103 $(1,493,200) $869,912,920
-------------------------------------------------------------------------------------------------------
</TABLE>
5. REPURCHASE AGREEMENTS
The Funds purchase (and their custodian takes possession of) U.S.
Government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Funds require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
6. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred.
31
<PAGE> 33
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
When the contract is closed, the Funds record a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transactions
and the Funds' basis in the contract.
The Funds enter into such contracts to hedge portions of their respective
portfolios. The Funds bear the market risk that arises from changes in the value
of the financial instruments and securities indices (futures contracts).
At June 30, 2000, the Funds had no open futures contracts.
7. OPTIONS CONTRACTS
Premiums paid when put or call options are purchased by the Funds,
represent investments, which are "marked-to-market" daily. When a purchased
option expires, the Funds will realize a loss in the amount of the premium paid.
When the Funds enter into closing sales transactions, the Funds will realize a
gain or loss depending on whether the proceeds from the closing sales
transactions are greater or less than the premium paid for the option. When the
Funds exercise a put option, they will realize a gain or loss from the sale of
the underlying security and the proceeds from such sale will be decreased by the
premium originally paid. When the Funds exercise a call option, the cost of the
security which the Funds purchase upon exercise will be increased by the premium
originally paid.
At June 30, 2000, the Funds had no open purchased call or put option
contracts.
8. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS
The Funds may trade securities on a "to-be-announced" ("TBA") basis. In a
TBA transaction, the Funds commit to purchasing or selling securities for which
specific information is not yet known at the time of the trade, particularly the
face amount and maturity date in GNMA/FNMA transactions. Securities purchased on
a TBA basis are not settled until they are delivered to the Funds, normally 15
to 45 days later. These transactions are subject to market fluctuations and
their current value is determined in the same manner as for other securities.
At June 30, 2000, the Funds held no TBA securities.
9. CAPITAL LOSS CARRYFORWARD
At December 31, 1999, HYBT had, for Federal income tax purposes,
approximately $705,000 of capital loss carryforwards available to offset future
capital gains. To the extent that these carryforward losses can be used to
offset realized capital gains, it is probable that such gains will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on December 31 of the year indicated:
<TABLE>
<CAPTION>
2000 2001 2002 2004 2007
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Carryforward Amounts.......................... $48,000 $135,000 $38,000 $342,000 $142,000
--------------------------------------------------------------------------------------------------------
</TABLE>
10. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in U.S. companies and the U.S. Government. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. Government.
32
<PAGE> 34
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
MANAGED ASSETS TRUST
Shares sold................................................. 555,076 1,654,617
Share issued on reinvestment................................ 2,556,857 1,187,265
Shares reacquired........................................... (452,845) (581,353)
---------------------------------------------------------------------------------------------------
Net Increase................................................ 2,659,088 2,260,529
---------------------------------------------------------------------------------------------------
HIGH YIELD BOND TRUST
Shares sold................................................. 401,899 776,247
Shares issued on reinvestment............................... 292,866 245,327
Shares reacquired........................................... (363,372) (671,120)
---------------------------------------------------------------------------------------------------
Net Increase................................................ 331,393 350,454
---------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
Shares sold................................................. 2,890,263 5,582,389
Share issued on reinvestment................................ 739,364 400,399
Shares reacquired........................................... (136,118) (626,790)
---------------------------------------------------------------------------------------------------
Net Increase................................................ 3,493,509 5,355,998
---------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
Shares sold................................................. 425,275,568 388,474,577
Share issued on reinvestment................................ 3,048,691 3,049,209
Shares reacquired........................................... (436,834,964) (313,623,231)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... (8,510,705) 77,900,555
---------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST 2000(1) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $21.12 $19.99 $17.65 $14.98 $15.50 $12.85
-----------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income............ 0.21 0.39 0.41 0.48 0.46 0.49
Net realized and unrealized
gain.......................... 0.34 2.30 3.27 2.70 1.50 2.83
-----------------------------------------------------------------------------------------------------------------
Total Income From Operations....... 0.55 2.69 3.68 3.18 1.96 3.32
-----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(2):
Net investment income............ (0.41) (0.39) (0.47) (0.12) (0.89) (0.50)
Net realized gains............... (2.54) (1.17) (0.87) (0.39) (1.59) (0.17)
-----------------------------------------------------------------------------------------------------------------
Total Distributions................ (2.95) (1.56) (1.34) (0.51) (2.48) (0.67)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $18.72 $21.12 $19.99 $17.65 $14.98 $15.50
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN....................... 2.66%++ 14.22% 21.44% 21.31% 13.78% 27.12%
-----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S).......................... $350,697 $339,438 $276,182 $223,870 $188,610 $171,276
-----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)...................... 0.60%+ 0.60% 0.60% 0.63% 0.58% 0.58%
Net investment income............ 2.38+ 2.17 2.30 2.91 3.51 3.49
-----------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............ 28% 51% 74% 90% 108% 110%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND TRUST 2000(1)(4) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $9.47 $9.85 $9.89 $8.49 $9.00 $8.49
-------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income............ 0.36 0.81 0.77 0.76 0.91 0.80
Net realized and unrealized gain
(loss)........................ (0.25) (0.38) (0.13) 0.65 0.41 0.41
-------------------------------------------------------------------------------------------------------------------
Total Income From Operations....... 0.11 0.43 0.64 1.41 1.32 1.21
-------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(2):
Net investment income............ (0.79) (0.81) (0.68) (0.01) (1.83) (0.70)
-------------------------------------------------------------------------------------------------------------------
Total Distributions................ (0.79) (0.81) (0.68) (0.01) (1.83) (0.70)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $8.79 $9.47 $9.85 $9.89 $8.49 $9.00
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN....................... 1.20%++ 4.42% 6.56% 16.56% 16.05% 15.47%
-------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S).......................... $31,037 $30,317 $28,088 $25,272 $17,291 $12,902
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(5)................... 0.81%+ 0.81% 0.82% 0.84% 0.97% 1.25%
Net investment income............ 8.63+ 8.85 8.42 9.04 11.01 9.37
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............ 45% 112% 147% 137% 84% 222%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Distributions from realized gains include both net realized short-term and
long-term capital gains. Prior to 1996 net realized short-term capital gains
were included in distributions from net investment income.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.25%.
(4) Per share amounts have been calculated using the monthly average shares
method.
