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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 18
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17
MANAGED ASSETS TRUST
(Exact name of Registrant)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (203) 277-0111
ERNEST J. WRIGHT
Secretary to the Board of Trustees
Managed Assets Trust
One Tower Square
Hartford, Connecticut 06183
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: ____________________
It is proposed that this filing will become effective (check appropriate box):
____ immediately upon filing pursuant to paragraph (b)
X on May 1, 1995 pursuant to paragraph (b)
____
____ 60 days after filing pursuant to paragraph (a)(i)
____ on ___________ pursuant to paragraph (a)(i)
____ 75 days after filing pursuant to paragraph (a)(ii)
____ on ___________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
____ this Post-Effective Amendment designates a new effective date for a
previously filed post-effective amendment.
AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE REGISTRANT
WERE REGISTERED PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940.
A RULE 24f-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED DECEMBER 31, 1994 WAS
FILED ON FEBRUARY 27, 1995.
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MANAGED ASSETS TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933
ITEM
NO. CAPTION IN PROSPECTUS
- ---- ---------------------
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Fund Description;
Investment Objective and Policies
5. Management of the Fund Board of Trustees; Investment
Advisers; Portfolio Turnover
and Expenses; Additional
Information
6. Capital Stock and Other Securities Fund Description; Dividends and Taxes;
Fund Shares; Pricing Shares
7. Purchase of Securities Being Offered How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Legal Proceedings
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
----------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and Policies;
Investment Restrictions; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Advisory Services;
Other Services Additional Information
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Securities Declaration of Trust
19. Purchase, Redemption and Pricing Valuation of Securities
of Securities Being Offered
20. Tax Status Distributions and Tax Status
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Financial Statements
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
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MANAGED ASSETS TRUST
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 1-800-842-0125
Managed Assets Trust (the "Fund") is a diversified open-end management
investment company (mutual fund) whose goal is high total investment return
through a fully managed investment policy. The Fund has a fully managed
investment policy and invests in common stocks, corporate bonds and money
market instruments.
Shares of the Fund are currently offered without a sales charge only to The
Travelers Fund U for Variable Annuities ("Fund U") and The Travelers Fund UL
for Variable Life Insurance ("Fund UL"), separate accounts of The Travelers
Insurance Company (the "Company" or "Travelers Insurance"). The Fund serves as
one of the investment vehicles for the variable annuity and variable life
insurance contracts issued by the Company. Funds U and UL invest in shares of
the Fund in accordance with allocation instructions received from owners of the
variable annuity and variable life insurance contracts. Such allocation rights
are described further in the accompanying prospectuses for Funds U and UL. The
rights of Funds U and UL as shareholders should be distinguished from the
rights of owners of the variable annuity and variable life insurance contracts.
The term "shareholder" as used herein refers to Funds U and UL or to any other
insurance company separate account that may use shares of the Fund as an
investment vehicle in the future.
This Prospectus concisely sets forth the information about the Fund that you
should know before investing. Please read it and retain it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information dated May 1, 1995 which has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to Travelers
Insurance, Annuity Services 5 SHS, One Tower Square, Hartford, Connecticut
06183-5030, or by calling 1-800-842-0125.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS ISSUED BY TRAVELERS INSURANCE AND
ITS SEPARATE ACCOUNTS. BOTH THIS PROSPECTUS AND THE CONTRACT PROSPECTUS SHOULD
BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
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THIS PAGE INTENTIONALLY LEFT BLANK.
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TABLE OF CONTENTS
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FINANCIAL HIGHLIGHTS .............................3
FUND DESCRIPTION .................................4
INVESTMENT OBJECTIVE AND POLICIES ................4
INVESTMENT RESTRICTIONS ..........................4
INVESTOR CONSIDERATIONS AND RISK FACTORS .........5
BOARD OF TRUSTEES ................................5
INVESTMENT ADVISERS ..............................5
TAMIC .........................................5
Advisory Fees ..............................6
Portfolio Manager ..........................6
TIMCO .........................................6
Sub-Advisory Fees ..........................6
Portfolio Manager ..........................6
SECURITIES TRANSACTIONS .......................6
PORTFOLIO TURNOVER ...............................7
FUND EXPENSES ....................................7
TRANSFER AGENT ...................................7
FUND SHARES ......................................7
HOW TO BUY SHARES ................................7
PRICING SHARES ...................................8
HOW TO REDEEM SHARES .............................8
DIVIDENDS AND TAX STATUS .........................8
LEGAL PROCEEDINGS ................................8
ADDITIONAL INFORMATION ...........................8
EXHIBIT A ........................................9
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FINANCIAL HIGHLIGHTS
MANAGED ASSETS TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
The following information on per share data for the five years ended December
31, 1994, has been audited by Coopers & Lybrand L.L.P, Independent Accountants.
All other periods presented have been audited by the Fund's prior auditors.
Coopers & Lybrand L.L.P.'s report on the per share data for each of the five
years in the period ended December 31, 1994 is contained in the 1994 Annual
Report to Shareholders. The Annual Report, which contains additional performance
information, is incorporated by reference into the Statement of Additional
Information. A copy of the Annual Report can be obtained without charge by
writing to or calling the Company at the address and telephone number listed on
the cover of this Prospectus. The following information should be read in
conjunction with the financial statements contained in the 1994 Annual Report.
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<CAPTION>
DECEMBER 1,
to YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, NOVEMBER 30,
1994 1993 1992 1991 +1990 1989 1988 1987 1986 1986 1985
-------- -------- -------- -------- ------- ------- -------- -------- ------- ------- -------
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PER SHARE DATA
Net asset value,
beginning of year...$ 14.21 $ 14.02 $ 14.78 $ 12.77 $ 13.03 $ 10.25 $ 9.89 $ 11.03 $ 12.07 $ 9.97 $ 8.24
Income from operations
Net investment
income ............ 0.46 0.51 0.64 0.74 0.65 0.52 0.48 0.40 0.04 0.42 0.44
Net gains or losses
on securities
(realized and
unrealized) ....... (0.73) 0.72 0.01 1.91 (0.37) 2.26 0.43 (0.16) (0.23) 2.13 1.55
-------- -------- -------- -------- ------- ------- -------- -------- ------- ------- -------
Total from
investment
operations..... (0.27) 1.23 0.65 2.65 0.28 2.78 0.91 0.24 (0.19) 2.55 1.99
Less distributions
Distributions from
net investment
income and
short-term
realized gains..... (0.67) (0.85) (1.04) (0.64) (0.54) -- (0.55) (0.38) (0.32) (0.45) (0.26)
Distributions from
long-term
realized gains..... (0.42) (0.19) (0.37) -- -- -- -- (1.00) (0.53) -- --
-------- -------- -------- -------- ------- ------- -------- -------- ------- ------- -------
Total
distributions.. (1.09) (1.04) (1.41) (0.64) (0.54) -- (0.55) (1.38) (0.85) (0.45) (0.26)
Net asset value,
end of year .......$ 12.85 $ 14.21 $ 14.02 $ 14.78 $ 12.77 $ 13.03 $ 10.25 $ 9.89 $ 11.03 $ 12.07 $ 9.97
======== ======== ======== ======== ======= ======= ======== ======== ======= ======= =======
TOTAL RETURN* (2.24)% 9.33% 5.14% 21.70% 2.47% 27.12% 9.18% 1.92% 19.05%***19.05%***26.80%***
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of year
(thousands) ........$140,887 $156,767 $148,971 $126,021 $92,464 $84,223 $115,111 $119,866 $72,791 $69,291 $33,919
Ratio of expenses
to average net
assets ............ 0.61%** 0.56%** 0.56%** 0.56%** 0.59%** 0.71% 0.66% 0.67% 0.78%** 0.78% 0.85%
Ratio of net
investment income
to average net
assets ............. 3.59% 3.65% 4.97% 5.49% 5.17% 4.41% 4.55% 3.23% 4.07%*** 3.68% 4.93%
Portfolio turnover
rate**** .......... 97% 86% 112% 141% 123% 56% 105% 140% 3% 88% 101%
<FN>
* Total return is determined by dividing the increase (decrease) in value of
a share during the year, after reflecting the reinvestment of dividends
declared during the year, by the beginning of year share price. Shares in
Fund MA are only sold to Travelers Insurance separate accounts in
connection with the issuance of variable annuity and variable life
insurance contracts. The above return does not reflect the deduction of any
contract charges or fees assessed by Travelers Insurance separate accounts.
** The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by Travelers Insurance in connection
with the voluntary expense limitations. Without the expense
reimbursement, the ratios of operating expenses to average net assets
would have been 0.60%, 0.63%, 0.69% and 0.74% for the years ended
December 31, 1993, 1992, 1991 and 1990 respectively. For the year ended
December 31, 1994, there was no expense reimbursement by Travelers
Insurance in connection with the voluntary expense limitations.
*** Annualized.
**** Portfolio turnover rate for periods ending on or after November 30, 1985
includes certain U.S. Government obligations.
+ On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for the Fund.
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FUND DESCRIPTION
Managed Assets Trust (the "Fund") is registered with the Securities and
Exchange Commission as a diversified open-end management investment company,
commonly known as a mutual fund. The Fund was created under Massachusetts law
as a Massachusetts business trust on August 6, 1982.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide shareholders with a high total
investment return through a fully managed investment policy. To do this, the
Fund adjusts its overall exposure to risk by shifting its investment emphasis
among investments providing alternatives for capital growth, capital stability
and income as market and economic trends change. This fully managed investment
policy makes use of equity, debt, convertible and money market securities. The
Fund expects that over longer periods a larger portion of the Fund's portfolio
will consist of equity securities.
The Fund's investment philosophy is based on the belief that, as in the past,
the structure of the United States economy and its securities markets will
undergo continuous change. Thus, the fully managed approach puts maximum
emphasis on flexibility. Because of the flexibility emphasized in the Fund's
management approach, the Fund may have a high rate of turnover in its portfolio
securities and thus higher costs of securities transactions and brokerage.
Accordingly, the Fund would expect to have turnover in the range of 100% to
300%. The Fund expects that the portfolio turnover rate will be approximately
50% for debt securities, and 200% to 300% for equity securities. A higher
turnover rate should not be interpreted as indicating variation from the stated
investment policy of high total return. Portfolio turnover is expected to
result when the Fund makes a change in its investments from one investment
sector (such as the equity market) to another investment sector (such as the
bond market), as well as in response to redemptions, when the Fund realizes
capital gains, and in response to market conditions. Increased cost to the Fund
may result if the Fund makes a change in the investment sector in which the
greatest proportion of its assets is invested at a time when subsequent market
conditions are unfavorable.