(5) The ratio of expenses to average net assets reflects an expense
reimbursement by Travelers Insurance in connection with voluntary expense
limitations. Without the expense reimbursement, the ratio of expenses to
average net assets would have been 1.28% for the year ended December 31,
1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
34
<PAGE> 36
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND 2000(1) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $108.80 $72.74 $46.32 $36.72 $33.18 $24.50
---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income
(loss)..................... (0.03) 0.04 0.06 0.19 0.23 0.24
Net realized and unrealized
gain (loss)................ (1.07) 38.08 28.07 9.41 8.49 8.61
---------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations.................... (1.10) 38.12 28.13 9.60 8.72 8.85
---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(2):
Net investment income......... (0.04) (0.07) (0.18) -- (0.41) (0.17)
Net realized gains............ (3.75) (1.99) (1.53) (0.00)* (4.77) --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions............. (3.79) (2.06) (1.71) (0.00)* (5.18) (0.17)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD........................ $103.91 $108.80 $72.74 $46.32 $36.72 $33.18
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.................... (1.02)%++ 53.52% 61.63% 26.14% 28.21% 36.37%
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(MILLIONS).................... $2,192 $1,915 $891 $408 $224 $122
---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)................... 0.83%+ 0.83% 0.85% 0.84% 0.83% 0.85%
Net investment income
(loss)..................... (0.04)+ 0.07 0.18 0.54 0.69 0.84
---------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE......... 7% 37% 53% 89% 84% 124%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO 2000(1) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------------------------------------
Net investment income(4)........ 0.029 0.049 0.049 0.049 0.0412 0.0417
Distributions from net
investment income............. (0.029) (0.049) (0.049) (0.049) (0.0412) (0.0417)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.................... 2.89%++ 4.96% 5.08% 5.03% 4.20% 4.17%
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S)....................... $111,460 $119,970 $42,069 $13,494 $3,543 $1,417
---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(4)(5)............. 0.40%+ 0.37% 0.65% 0.57% 0.78% 1.25%
Net investment income......... 5.83+ 4.96 5.37 5.03 3.72 --
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Distributions from realized gains include both net realized short-term and
long-term capital gains. Prior to 1996 net realized short-term capital gains
were included in distributions from net investment income.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.25% and 0.40% for Capital Appreciation
Fund and Money Market Portfolio, respectively.
(4) Travelers Insurance reimbursed Money Market Portfolio for $35,110, $85,612,
$31,300 and $43,376 in expenses for the six months ended June 30, 2000, the
years ended December 31, 1999, 1997, and 1996, respectively. If expenses
were not reimbursed, the per share decreases of net investment income would
have been $0.001, $0.001, $0.002 and $0.02, respectively, and the actual
expense ratios would have been 0.47%, 0.50%, 1.39% and 1.71%, respectively.
(5) The ratio of expenses to average net assets for 1995 reflects an expense
reimbursement by Travelers Insurance in connection with voluntary expense
limitations. Without the expense reimbursement, the ratio of expenses to
average net assets would have been 7.37% for the year ended December 31,
1995.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
35
<PAGE> 37
SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio ("Portfolio") seeks to select
investments from the point of view of an investor who is primarily concerned
with the highest credit quality, current income and total return. The assets of
the Portfolio will be invested in direct obligations of the United States, its
agencies and instrumentalities. For the six months ended June 30, 2000, the
Portfolio returned 5.16%. In comparison, the Lehman Brothers Government Bond
Index(12) returned 4.97% for the same period. (Past performance is not
indicative of future results.)
The Fed only had one tightening in the second quarter but it was for 50 basis
points. (A basis point is 0.01% or one one-hundredth of a percent.) The Fed has
now tightened by 175 basis points since it began raising the federal funds rate
on June 30, 1999. The short-end of the U.S. Treasury yield curve moved as if the
Fed was done tightening. The 5-year Treasury rallied by 70 basis points after
the Fed tightening. The 5-year Treasury ended the quarter at a yield 15 basis
points lower than when it started.
Moreover, the Treasury yield curve flattened during the quarter. The rally in
the 30-year was more muted than the rally in the 5-year note. Thus, the yield
curve ended the quarter inverted by 28 basis points. The yield curve had started
the quarter 48 basis points inverted (An inverted yield curve is an unusual
situation where short-term interest rates are longer than long-term rates.)
The cumulative Fed action appears to have taken its toll on the economy. While
the first quarter Gross Domestic Product ("GDP")(13) annual economic growth rate
was 5.5%, the second quarter may be substantially slower. Consumer spending
increased only 0.2% in both May and April. Lending indicators were also weak
during the reporting period, and they were unchanged in April and down 1% in
May.
Going forward the Portfolio is nearly even to its benchmark's duration.
(Duration is a common gauge of the price sensitivity of a fixed income asset or
portfolio to a change in interest rates.) As of June 30, 2000, the Portfolio
remained overweighted in spread product and was relatively neutral to the yield
curve.
SOCIAL AWARENESS STOCK PORTFOLIO
The Social Awareness Stock Portfolio ("Portfolio") seeks long-term capital
appreciation by selecting investments, primarily common stocks, that meet the
social criteria established for the Portfolio. The Portfolio's social criteria
currently excludes companies that derive a significant portion of their revenues
from the production of tobacco, tobacco products, alcohol, military defense
related services or gambling services. For the six months ended June 30, 2000,
the Portfolio returned a negative 1.25%. In comparison, the S&P 500 returned a
negative 0.43% for the same period. (Past performance is not indicative of
future results.)
The Portfolio underperformed the benchmark because of the under emphasis the
Portfolio had in technology stocks. The manager believed technology stocks
looked too expensive in his valuation models. The Portfolio's overweight
position in big name retail stocks also contributed to the underperformance of
the Portfolio. In the latter instance, the stocks were surprisingly weak in
price apparently reacting more to the rising trend of interest rates rather than
a continued strong presence by consumers in the first half of the year.
The manager was fairly active from a portfolio management perspective,
initiating almost 100 individual trades, with the emphasis on the buy side as
the manager continued to employ new cash inflows. The relatively modest decline
in values for both the S&P 500 and the Portfolio masked the very volatile nature
of the stock market. It was common to see stocks up or down 25% to 50% in price,
and the Portfolio had its fair share of both.
As the first half of 2000, the manager retained a lighter than market exposure
to the technology sector because the valuations accorded many individual stocks
exceeded the acceptable boundaries of the manager's valuation models. The
Portfolio remained slightly less than fully invested with between 6% and 7% in
cash. On balance, the manager is comfortable with the Portfolio, feeling that it
conforms well to all elements of its investment discipline.
---------------
12 The Lehman Brothers Government Bond Index is a broad-based index of all
public debt obligations of the U.S. government and its agencies that has an
average maturity of roughly nine years. An investor cannot invest directly in
an index.
13 GDP is the market value of the goods and services produced by labor in the
U.S.