The Fund may invest a limited portion of its assets in bonds which are rated
lower than Baa by Moody's Investors Service, Inc. (Moody's) or BBB by Standard
& Poor's Corporation (S&P) or which, if unrated, are deemed to be of comparable
quality by the Fund's investment adviser. The Fund may not purchase any debt
securities rated B or lower by either service or their equivalent. Bonds which
are rated Baa by Moody's are considered to be medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal 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. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well. Debt rated BBB by S&P is
regarded as having an adequate capacity to pay interest and repay principal.
While it normally exhibits 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 debt in this category than in
higher rated categories. Bonds which are rated lower than Baa by Moody's or
BBB by S&P, but above B by either service, 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 good and bad times over the future. Uncertainty of
position characterizes bonds in this class. TAMIC expects that securities rated
below Baa by Moody's or below BBB by S&P will be primarily subordinated
convertible securities of issuers whose senior debt is rated Baa or higher
by Moody's, BBB or higher by S&P or, in the absence of such ratings, are
deemed to be of comparable quality by TAMIC.
The Fund may invest in money market instruments which mature within one year
of their purchase, and which consist of U.S. government securities; instruments
of banks insured by the Federal Deposit Insurance Corporation which have assets
of at least $1 billion, including U.S. branches of foreign banks and foreign
branches of U.S. banks, such as certificates of deposit, demand and time
deposits and bankers' acceptances; prime commercial paper, including master
demand notes; and repurchase agreements secured by U.S. government securities.
For further information about the types of investments and investment
techniques available to the Fund, including the associated investment risks,
see Exhibit A to this Prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
may not be changed without a vote of a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940, as
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amended. These restrictions and certain other fundamental restrictions are set
forth in the Statement of Additional Information. Unless otherwise stated, all
references to the Fund's assets are in terms of current market value.
The Fund will not: (1) invest more than 25% of its assets in the securities
of a single issuer; (2) borrow money, except that the Fund may borrow money
from banks for temporary or emergency purposes in amounts of up to 10% of its
assets; (3) pledge more than the lesser of the dollar amounts borrowed or 10%
of its assets; (4) invest more than 25% of its assets in the securities of
issuers in the same industry; and (5) invest more than 10% of its assets in
securities for which market quotations are not readily available, including
restricted securities. In addition, a policy which may be changed without
shareholder approval permits the Fund to invest up to 25% of its assets in the
securities of foreign issuers.
The Fund has undertaken to a state insurance authority that so long as the
state authority requires and shares of the Fund are offered for sale to fund
variable life insurance policies in that state, the Fund will comply with
certain foreign security diversification guidelines. These guidelines provide
that: (1) as the percentage of the Fund's net asset value invested in foreign
securities increases, a corresponding increase will be made in the number of
countries in whose securities the Fund invests; and (2) the Fund will invest no
more than 20% of its net asset value in the securities of issuers located in
any one country (other than the United States). Notwithstanding the above, the
guidelines permit the Fund to invest any amount in the securities of issuers
located in the United States, and to invest an additional 15% of its net asset
value in the securities of issuers located in Australia, Canada, France, Japan,
the United Kingdom or Germany. The guidelines also require that American
Depository Receipts be treated as if they were foreign securities. This
undertaking is not a fundamental investment restriction or policy and may be
changed without a vote of shareholders.
INVESTOR CONSIDERATIONS AND RISK FACTORS
The risk inherent in investing in the Fund is that the net asset value will
fluctuate in response to changes in economic conditions, interest rates and the
market's perception of the underlying portfolio securities of the Fund. There
can, of course, be no assurance that the Fund will achieve its investment
objective since there is uncertainty in every investment.
The investment experience of equity investments over time will tend to
reflect levels of stock market prices and dividend payouts. Both are affected
by diverse factors, including not only business conditions and investor
confidence in the economy, but current conditions in a particular industry or
company. The yield on a common stock is not contractually determined. Equity
securities are subject to financial risks relating to the earning stability and
overall financial soundness of an issue. They are also subject to market risks
relating to the effect of general changes in the securities market on the price
of a security.
The yield on debt instruments over a period of time should reflect prevailing
interest rates, which depend on a number of factors, including government
action in the capital markets, government fiscal and monetary policy, needs of
businesses for capital goods for expansion, and investor expectations as to
future inflation. The yield on a particular debt instrument is also affected by
the risk that the issuer will be unable to pay principal and interest.
BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the
Fund. Subject to the provisions of the Declaration of Trust, the business and
affairs of the Fund shall be managed by the Trustees or other parties so
designated by the Trustees. Information relating to the Board of Trustees,
including its members and their compensation, is contained in the Statement of
Additional Information.
INVESTMENT ADVISERS
As described above, the Board of Trustees monitors the activities of those
entities which provide investment advisory services to the Fund. Travelers
Asset Management International Corporation (TAMIC) provides investment advice
and, in general, supervises the management and investment program of the Fund.
The Travelers Investment Management Company (TIMCO) provides sub-advisory
services to the Fund with respect to the Fund's common stock investments,
subject to the supervision of the Board of Trustees and TAMIC.
TAMIC
TAMIC is a registered investment adviser which has provided investment
advisory services since its incorporation in 1978. TAMIC is an indirect wholly
owned subsidiary of Travelers Group Inc., and its principal offices are located
at One Tower Square, Hartford, Connecticut 06183. In addition to providing
investment advice to the Fund, TAMIC also
MAT-5
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acts as investment adviser for other investment companies used to fund variable
products, including The Travelers Timed Bond Account for Variable Annuities,
The Travelers Money Market Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities, Cash Income Trust, High Yield Bond
Trust and the U.S. Government Securities Portfolio of The Travelers Series
Trust. TAMIC also provides investment advice to individual and pooled pension
and profit-sharing accounts, offshore insurance companies affiliated with
Travelers Insurance, and non-affiliated insurance companies, both domestic and
offshore.
ADVISORY FEES
Under its Advisory Agreement with the Fund, TAMIC is paid an amount
equivalent on an annual basis to 0.50% of the average daily net assets of the
Fund. The fee is computed daily and paid weekly.
PORTFOLIO MANAGER
The fixed income investments of the Fund are managed by David A. Tyson, Ph.D.
and CFA, since February 1994. Mr. Tyson is currently Vice President and the
head of the Company's Portfolio Management Group. He directly manages The
Travelers Annuity, Life Surplus and Convertible portfolios. His previous
responsibilities have included managing The Travelers Derivatives,
Mortgage-Backed and Quantitative Investment Groups. Mr. Tyson joined Travelers
Insurance in 1985 and TAMIC in 1994. He previously spent seven years with the
Equitable Investment Management Corporation where he was responsible for
quantitative equity research and new product development.
TIMCO
As stated briefly above, TIMCO has been employed by TAMIC as the Fund's
sub-adviser with respect to the management of the Fund's common stock
investments. TIMCO is a registered investment adviser which has provided
investment advisory services since its incorporation in 1967. TIMCO is an
indirect wholly owned subsidiary of Travelers Group Inc. with principal offices
located at One Tower Square, Hartford, Connecticut 06183. In addition to
serving as sub-adviser to the Fund, TIMCO also acts as investment adviser for
other investment companies used to fund variable products, including The
Travelers Growth and Income Stock Account for Variable Annuities, The Travelers
Timed Growth and Income Stock Account for Variable Annuities, The Travelers
Timed Short-Term Bond Account for Variable Annuities, The Travelers Timed
Aggressive Stock Account for Variable Annuities and Capital Appreciation Fund.
TIMCO also provides investment advice to individual and pooled pension and
profit-sharing accounts, and affiliated companies of Travelers Insurance.
SUB-ADVISORY FEES
For its services under the Sub-Advisory Agreement, TIMCO receives from TAMIC
50% of the investment advisory fees earned by TAMIC.
PORTFOLIO MANAGER
The common stock investments of the Fund are managed by a team of TIMCO's
investment professionals. TIMCO uses a disciplined stock selection process to
review a broad universe of equity securities and identify those that appear
most attractive in terms of relative valuation and earnings momentum. A group
of experienced investment professionals work as a team to select specific
holdings and manage the portfolio according to specific diversification
guidelines.
Effective December 30, 1994, Kent A. Kelley, CFA, became Chief Executive
Officer of TIMCO. Mr. Kelley is responsible for the day-to-day management of
the common stock investments of the Fund, and is responsible for directing the
activities of TIMCO's portfolio management team. Prior to this, Mr. Kelley was
appointed President of TIMCO in November 1992, at which time he became
responsible for management of the Fund. Prior to this appointment as President,
Mr. Kelley was the Executive Vice President in charge of the risk management
group in TIMCO, which managed index funds and other structured investment
strategies.
SECURITIES TRANSACTIONS
Under policies established by the Board of Trustees, TAMIC and TIMCO will
select broker-dealers to execute transactions for the Fund subject to the
receipt of best execution. When selecting broker-dealers to execute portfolio
transactions for the Fund, TAMIC and TIMCO may follow a policy of considering
as a factor the number of shares of the Fund sold by such broker-dealers. In
addition, broker-dealers may from time to time be affiliated with the Fund,
TAMIC, TIMCO or their affiliates.
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The Fund may pay higher commissions to broker-dealers which provide research
services. TAMIC and TIMCO may use these services in advising the Fund, as well
as in advising other clients for which they acts as investment adviser.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rates for the fiscal years ended December 31,
1992, 1993 and 1994 were 112%, 86% and 97%, respectively. High portfolio
turnover may involve correspondingly greater brokerage commissions and other
transaction costs, which would be borne directly by the Fund, as well as
additional realized gains and/or losses to shareholders.
FUND EXPENSES
In addition to the investment advisory fees discussed above, the other
principal expenses of the Fund include the charges and expenses of the transfer
agent, the custodian, the independent auditors, and any outside legal counsel
employed by either the Fund or the Board of Trustees; the compensation for the
disinterested members of the Board of Trustees; the costs of printing and
mailing the Fund's prospectuses, proxy solicitation materials, and annual,
semi-annual and periodic reports; brokerage commissions, interest charges and
taxes; and any registration, filing and other fees payable to government
agencies in connection with the registration of the Fund and its shares under
federal and state securities laws.
Pursuant to a Management Agreement dated May 1, 1993 between the Fund and the
Company, the Company has agreed to reimburse the Fund for the amount by which
the Fund's aggregate annual expenses, including investment advisory fees but
excluding brokerage commissions, interest charges and taxes, exceed 1.25% of
the Fund's average net assets for any fiscal year.
For the fiscal year ended December 31, 1994, the Fund paid .61% of its
average net assets in expenses.
TRANSFER AGENT
Travelers Insurance, One Tower Square, Hartford, Connecticut 06183, serves as
the Fund's transfer agent and dividend disbursing agent.