36
<PAGE> 38
SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
--------------------------------------------------------------------------------
UTILITIES PORTFOLIO
The Utilities Portfolio ("Portfolio") seeks to provide current income by
investing in equity and debt securities of companies in the utility industries.
For the six months ended June 30, 2000, the Portfolio returned 6.29%. In
comparison, the S&P 500 returned negative 0.43% for the same period. In a
difficult market for both utilities stocks and bonds, the Portfolio continued to
generate competitive performance. (Past performance is not indicative of future
results.)
The first half of the year produced two tales for this Portfolio. The Portfolio
recorded strong absolute investment returns in an otherwise negatively biased
stock market, but the broad diversification across all aspects of the utility
sector hurt the relative performance of the Portfolio. In the long run, the
manager believes investors should have a strong representation in the
telecommunications sector; however, in the most recent period, those stocks
negatively impacted the final results of the Portfolio.
At or near the bottom of the Portfolio's performance roster were stocks such as
WorldCom, Sprint, AT&T and NEXTLINK. At the top of the list were companies in
natural gas and restructuring electric sectors. In the long-term the manager
remains committed to diversification, especially in today's world where fiber
optics is intruding into the gas pipeline universe. Moreover, traditional
electric companies are transforming themselves into energy movers and shakers
and these are, in the views of the manager, solid investment opportunities.
Thank you for your investment in The Travelers Series Trust. We look forward to
continuing to help you pursue your financial goals in the new century.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
July 27, 2000
37
<PAGE> 39
--------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 6/30/00
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
<S> <C>
Six Months Ended 6/30/00+ 5.16%
Year Ended 6/30/00 4.79%
Five Years Ended 6/30/00 6.49%
1/24/92* through 6/30/00 6.92%
CUMULATIVE TOTAL RETURN
----------------------------------------------
1/24/92* through 6/30/00 75.88%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on January
24, 1992, assuming reinvestment of dividends, through June 30,
2000. The Lehman Brothers Government Bond Index is a broad-based
index of all public debt obligations of the U.S. Government and its
agencies and has an average maturity of nine years. The Consumer
Price Index is a measure of the average change in prices over time
in a fixed market basket of goods and services.
[U.S GOVERNMENT SECURITIES PORTFOLIO GRAPH]
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES LEHMAN BROTHERS
PERIOD END PORTFOLIO GOVERNMENT BOND INDEX CONSUMER PRICE INDEX
---------- -------------------------- --------------------- --------------------
<S> <C> <C> <C>
1/24/92 $ 10,000.00 $ 10,000.00 $ 10,000.00
12/92 10,790.00 10,723.00 10,275.00
12/93 11,813.00 11,866.00 10,557.00
12/94 11,147.00 11,464.00 10,640.00
12/95 13,869.00 13,567.00 11,115.00
12/96 14,071.00 13,943.00 11,484.00
12/97 15,846.00 15,280.00 11,579.00
12/98 17,463.00 16,785.00 11,866.00
12/99 16,724.00 16,411.00 12,220.00
6/30/00 17,588.00 17,226.00 12,511.00
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.
--------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- SOCIAL AWARENESS STOCK PORTFOLIO AS OF 6/30/00
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
<S> <C>
Six Months Ended 6/30/00+ (1.25)%
Year Ended 6/30/00 1.55%
Five Years Ended 6/30/00 20.81%
5/1/92* through 6/30/00 16.70%
CUMULATIVE TOTAL RETURN
----------------------------------------------
5/1/92* through 6/30/00 253.18%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on May 1,
1992, assuming reinvestment of dividends, through June 30, 2000.
The Standard & Poor's 500 Index is an unmanaged index composed of
500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the over-the-counter market.
The Consumer Price Index is a measure of the average change in
prices over time in a fixed market basket of goods and services.
[SOCIAL AWARENESS STOCK PORTFOLIO GRAPH]
<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK STANDARD & POOR'S 500
PERIOD END PORTFOLIO INDEX CONSUMER PRICE INDEX
---------- ---------------------- --------------------- --------------------
<S> <C> <C> <C>
5/1/92 $ 10,000.00 $ 10,000.00 $ 10,000.00
12/92 10,950.00 10,673.00 10,157.00
12/93 11,777.00 11,745.00 10,436.00
12/94 11,461.00 11,900.00 10,716.00
12/95 15,285.00 14,509.00 10,988.00
12/96 18,339.00 17,838.00 11,353.00
12/97 23,343.00 23,789.00 11,545.00
12/98 30,875.00 30,626.00 11,731.00
12/99 35,765.00 37,067.00 12,080.00
6/30/00 35,318.00 38,908.00 12,368.00
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.
38
<PAGE> 40
--------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------
<S> <C>
Six Months Ended 6/30/00+ 6.29%
Year Ended 6/30/00 1.81%
Five Years Ended 6/30/00 15.18%
2/4/94* through 6/30/00 13.90%
CUMULATIVE TOTAL RETURN
----------------------------------------------
2/4/94* through 6/30/00 130.24%
+ Total return is not annualized, as it may
not be representative of the total return
for the year.
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on
February 4, 1994, assuming reinvestment of dividends, through June
30, 2000. The Standard & Poor's 500 Index is an unmanaged index
composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and over-the-counter
market. The Consumer Price Index is a measure of the average change
in prices over time in a fixed market basket of goods and services.
[UTILITIES PORTFOLIO GRAPH]
<TABLE>
<CAPTION>
STANDARD & POOR'S
PERIOD END UTILITIES PORTFOLIO 500 INDEX CONSUMER PRICE INDEX
---------- ------------------- ----------------- --------------------
<S> <C> <C> <C>
2/4/94 $ 10,000.00 $ 10,000.00 $ 10,000.00
12/94 10,170.00 10,072.00 10,205.00
12/95 13,149.00 13,852.00 10,464.00
12/96 14,638.00 17,031.00 10,811.00
12/97 18,340.00 22,712.00 10,995.00
12/98 21,880.00 29,240.00 11,171.00
12/99 21,662.00 35,390.00 11,504.00
6/30/00 23,024.00 35,237.00 11,778.00
</TABLE>
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.