FUND SHARES
The Fund currently issues one class of shares which participate equally in
dividends and distributions and have equal voting, liquidation and other
rights. When issued and paid for, the shares will be fully paid and
nonassessable by the Fund and will have no preference, conversion, exchange or
preemptive rights.
Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares. Shares are redeemable, transferable and
freely assignable as collateral. There are no sinking fund provisions. (See the
accompanying separate account prospectus for a discussion of voting rights
applicable to purchasers of variable annuity and variable life insurance
contracts.)
Under Massachusetts law it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. However, the Fund's Declaration
of Trust provides that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.
HOW TO BUY SHARES
Shares of the Fund are currently sold only to The Travelers Fund U for
Variable Annuities and The Travelers Fund UL for Variable Life Insurance in
connection with variable annuity and variable life insurance contracts issued
by the Company. Shares of the Fund are not sold to the general public. Fund
shares are sold on a continuing basis, without a sales charge, at the net asset
value next computed after payment is made by the insurance company to the
Fund's custodian. However, the separate accounts to which shares are sold may
impose sales and other charges, as described in the appropriate contract
prospectus.
Although the Fund is not currently aware of any disadvantages to contract
owners of either variable annuity or variable life insurance contracts because
the Fund's shares are available with respect to both products, an
irreconcilable material conflict may conceivably arise between contract owners
of different separate accounts investing in the Fund due
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to differences in tax treatment, management of the Fund's investments, or other
considerations. The Fund's Board of Trustees will monitor events in order to
identify any material conflicts between variable annuity contract owners and
variable life insurance policy owners, and will determine what action, if any,
should be taken in the event of such a conflict.
PRICING SHARES
The net asset value of a Fund share is computed as of the close of trading on
each day on which the New York Stock Exchange is open, except on days when
changes in the value of the Fund's securities do not affect the current net
asset value of its shares. The New York Stock Exchange is currently closed on
weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of the Fund is arrived at by determining the value of the
Fund's assets, subtracting its liabilities, and dividing the result by the
number of shares outstanding.
Current values for the Fund's portfolio securities are determined as follows.
Securities that are traded on a national securities exchange or the
over-the-counter National Market System (NMS) are valued on the basis of the
last sales price on the exchange where primarily traded or on the NMS prior to
the time of the valuation, provided that a sale has occurred and that this
price reflects current market value according to procedures established by the
Board of Trustees. Securities traded in the over-the-counter market, other than
NMS, are valued at the mean of the bid and asked prices at the time of
valuation. Short-term instruments with maturities of sixty days or less
(including all master demand notes) are valued at amortized cost (original
purchase cost as adjusted for amortization of premium or accretion of discount)
which, when combined with accrued interest receivable or amortized discount,
approximates market. Short-term instruments with maturities of more than sixty
days, for which market quotations are readily available, are valued at current
market value. The following are valued at prices deemed in good faith to be
fair under procedures established by the Board of Trustees: (a) securities,
including restricted securities, for which complete quotations are not readily
available; (b) listed securities or those on NMS if, in the Fund's opinion, the
last sales price does not reflect a current market value or if no sale
occurred; and (c) other assets.
HOW TO REDEEM SHARES
Shareholders may redeem Fund shares at the redemption value next determined
after receipt by the Fund of a proper redemption request. The redemption value
is the net asset value adjusted for fractions of a cent and may be more or less
than the shareholder's cost depending upon changes in the value of the Fund's
portfolio securities between purchase and redemption.
The Fund computes the redemption value at the close of the New York Stock
Exchange at the end of the day on which it has received all proper
documentation from the shareholder. Redemption proceeds are normally wired or
mailed either the same or the next business day, but in no event later than
seven days thereafter.
The Fund may temporarily suspend the right to redeem its shares when (1) the
New York Stock Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable; or (4) the Securities and Exchange Commission, for the protection
of shareholders, so orders.
DIVIDENDS AND TAX STATUS
The Fund has qualified and intends to qualify in the future as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for each fiscal year.
Capital gains and dividends are distributed in cash or reinvested in
additional shares of the Fund, without a sales charge. Although purchasers of
variable contracts are not subject to federal income taxes on distributions by
the Fund, they may be subject to state and local taxes and should review the
accompanying contract prospectus for a discussion of the tax treatment
applicable to purchasers of variable annuity and variable life insurance
contracts.
LEGAL PROCEEDINGS
There are no pending material legal proceedings affecting the Fund.
ADDITIONAL INFORMATION
Except as otherwise stated in this Prospectus or as required by law, the Fund
reserves the right to change the terms of the offer stated in this Prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
MAT-8
<PAGE>
EXHIBIT A
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS
AND INVESTMENT TECHNIQUES AVAILABLE TO THE FUND
OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS
The obligations of foreign branches of United States banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected
by governmental action in the country of domicile of the branch (generally
referred to as sovereign risk). In addition, evidences of ownership of such
securities may be held outside the United States and the Fund may be subject to
the risks associated with the holding of such property overseas. Various
provisions of federal law governing domestic branches do not apply to foreign
branches of domestic banks.
OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office. In addition, there may be less publicly
available information about a United States branch of a foreign bank than about
a domestic bank.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund as lender and the issuer as borrower. The Fund
has the right to increase the amount under the note at any time up to the full
amount provided by the note agreement, or to decrease the amount, and the
borrower may repay up to the full amount of the note without penalty. Notes
purchased by the Fund permit the Fund to demand payment of principal and
accrued interest at any time (on not more than seven days notice). Notes
acquired by the Fund may have maturities of more than one year, provided that
(i) the Fund is entitled to payment of principal and accrued interest upon not
more than seven days notice, and (ii) the rate of interest on such notes is
adjusted automatically at periodic intervals which normally will not exceed 31
days but may extend up to one year. The notes will be deemed to have a maturity
equal to the longer of the period remaining to the next interest rate
adjustment or the demand notice period. Because these types of notes are direct
lending arrangements between the lender and the borrower, such instruments are
not normally traded and there is no secondary market for these notes, although
they are redeemable and thus repayable by the borrower at face value plus
accrued interest at any time. Accordingly, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. In connection with master demand notes, TAMIC considers, under
standards established by the Board of Trustees, earning power, cash flow and
other liquidity ratios of the borrower and will monitor the ability of the
borrower to pay principal and interest on demand. These notes are not typically
rated by credit rating agencies. Unless rated, the Fund will invest in them
only if the issuer meets the criteria established for commercial paper.
REPURCHASE AGREEMENTS
Interim cash balances may be invested from time to time in repurchase
agreements with approved counterparties. Approved counterparties are limited to
national banks or reporting broker-dealers meeting the Advisor's credit quality
standards as presenting minimal risk of default. All repurchase transactions
must be collateralized by U.S. Government securities with market value no less
than 102% of the amount of the transaction, including accrued interest.
Repurchase transactions generally mature the next business day but, in the
event of a transaction of longer maturity, collateral will be marked to market
daily and, when required, additional cash or qualifying collateral will be
required from the counterparty.
In executing a repurchase agreement, a portfolio purchases eligible
securities subject to the seller's simultaneous agreement to repurchase them on
a mutually agreed upon date and at a mutually agreed upon price. The purchase
and resale prices are negotiated with the counterparty on the basis of current
short-term interest rates, which may be more or less than the rate on the
securities collateralizing the transaction. Physical delivery or, in the case
of "book-entry" securities, segregation in the counterparty's account at the
Federal Reserve for the benefit of the Portfolio is required to establish a
perfected claim to the collateral for the term of the agreement in the event
the counterparty fails to fulfill its obligation.
MAT-9
<PAGE>
As the securities collateralizing a repurchase transaction are generally of
longer maturity than the term of the transaction, in the event of default by
the counterparty on its obligation, the Portfolio would bear the risks of
delay, adverse market fluctuation and transaction costs in disposing of the
collateral.
FOREIGN SECURITIES
The Fund may invest in securities principally traded in securities markets
outside the United States. While investment in foreign securities is intended
to reduce risk by providing further diversification, such investments involve
sovereign risk in addition to the credit and market risks normally associated
with domestic securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign
brokerage commissions and custodian fees are generally higher than in the
United States. Investments in foreign securities may also be subject to other
risks different from those affecting U.S. investments, including political or
economic developments, expropriation or nationalization of assets, imposition
of withholding taxes on dividend or interest payments and currency blockage
(which would prevent cash from being brought back to the United States). These
risks are carefully considered by the investment adviser prior to the purchase
of these securities.
WHEN-ISSUED SECURITIES
The Fund may, from time to time, purchase new-issue Government or Agency
securities on a "when-issued" or "to be announced" ("TBA") basis ("when-issued
securities"). The prices of such securities will be fixed at the time the
commitment to purchase is made, and may be expressed in either dollar price or
yield maintenance terms. Delivery and payment may be at a future date beyond
customary settlement time. It is the customary practice of the Fund to make
when-issued or TBA purchases for settlement no more than 90 days beyond the
commitment date.
The commitment to purchase a when-issued security may be viewed as a senior
security, and will be marked to market and reflected in the Fund's net asset
value daily from the commitment date. While it is TAMIC's intention to take
physical delivery of these securities, offsetting transactions may be made
prior to settlement, if it is advantageous to do so. The Fund does not make
payment or begin to accrue interest on these securities until settlement date.
In order to invest its assets pending settlement, the Fund will normally invest
in short-term money market instruments and other securities maturing no later
than the scheduled settlement date.
The Fund does not intend to purchase when-issued securities for speculative
or "leverage" purposes. Consistent with Section 18 of the Investment Company
Act of 1940 and the General Policy Statement of the SEC thereunder, when the
Fund commits to purchase a when-issued security, it will identify and place in
a segregated account high-grade money market instruments and other liquid
securities equal in value to the purchase cost of the when-issued securities.
TAMIC believes that purchasing when-issued securities in this manner will be
advantageous to the Fund. However, this practice does entail certain additional
risks, namely the default of the counterparty on its obligations to deliver the
security as scheduled. In this event, the Fund would endure a loss (gain) equal
to the price appreciation (depreciation) in value from the commitment date.
TAMIC employs a rigorous credit quality procedure in determining the
counterparties with which it will deal in when-issued securities, and in some
circumstances, will require the counterparty to post cash or some other form of
security as margin to protect the value of its delivery obligation pending
settlement.
FUTURES CONTRACTS
The Fund may use exchange-traded financial futures contracts as a hedge to
protect against anticipated changes in interest rates or stock prices.
Financial futures contracts consist of stock index futures contracts and
futures contracts on debt securities ("interest rate futures"). A stock index
futures contract is a contractual obligation to buy or sell a specified index
of stocks at a future date for a fixed price. Unlike most other financial
futures, stock index futures require cash settlement on a daily basis. An
interest rate futures contract is a contract to buy or sell specified debt
securities at a future time for a fixed price.
Stock index futures may be used, to a limited extent, to hedge specific
common stocks with respect to market (systematic) risk (involving the market's
assessment of overall economic prospects) as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). Gains and losses on futures contracts employed as hedges
for specific securities will normally be offset by losses or gains,
respectively, on the hedged security.
MAT-10
<PAGE>
Hedging by use of interest rate futures seeks to establish, with more
certainty than would otherwise be possible, the effective rate of return on
portfolio securities. When hedging is successful, any depreciation in the value
of portfolio securities will substantially be offset by appreciation in the
value of the futures position. Conversely, any appreciation in the value of the
portfolio securities will substantially be offset by depreciation in the value
of the futures position. At no time will the Fund's transactions in such
financial futures be employed for speculative purposes.
When a futures contract is purchased, the Fund will set aside, in an
identifiable manner, an amount of cash and cash equivalents equal to the total
market value of the futures contract, less the amount of the initial margin.
Positions taken in the futures market are not normally held to maturity, but
instead are liquidated through offsetting transactions which may result in a
profit or a loss. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the stock index or security and
the same delivery date. If the offsetting purchase price is less than the
original sale price, the Fund realizes a gain; if it is more, the Fund realizes
a loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if less, a loss. While futures
positions taken by the Fund will usually be liquidated in this manner, the Fund
may instead make or take delivery of the underlying securities whenever it
appears economically advantageous for it to do so. In determining gain or loss,
transaction costs must be taken into account. There can be no assurance that
the Fund will be able to enter into an offsetting transaction with respect to a
particular contract at a particular time.
All stock index and interest rate futures contracts will be traded on
exchanges that are licensed and regulated by the Commodity Futures Trading
Commission ("CFTC").
The Fund will not purchase or sell futures contracts for which the aggregate
initial margin exceeds five percent (5%) of the fair market value of its
assets, after taking into account unrealized profits and unrealized losses on
any such contracts it has entered into.
To ensure that its futures transactions meet CFTC standards, the Fund will
enter into futures contracts for hedging purposes only, i.e., for the purposes
or with the intent specified in CFTC regulations and interpretations, subject
to the requirements of the SEC. The Fund will further seek to assure that
fluctuations in the price of any futures contracts that it uses for hedging
purposes will be substantially related to fluctuations in the price of the
securities held by it or which it expects to purchase, or for other risk
reduction strategies, though there can be no assurance the expected result will
always be achieved.
As evidence of its hedging intent, the Fund expects that on seventy-five
percent (75%) or more of the occasions on which it purchases a long futures
contract, it will effect the purchase of securities in the cash market or take
delivery as it closes out a futures position. In particular cases, however,
when it is economically advantageous, a long futures position may be terminated
without the corresponding purchase of securities.
SPECIAL RISKS RELATING TO FUTURES CONTRACTS
While certain futures contracts may be purchased and sold to reduce certain
risks, these transactions may entail other risks. Thus, while the Fund may
benefit from the use of such futures, unanticipated changes in stock price
movements or interest rates may result in a poorer overall performance for the
Fund than if it had not entered into such futures contracts. Moreover, in the
event of an imperfect correlation between the futures position and the
portfolio position which is intended to be protected, the desired protection
may not be obtained and the Fund may be exposed to risk of loss. TAMIC will
attempt to reduce this risk by engaging in futures transactions, to the extent
possible, where, in its judgment, there is a significant correlation between
changes in the prices of the futures contracts and the prices of any portfolio
securities sought to be hedged. Successful use of futures contracts for hedging
purposes is also subject to TAMIC's ability to predict correctly movements in
the direction of the market.
BUYING PUT AND CALL OPTIONS
The Fund may purchase put options on securities held, or on futures contracts
whose price volatility is expected to closely match that of securities held, as
a defensive measure to preserve shareholders' capital when market conditions
warrant. The Fund may purchase call options on specific securities, or on
futures contracts whose price volatility is expected to closely match that of
securities eligible for purchase by the Fund, in anticipation of or as a
substitute for the purchase of the securities themselves. These options may be
listed on a national exchange or executed "over-the-counter" with a
broker-dealer as the counterparty. While TIMCO anticipates that the majority of
option purchases and sales will be executed on a national exchange, put or call
options on specific securities or for non-standard terms are likely to be
executed directly with a broker-dealer when it is advantageous to do so. Option
contracts will be short-term in nature, generally less than nine months in
duration.
MAT-11
<PAGE>
The Fund will pay a premium in exchange for the right to purchase (call) or
sell (put) a specific number of shares of an equity security or futures
contract at a specified price (the strike price) on or before the expiration
date of the option contract. In either case, the Fund's risk is limited to the
option premium paid.
The Fund may sell the put and call options prior to their expiration and
thereby realize a gain or loss. A call option will expire worthless if the
price of the related security is below the contract strike price at the time of
expiration; a put option will expire worthless if the price of the related
security is above the contract strike price at the time of expiration.
Put and call options will be employed for bona fide hedging purposes only.
Liquid securities sufficient to fulfill the call option delivery obligation
will be identified and segregated in an account; deliverable securities
sufficient to fulfill the put option obligation will be similarly identified
and segregated. In the case of put options on futures contracts, portfolio
securities whose price volatility is expected to match that of the underlying
futures contract will be identified and segregated.