39
<PAGE> 41
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 39.8%
U.S. Treasury Notes:
$1,000,000 8.000% due 11/15/21......................................... $ 1,207,180
3,000,000 5.250% due 2/15/29.......................................... 2,662,500
3,000,000 6.125% due 8/15/29.......................................... 3,034,500
4,000,000 6.250% due 5/15/30.......................................... 4,200,000
U.S. Treasury Bonds:
2,000,000 12.000% due 8/15/13......................................... 2,703,120
6,500,000 9.250% due 2/15/16.......................................... 8,423,545
1,000,000 6.125% due 11/15/27......................................... 997,180
9,000,000 U.S. REFCO Strips, zero coupon due 10/15/13................. 3,750,030
1,041,320 U.S. Treasury Inflation Index Bonds, 3.875% due 4/15/29..... 1,038,717
--------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $27,867,805)..... 28,016,772
--------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 53.4%
3,000,000 Federal Home Loan Bank (FHLB) Certificates, 5.705% due
3/2/09...................................................... 2,720,370
Federal Home Loan Mortgage Corp. (FHLMC) Certificates:
2,668,875 8.500% due 6/15/21.......................................... 2,724,084
2,843,050 8.000% due 3/1/27+.......................................... 2,859,028
6,336,454 6.500% due 3/15/28++........................................ 5,910,712
Federal National Mortgage Association (FNMA) Certificates:
1,844,000 8.000% due 7/1/27+.......................................... 1,852,630
2,660,868 6.500% due 12/1/27.......................................... 2,509,518
3,904,997 7.500% due 11/1/29.......................................... 3,851,304
2,000,000 8.500% due 6/1/30........................................... 2,037,500
Government National Mortgage Association (GNMA)
Certificates:
1,455,740 9.000% due 9/15/09++........................................ 1,504,867
591,165 8.500% due 7/15/18++........................................ 606,128
1,363,282 7.000% due 3/15/28++........................................ 1,326,638
6,498,426 6.000% due 2/20/29++........................................ 5,057,758
2,914,728 7.500% due 9/15/29.......................................... 2,895,579
2,000,000 Tennessee Valley Authority Debentures, 6.250% due
12/15/17.................................................... 1,801,680
--------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost -- $39,146,870)........ 37,657,796
--------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.8%
4,772,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at
maturity -- $4,774,602; (Fully collateralized by U.S.
Treasury Notes, 6.250% due 1/31/02; Market value --
$4,868,123) (Cost -- $4,772,000)......................... 4,772,000
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $71,786,675**)........... $70,446,568
--------------------------------------------------------------------------------------
</TABLE>
+ Security is traded on a "to-be-announced" basis (See Note 7).
++ Date shown represents the last in range of maturity dates of mortgage
certificates owned.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 42
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 93.5%
-----------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.5%
8,000 Ford Motor Co. ............................................. $ 344,000
-----------------------------------------------------------------------------------------
BASIC MATERIALS -- 4.3%
44,600 Alcoa Inc. ................................................. 1,293,400
25,000 Engelhard Corp. ............................................ 426,563
20,000 Nucor Corp. ................................................ 663,750
16,000 Praxair, Inc. .............................................. 599,000
-----------------------------------------------------------------------------------------
2,982,713
-----------------------------------------------------------------------------------------
CAPITAL GOODS -- 2.9%
24,500 Anixter International Inc.+................................. 649,250
25,500 Deere & Co. ................................................ 943,500
9,800 Pitney Bowes Inc. .......................................... 392,000
1,047 Visteon Corp. .............................................. 12,701
-----------------------------------------------------------------------------------------
1,997,451
-----------------------------------------------------------------------------------------
COMMUNICATION -- 3.9%
10,000 AT&T Wireless Group......................................... 278,750
24,100 Bell Atlantic Corp.++ ...................................... 1,224,581
6,250 Time Warner Telecom Inc.+................................... 402,344
17,754 WorldCom, Inc.+............................................. 814,465
-----------------------------------------------------------------------------------------
2,720,140
-----------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 17.6%
26,100 Black & Decker Corp. ....................................... 1,026,056
11,400 Convergys Corp. ............................................ 591,375
35,600 Home Depot, Inc. ........................................... 1,777,775
50,000 Interface, Inc. ............................................ 190,625
31,000 Kaufman & Broad Home Corp. ................................. 614,187
16,928 Koninklijke Philips Electronics N.V. ADR.................... 804,080
27,500 Liz Claiborne, Inc. ........................................ 969,375
25,200 Lowe's Cos., Inc. .......................................... 1,034,775
33,000 Office Depot, Inc.+......................................... 206,250
31,200 Reader's Digest Association, Inc. .......................... 1,240,200
37,600 Staples, Inc.+.............................................. 578,100
22,200 Tribune Co. ................................................ 777,000
29,200 Tyco International Ltd. .................................... 1,383,350
19,500 Wal-Mart Stores, Inc. ...................................... 1,123,687
-----------------------------------------------------------------------------------------
12,316,835
-----------------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.9%
18,000 Brinker International, Inc.+................................ 526,500
18,000 Kimberly-Clark Corp. ....................................... 1,032,750
27,400 Kroger Co.+................................................. 604,512
14,800 Newell Rubbermaid Inc. ..................................... 381,100
25,000 Pepsi Bottling Group, Inc. ................................. 729,688
4,800 PepsiCo, Inc. .............................................. 213,300
15,400 Sara Lee Corp. ............................................. 297,412
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 43
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER STAPLES -- 7.9% (CONTINUED)
29,700 SYSCO Corp. ................................................ $ 1,251,113
27,700 Wendy's International, Inc. ................................ 493,406
-----------------------------------------------------------------------------------------
5,529,781
-----------------------------------------------------------------------------------------
ENERGY -- 5.0%
6,600 Anadarko Petroleum Corp. ................................... 325,463
28,626 BP Amoco PLC ADR............................................ 1,619,158
10,600 Coastal Corp. .............................................. 645,275
14,800 Royal Dutch Petroleum Co. ADR............................... 911,125
-----------------------------------------------------------------------------------------
3,501,021
-----------------------------------------------------------------------------------------
FINANCIALS -- 10.0%
24,600 American Express Co. ....................................... 1,282,275
7,640 American International Group, Inc. ......................... 897,700
14,400 Associates First Capital Corp. ............................. 321,300
12,300 Bank of New York Co., Inc. ................................. 571,950
30,450 Chase Manhattan Corp. ...................................... 1,402,603
5,400 Freddie Mac................................................. 218,700
10,000 Hartford Financial Services Group, Inc. .................... 559,375
7,000 Marsh & McLennan Cos., Inc. ................................ 731,063
11,100 PNC Financial Services Group................................ 520,313
13,300 St. Paul Cos., Inc. ........................................ 453,862
-----------------------------------------------------------------------------------------
6,959,141
-----------------------------------------------------------------------------------------
HEALTH CARE -- 10.1%
28,000 Amgen Inc.+................................................. 1,967,000
6,600 C.R. Bard, Inc. ............................................ 317,625
12,700 Johnson & Johnson........................................... 1,293,813
14,100 Medtronic, Inc. ............................................ 702,356
11,600 Merck & Co., Inc. .......................................... 888,850
23,100 Schering-Plough Corp. ...................................... 1,166,550
25,900 Tenet Healthcare Corp. ..................................... 699,300
-----------------------------------------------------------------------------------------
7,035,494
-----------------------------------------------------------------------------------------
PUBLISHING -- 0.9%
11,900 Harcourt General, Inc. ..................................... 647,063
-----------------------------------------------------------------------------------------
TECHNOLOGY -- 21.5%
24,000 America Online, Inc.+....................................... 1,266,000
20,000 Automatic Data Processing, Inc. ............................ 1,071,250
19,500 Cisco Systems, Inc.+........................................ 1,239,469
10,000 Compaq Computer Corp. ...................................... 255,625
15,000 Electronic Data Systems Corp. .............................. 618,750
38,200 EMC Corp.+.................................................. 2,939,012
10,500 Genuity Inc. ............................................... 96,141
500 Infineon Technologies AG ADR................................ 39,625
10,400 Intel Corp. ................................................ 1,390,350
18,500 International Business Machines Corp. ...................... 2,026,906
7,700 Microsoft Corp.+............................................ 616,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 44
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 21.5% (CONTINUED)
10,000 N2H2, Inc.+................................................. $ 50,000
15,000 Oracle Corp.+............................................... 1,260,937
11,500 Solectron Corp. ............................................ 481,562
12,400 Sun Microsystems, Inc.+..................................... 1,127,625
27,100 Xerox Corp. ................................................ 562,325
-----------------------------------------------------------------------------------------
15,041,577
-----------------------------------------------------------------------------------------
TRANSPORTATION -- 2.7%
26,187 Southwest Airlines Co. ..................................... 495,916
16,800 United Parcel Service, Inc., Class B Shares................. 991,200
15,200 USFreightways Corp. ........................................ 373,350
-----------------------------------------------------------------------------------------
1,860,466
-----------------------------------------------------------------------------------------
UTILITIES -- 6.2%
44,200 AES Corp.+.................................................. 2,016,625
17,300 Enron Corp. ................................................ 1,115,850
28,200 The Williams Cos., Inc. .................................... 1,175,588
-----------------------------------------------------------------------------------------
4,308,063
-----------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $48,479,791).................... 65,243,745
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 6.5%
$4,500,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at
maturity -- $4,502,456; (Fully collateralized by
U.S. Treasury Notes, 6.250% due 1/31/02; Market value
-- $4,590,003) (Cost -- $4,500,000)......................... 4,500,000
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $52,979,791**)........... $69,743,745
-----------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 45
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 91.7%
------------------------------------------------------------------------------------------------------
ELECTRIC - UTILITY -- 53.9%
20,000 Allegheny Energy, Inc. .................................................. $ 547,500
30,000 Calpine Corp.+........................................................... 1,972,500
15,000 Cinergy Corp. ........................................................... 381,563
12,106 Dominion Resources, Inc. ................................................ 519,061
30,000 DQE, Inc. ............................................................... 1,185,000
11,000 Duke Energy Corp. ....................................................... 620,125
21,800 Edison International..................................................... 446,900
20,000 Energy East Corp. ....................................................... 381,250
29,000 FirstEnergy Corp. ....................................................... 677,875
20,000 Florida Progress Corp. .................................................. 937,500
10,000 FPL Group, Inc. ......................................................... 495,000
20,000 GPU, Inc. ............................................................... 541,250
20,000 Montana Power Co. ....................................................... 706,250
11,000 New Century Energies, Inc. .............................................. 330,000
53,000 Niagara Mohawk Holdings Inc.+............................................ 738,687
20,000 Nisource Inc. ........................................................... 372,500
30,000 Northeast Utilities...................................................... 652,500
20,000 Northern States Power Co. ............................................... 403,750
14,766 NSTAR.................................................................... 600,792
21,000 PECO Energy Co. ......................................................... 846,562
25,000 Pinnacle West Capital Corp. ............................................. 846,875
10,000 Public Service Enterprise Group Inc. .................................... 346,250
15,000 SCANA Corp. ............................................................. 361,875
36,000 Sierra Pacific Resources................................................. 452,250
10,000 Texas Utilities Co. ..................................................... 295,000
30,000 Unicom Corp. ............................................................ 1,160,625
------------------------------------------------------------------------------------------------------
16,819,440
------------------------------------------------------------------------------------------------------
NATURAL GAS -- 17.0%
16,000 Coastal Corp. ........................................................... 974,000
15,000 Dynegy Inc. ............................................................. 1,024,688
22,000 Energen Corp. ........................................................... 479,875
15,000 MCN Energy Group Inc. ................................................... 320,625
15,000 National Fuel Gas Co. ................................................... 731,250
20,000 Sempra Energy............................................................ 340,000
20,000 Southwest Gas Corp. ..................................................... 350,000
26,000 The Williams Cos., Inc. ................................................. 1,083,875
------------------------------------------------------------------------------------------------------
5,304,313
------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 46
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELEPHONE -- 20.8%
28,450 AT&T Corp. .............................................................. $ 899,731
5,000 AT&T Wireless Group+..................................................... 139,375
10,000 Bell Atlantic Corp.++ ................................................... 508,125
6,975 Covad Communications Group, Inc.+........................................ 112,472
10,000 GTE Corp.++ ............................................................. 622,500
17,000 NEXTLINK Communications, Inc.+........................................... 644,938
12,000 Qwest Communications International Inc.+................................. 596,250
20,000 SBC Communications Inc. ................................................. 865,000
14,000 Sprint Corp. ............................................................ 714,000
30,000 WorldCom, Inc.+.......................................................... 1,376,250
------------------------------------------------------------------------------------------------------
6,478,641
------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $23,030,645)................................. 28,602,394
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
<C> <C> <S> <C>
------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 1.3%
------------------------------------------------------------------------------------------------------
ELECTRIC - UTILITY -- 0.6%
$200,000 A- Arizona Public Service Co., 7.250% due 8/1/23............... 178,250
------------------------------------------------------------------------------------------------------
TELEPHONE -- 0.7%
230,000 A- MCI Communications Corp., 7.750% due 3/23/25................ 216,487
------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $405,157).................... 394,737
------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.0%
2,193,000 CS First Boston Corp., 6.550% due 7/3/00; Proceeds at
maturity -- $2,194,197; (Fully collateralized by U.S.
Treasury Notes, 6.250% due 1/31/02;
Market value -- $2,237,230) (Cost -- $2,193,000)......... 2,193,000
------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $25,628,802**)........... $31,190,131
------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
(a) All ratings are by Standard & Poor's Ratings Service, except for those which
are identified by an asterisk (*), are rated by Moody's Investors Service,
Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 46 for definitions of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 47
--------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"C" may be modified by the addition of a plus (+) or a minus (-) sign to show
relative standings within the major rating categories.
<TABLE>
<S> <C> <C>
AAA -- Bonds rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issue
only in a small degree.
A -- Bonds rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as
and CCC predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. "BB" represents a lower degree of
speculation than "B", and "CCC" the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
C -- The rating "C" is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated "D" are in default, and payment of interest
and/or repayment of principal is in arrears.
</TABLE>
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "C", where 1 is the highest
and 3 the lowest rating within its generic category.
<TABLE>
<S> <C> <C>
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa -- Bonds rated "Baa" are considered to be medium grade
obligations; that is, they are neither highly protected nor
poorly secured. Interest payment and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack
outstanding investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long
period of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be
in default, or present elements of danger may exist with
respect to principal or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have
other marked shortcomings.
C -- Bonds rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
</TABLE>
46
<PAGE> 48
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2000
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost -- $71,786,675,
$52,979,791 and $25,628,802, respectively)........ $70,446,568 $69,743,745 $31,190,131
Cash................................................. 923 166,200 22
Dividends and interest receivable.................... 802,988 37,978 75,833
-------------------------------------------------------------------------------------------------------------
TOTAL ASSETS......................................... 71,250,479 69,947,923 31,265,986
-------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased..................... 4,713,272 -- --
Investment advisory fees payable..................... 17,640 35,665 16,524
Administration fees payable.......................... 3,205 3,399 1,581
Accrued expenses..................................... 10,820 33,726 28,621
-------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................... 4,744,937 72,790 46,726
-------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS....................................... $66,505,542 $69,875,133 $31,219,260
-------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital...................................... $69,547,663 $51,484,154 $23,529,163
Undistributed net investment income.................. 2,109,636 138,726 358,044
Accumulated net realized gain (loss) from security
transactions...................................... (3,811,650) 1,488,299 1,770,724
Net unrealized appreciation (depreciation) of
investments....................................... (1,340,107) 16,763,954 5,561,329
-------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS....................................... $66,505,542 $69,875,133 $31,219,260
-------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING..................................... 5,928,225 2,448,287 1,899,371
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE............................. $11.22 $28.54 $16.44
-------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 49
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................ $ 2,267,425 $ 93,179 $ 36,634
Dividends............................................... -- 306,367 458,725
Less: Foreign withholding tax........................... -- (4,355) --
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................. 2,267,425 395,191 495,359
-------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)....................... 103,803 207,825 99,922
Administration fees (Note 2)............................ 19,122 19,952 9,224
Audit and legal......................................... 16,123 13,310 14,407
Shareholder and system servicing fees................... 7,466 7,343 7,484
Shareholder communications.............................. 2,983 2,935 1,508
Custody................................................. 2,139 2,382 1,631
Trustees' fees.......................................... 1,989 2,006 1,989
Pricing service fees.................................... 417 -- 249
Other................................................... 3,270 589 572
-------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES.......................................... 157,312 256,342 136,986
-------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... 2,110,113 138,849 358,373
-------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE
3):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities):
Proceeds from sales.................................. 49,950,601 12,584,116 4,541,839
Cost of securities sold.............................. 50,785,513 11,008,478 2,687,182
-------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)................................ (834,912) 1,575,638 1,854,657
-------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments:
Beginning of period.................................. (3,259,091) 19,320,275 5,942,842
End of period........................................ (1,340,107) 16,763,954 5,561,329
-------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION).... 1,918,984 (2,556,321) (381,513)
-------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS............................ 1,084,072 (980,683) 1,473,144
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... $ 3,194,185 $ (841,834) $1,831,517
-------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 50
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................ $ 2,110,113 $ 138,849 $ 358,373
Net realized gain (loss)......................... (834,912) 1,575,638 1,854,657
Change in net unrealized appreciation
(depreciation)................................ 1,918,984 (2,556,321) (381,513)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... 3,194,185 (841,834) 1,831,517
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................ (3,702,666) (378,165) (823,875)
Net realized gains............................... -- (844,042) (53,040)
-------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS.................................. (3,702,666) (1,222,207) (876,915)
-------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares................. 12,429,574 6,216,688 3,110,319
Net asset value of shares issued for reinvestment
of dividends.................................. 3,702,666 1,222,207 876,915
Cost of shares reacquired........................ (10,740,908) (3,738,438) (5,135,656)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS....................... 5,391,332 3,700,457 (1,148,422)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS.................. 4,882,851 1,636,416 (193,820)
NET ASSETS:
Beginning of period.............................. 61,622,691 68,238,717 31,413,080
-------------------------------------------------------------------------------------------------------
END OF PERIOD*................................... $ 66,505,542 $69,875,133 $31,219,260
-------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income
of:........................................... $2,109,636 $138,726 $358,044
-------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 51
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
U.S. GOVERNMENT SOCIAL AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................ $ 3,766,648 $ 379,966 $ 823,725
Net realized gain (loss)......................... (2,696,924) 765,721 (30,893)
Change in net unrealized appreciation
(depreciation)................................ (3,730,793) 6,847,079 (754,466)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... (2,661,069) 7,992,766 38,366
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................ (5,416) (185,510) (791,288)
Net realized gains............................... -- (952,059) (1,799,094)
-------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS.................................. (5,416) (1,137,569) (2,590,382)
-------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares................. 14,321,630 22,265,700 6,945,662
Net asset value of shares issued for reinvestment
of dividends.................................. 5,416 1,137,569 2,590,382
Cost of shares reacquired........................ (16,491,880) (1,502,002) (8,479,998)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS....................... (2,164,834) 21,901,267 1,056,046
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS.................. (4,831,319) 28,756,464 (1,495,970)
NET ASSETS:
Beginning of year................................ 66,454,010 39,482,253 32,909,050
-------------------------------------------------------------------------------------------------------
END OF YEAR*..................................... $ 61,622,691 $68,238,717 $31,413,080
-------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income
of:........................................... $3,702,189 $378,042 $823,546
-------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 52
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The U.S. Government Securities, Social Awareness Stock and Utilities
Portfolios (collectively, "Portfolio(s)") are separate investment portfolios of
The Travelers Series Trust ("Trust"). The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company and consists of these
portfolios and 17 other separate investment portfolios: Travelers Quality Bond,
Lazard International Stock, MFS Emerging Growth, Federated High Yield, Federated
Stock, Large Cap, Equity Income, Disciplined Mid Cap Stock, Convertible Bond,
Strategic Stock, Disciplined Small Cap Stock, MFS Mid Cap Growth, MFS Research,
NWQ Large Cap, Jurika & Voyles Core Equity, Zero Coupon Bond Fund Portfolio
Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005 Portfolios. Shares
of the Trust are offered only to insurance company separate accounts that fund
certain variable annuity and variable life insurance contracts. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets; securities for which no sales prices were reported and U.S. Government
and Agency obligations are valued at the mean between the last reported bid and
asked prices or on the basis of quotations received from reputable brokers or
other recognized sources; (c) securities for which market quotations are not
available will be valued in good faith at fair value by or under the direction
of the Board of Trustees; (d) securities maturing within 60 days are valued at
cost plus accreted discount, or minus amortized premium, which approximates
value; (e) securities, other than U.S. government agencies and obligations, that
have a maturity of 60 days or more are valued at prices based on market
quotations for securities of similar type, yield and maturity; (f) interest
income, adjusted for amortization of premium and accretion of discount, is
recorded on the accrual basis and dividend income is recorded on the ex-dividend
date; (g) gains or losses on the sale of securities are calculated by using the
specific identification method; (h) dividends and distributions to shareholders
are recorded on the ex-dividend date; (i) the Portfolios intend to comply with
the requirements of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
(j) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At December 31, 1999, reclassifications were made to the
capital accounts of the U.S. Government Securities Portfolio, Social Awareness
Stock Portfolio and Utilities Portfolio to reflect permanent book/tax
differences and income and gains available for distribution under income tax
regulations. Accordingly, for the Utilities Portfolio, a portion of
undistributed net investment income amounting to $173 and accumulated net
realized losses amounting to $3 was reclassified to paid-in capital. In
addition, for the U.S. Government Securities a portion of undistributed net
investment income amounting to $58 was reclassed to paid in capital. Net
investment income, net realized gains and net assets for each Portfolio were not
affected by these changes; and (k) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS
Travelers Asset Management International Company LLC ("TAMIC"), an indirect
wholly owned subsidiary of Citigroup Inc., ("Citigroup"), acts as investment
manager and advisor to the U.S. Government Securities Portfolio ("USGS"). USGS
pays TAMIC an investment management and advisory fee calculated at the annual
rate of 0.3257% of its average daily net assets. This fee is calculated daily
and paid monthly.
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH") and an indirect wholly owned subsidiary of Citigroup,
acts as investment manager and advisor to the Social Awareness Stock ("SAS") and
Utilities ("Utilities") Portfolios. SAS pays SSBC an investment management and
advisory fee calculated at an annual rate of: 0.65% on the first $50 million,
0.55% on the next $50 million, 0.45% on the next $100 million and 0.40% on
amounts over $200 million of the average daily net assets. Utilities pays SSBC
investment management and advisory fees calculated at an annual rate of 0.65% of
the average daily net assets. These fees are calculated daily and paid monthly.
51
<PAGE> 53
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Portfolios. The Portfolios pay Travelers Insurance an administration fee
calculated at an annual rate of 0.06% of the average daily net assets. Travelers
Insurance has entered into a sub-administrative services agreement with SSBC.
Travelers Insurance pays SSBC, as sub-administrator, a fee calculated at an
annual rate of 0.06% of the average daily net assets of each Portfolio. This fee
is calculated daily and paid monthly.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney
Private Trust Company, another subsidiary of Citigroup, acts as the Portfolios
transfer agent. CFTC receives account fees and asset-based fees that vary
according to the size and type of account. During the six months ended June 30,
2000, USGS, SAS, and Utilities, each paid transfer agent fees of $2,500 to CFTC.
One Trustee and all officers of the Trust are employees of Citigroup or its
subsidiaries.
3. INVESTMENTS
During the six months ended June 30, 2000, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
USGS SAS UTILITIES
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases................................................... $56,992,072 $15,510,805 $ 687,644
----------------------------------------------------------------------------------------------------
Sales....................................................... 49,950,601 12,584,116 4,541,839
--------------------------------------------------------------------------------
</TABLE>
At June 30, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
USGS SAS UTILITIES
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation............................... $ 761,541 $20,179,434 $ 7,671,565
Gross unrealized depreciation............................... (2,101,648) (3,415,480) (2,110,236)
-----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation).................. $(1,340,107) $16,763,954 $ 5,561,329
-----------------------------------------------------------------------------------------------------
</TABLE>
4. REPURCHASE AGREEMENTS
The Portfolios purchase (and their custodian takes possession of) U.S.
Government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolios' basis in the contract.
The Portfolios enter into such contracts to hedge portions of their
respective portfolios. The Portfolios bear the market risk that arises from
changes in the value of the financial instruments and securities indices
(futures contracts).
At June 30, 2000, the Portfolios had no open futures contracts.
52
<PAGE> 54
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. OPTIONS CONTRACTS
Premiums paid when put or call options are purchased by the Portfolios,
represent investments, which are "marked-to-market" daily. When a purchased
option expires, the Portfolios will realize a loss in the amount of the premium
paid. When the Portfolios enter into closing sales transactions, the Portfolios
will realize a gain or loss depending on whether the proceeds from the closing
sales transactions are greater or less than the premium paid for the option.
When the Portfolios exercise a put option, they will realize a gain or loss from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Portfolios exercise a call
option, the cost of the security which the Portfolios purchase upon exercise
will be increased by the premium originally paid.
At June 30, 2000, the Portfolios had no open purchased call or put option
contracts.
7. SECURITIES TRADED ON A TO-BE-ANNOUNCED BASIS
The Portfolios may trade securities on a "to-be-announced" ("TBA") basis.
In a TBA transaction, the Portfolios commit to purchasing or selling securities
for which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA/FNMA transactions.
Securities purchased on a TBA basis are not settled until they are delivered to
the Portfolios, normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner as
for other securities.
As of June 30, 2000, USGS had purchased TBA securities with a total cost of
$4,696,599.
8. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Shares sold................................................. 1,083,995 1,246,566
Shares issued on reinvestment............................... 330,595 484
Shares reacquired........................................... (937,763) (1,427,742)
-------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 476,827 (180,692)
-------------------------------------------------------------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO
Shares sold................................................. 216,985 808,161
Shares issued on reinvestment............................... 43,051 40,998
Shares reacquired........................................... (130,852) (53,531)
-------------------------------------------------------------------------------------------------
Net Increase................................................ 129,184 795,628
-------------------------------------------------------------------------------------------------
UTILITIES PORTFOLIO
Shares sold................................................. 184,358 414,864
Shares issued on reinvestment............................... 52,890 154,823
Shares reacquired........................................... (312,340) (510,525)
-------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... (75,092) 59,162
-------------------------------------------------------------------------------------------------
</TABLE>
9. CAPITAL LOSS CARRYFORWARDS
At December 31, 1999, the USGS had, for Federal income tax purposes,
capital loss carryforwards available to offset future realized gains. To the
extent that these carryforward losses can be used to offset net realized capital
gains, such gains, if any, will not be distributed. The amount of $2,847,000
expires December 31, 2007.
53
<PAGE> 55
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO 2000(1)(2) 1999(2) 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $11.30 $11.80 $11.65 $10.86 $12.43 $10.58
--------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................. 0.34 0.68 0.49 0.58 0.68 0.65
Net realized and unrealized gain
(loss)............................. 0.24 (1.18) 0.70 0.79 (0.52) 1.80
--------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations..... 0.58 (0.50) 1.19 1.37 0.16 2.45
--------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(3):
Net investment income................. (0.66) (0.00)* (0.50) (0.58) (1.55) (0.60)
Net realized gains.................... -- -- (0.54) -- (0.18) --
--------------------------------------------------------------------------------------------------------------------
Total Distributions..................... (0.66) (0.00)* (1.04) (0.58) (1.73) (0.60)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... $11.22 $11.30 $11.80 $11.65 $10.86 $12.43
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 5.16%++ (4.23)% 10.20% 12.62% 1.46% 24.42%
--------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)....... $66,506 $61,623 $66,454 $35,279 $26,009 $28,192
--------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4)........................... 0.50%+ 0.48% 0.45% 0.49% 0.62% 0.56%
Net investment income................. 6.64+ 5.97 5.31 6.10 5.68 5.80
--------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................. 80% 164% 349% 208% 501% 214%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK PORTFOLIO 2000(1)(2) 1999(2) 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $29.42 $25.92 $20.06 $15.76 $14.32 $11.05
--------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(5).............. 0.06 0.13 0.10 0.15 0.31 0.12
Net realized and unrealized gain
(loss)............................. (0.43) 3.93 6.30 4.15 2.42 3.47
--------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations..... (0.37) 4.06 6.40 4.30 2.73 3.59
--------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(3):
Net investment income................. (0.16) (0.09) (0.12) -- (0.43) (0.14)
Net realized gains.................... (0.35) (0.47) (0.42) -- (0.86) (0.18)
--------------------------------------------------------------------------------------------------------------------
Total Distributions..................... (0.51) (0.56) (0.54) -- (1.29) (0.32)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... $28.54 $29.42 $25.92 $20.06 $15.76 $14.32
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................ (1.25)%++ 15.84% 32.27% 27.28% 19.98% 33.37%
--------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)....... $69,875 $68,239 $39,482 $21,013 $11,040 $7,055
--------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(5)(6)........................ 0.77%+ 0.80% 0.84% 0.98% 1.25% 1.25%
Net investment income................. 0.42+ 0.69 0.63 0.97 0.43 0.99
--------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................. 20% 12% 14% 19% 26% 73%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Distributions from realized gains include both net realized short-term and
long-term capital gains. Prior to 1996 net realized short-term capital gains
were included in distributions from net investment income.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.25%.
(5) For the year ended December 31, 1996, The Travelers reimbursed the Social
Awareness Stock Portfolio for $25,093 in expenses. If such fees were not
waived and expenses not reimbursed, the per share decrease of net investment
income would have been $0.06 and the actual expense ratio would have been
1.69%.
(6) The ratio of expenses to average net assets for the year ended December 31,
1995 reflects an expense reimbursement by Travelers Insurance in connection
with voluntary expense limitations. Without the expense reimbursement, the
ratio of expenses to average net assets would have been 1.75%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
54
<PAGE> 56
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
UTILITIES PORTFOLIO 2000(1) 1999(2) 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $15.91 $17.18 $15.29 $12.22 $12.85 $10.17
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.................. 0.22 0.41 0.37 0.46 0.47 0.48
Net realized and unrealized gain
(loss).............................. 0.79 (0.36) 2.33 2.63 0.47 2.44
----------------------------------------------------------------------------------------------------------------------
Total Income From Operations............. 1.01 0.05 2.70 3.09 0.94 2.92
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM(3):
Net investment income.................. (0.45) (0.40) (0.42) (0.01) (0.84) (0.24)
Net realized gains..................... (0.03) (0.92) (0.39) (0.01) (0.73) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions...................... (0.48) (1.32) (0.81) (0.02) (1.57) (0.24)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $16.44 $15.91 $17.18 $15.29 $12.22 $12.85
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................. 6.29%++ (0.08)% 18.21% 25.29% 7.47% 29.29%
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........ $31,219 $31,413 $32,909 $21,413 $18,214 $15,340
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4)............................ 0.89%+ 0.88% 0.80% 1.06% 1.07% 1.25%
Net investment income.................. 2.34+ 2.41 3.06 3.58 3.88 4.29
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................. 2% 10% 51% 68% 39% 25%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Distributions from realized gains include both net realized short-term and
long-term capital gains. Prior to 1996 net realized short-term capital gains
were included in distributions from net investment income.
(4) The ratio of expenses to average net assets for the year ended December 31,
1995 reflects expense reimbursements by Travelers Insurance in connection
with voluntary expense limitations. Without the expense reimbursement, the
ratio of expenses to average net assets would have been 1.27%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
55
<PAGE> 57
Investment Advisers
--------------------
MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CAPITAL APPRECIATION FUND, MONEY
MARKET PORTFOLIO AND
THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC
Hartford, Connecticut
THE TRAVELERS SERIES TRUST: SOCIAL AWARENESS STOCK PORTFOLIO AND UTILITIES
PORTFOLIO
SSB CITI FUND MANAGEMENT LLC
New York, New York
Independent Auditors
---------------------
KPMG LLP
New York, New York
Custodian
----------
PFPC TRUST COMPANY
This report is prepared for the general information of contract owners and is
not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital
Appreciation Fund, Money Market Portfolio, The Travelers Series Trust: U.S.
Government Securities Portfolio, Social Awareness Stock Portfolio or Utilities
Portfolio. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Annuity and Variable
Universal Life Insurance products offered by The Travelers Insurance Company or
Travelers Life & Annuity Company and the Prospectuses for the underlying funds,
which collectively contain all pertinent information, including the applicable
sales commissions.
Printed in U.S.A. VG-181 (Semi-Annual)(8-00)