WRITING COVERED CALL OPTIONS
The Fund may write or sell covered call options. By writing a call option,
the Fund becomes obligated during the term of the option to deliver the
securities underlying the option upon payment of the exercise price.
The Fund may only write "covered" options. This means that as long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option or in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The principal reason for writing call options is to obtain, through a receipt
of premiums, a greater current return than would be realized on the underlying
securities alone. The Fund receives a premium from writing a call option which
it retains whether or not the option is exercised. By writing a call option,
the Fund might lose the potential for gain on the underlying security while the
option is open.
Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objectives.
COMMERCIAL PAPER RATINGS
The Fund's investments in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation or Prime-1 by Moody's Investors Service, Inc.
These ratings and other money market instruments are described as follows.
Commercial paper rated A-1 by S&P has the following characteristics:
Liquidity ratios are adequate to meet cash requirements. The issuer's long-term
senior debt is rated "A" or better although in some cases "BBB" credits may be
allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or which may arise as a result
of public preparations to meet such obligations. Relative strength or weakness
of the above factors determines how the issuer's commercial paper is rated
within various categories.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the United States Government include a
variety of Treasury securities that differ only in their interest rates,
maturities and dates of issuance. Treasury bills have maturities of one year or
less; Treasury notes have maturities of one to ten years; and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include direct obligations of the United States
Treasury and securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Home Loan
MAT-12
<PAGE>
Banks, Federal Loan Mortgage Corporation, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, The Tennessee Valley Authority,
District of Columbia Armory Board and Federal National Mortgage Association.
Some obligations of United States Government agencies and instrumentalities,
such as Treasury bills and Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
United States; others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the Treasury; still others,
such as bonds issued by the Federal National Mortgage Association, a private
corporation, are supported only by the credit of the instrumentality. Because
the United States Government is not obligated by law to provide support to an
instrumentality which it sponsors, the Fund will invest in the securities
issued by such an instrumentality only when TAMIC determines that the credit
risk with respect to the instrumentality does not make its securities
unsuitable investments. United States Government securities will not include
international agencies or instrumentalities in which the United States
Government, its agencies or instrumentalities participate, such as the World
Bank, the Asian Development Bank or the Inter-American Development Bank, or
issues insured by the Federal Deposit Insurance Corporation.
CERTIFICATES OF DEPOSIT
Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest
to the bearer of the receipt on the date specified on the certificate. The
certificate can usually be traded in the secondary market prior to maturity.
Certificates of deposit will be limited to U.S. dollar-denominated
certificates of United States banks which have at least $1 billion in deposits
as of the date of their most recently published financial statements (including
foreign branches of U.S. banks, U.S. branches of foreign banks which are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation, and savings and loan associations which are insured by the Federal
Deposit Insurance Corporation).
The Fund will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Fund does not
currently intend to purchase such foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by foreign banks.
BANKERS' ACCEPTANCES
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Fund must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.
MAT-13
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
MANAGED ASSETS TRUST
PROSPECTUS
TIC Ed. 5-95
L-11172 Printed in U.S.A.
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MANAGED ASSETS TRUST
MAY 1, 1995
This Statement of Additional Information is not a prospectus but relates to,
and should be read in conjunction with, the Fund's prospectus dated May 1,
1995. A copy of the Prospectus is available from the office of the Fund at The
Travelers Insurance Company, Annuity Services, 5 SHS, One Tower Square,
Hartford, Connecticut 06183-5030.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES...................................1
INVESTMENT RESTRICTIONS.............................................1
VALUATION OF SECURITIES.............................................2
DISTRIBUTIONS AND TAXES.............................................2
TRUSTEES AND OFFICERS...............................................3
DECLARATION OF TRUST................................................4
INVESTMENT ADVISORY SERVICES........................................5
The Investment Adviser......................................5
Advisory Fees...............................................5
The Sub-Adviser.............................................5
REDEMPTIONS IN KIND.................................................5
BROKERAGE...........................................................6
ADDITIONAL INFORMATION..............................................6
FINANCIAL STATEMENTS................................................7
APPENDIX............................................................8
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Managed Assets Trust (the "Fund") is to
provide shareholders with a high total investment return. To do this, the Fund
adjusts its overall exposure to risk by shifting its investment emphasis among
investments providing alternatives for capital growth, capital stability and
income as market and economic trends change.
INVESTMENT RESTRICTIONS
None of the restrictions enumerated in this paragraph may be changed without
a vote of a majority of the Fund's outstanding shares, as defined in the
Investment Company Act of 1940 (the "1940 Act"). The Fund will not:
(1) purchase any securities which are rated lower than BBB by S&P, Baa by
Moody's or, if unrated by such services, are, in TAMIC'S opinion, of
equivalent quality, if as a result more than 10% of the Fund's assets
which are invested in debt securities would be invested in such
securities; or purchase any debt securities rated B or lower by
either service or their equivalent;
(2) purchase any securities (other than securities issued by the United
States Government, its agencies or instrumentalities or securities
which are backed by the full faith and credit of the United States)
of any issuer if as a result more than 5% of its total assets would
be invested in the securities of the issuer, except that up to 25% of
its total assets may be invested without regard to this 5% limitation;
(3) invest in securities of a single issuer if, as a result, the Fund
owns more than 10% of the outstanding voting securities of such issuer;
(4) borrow money, except from banks as a temporary measure in an
amount not to exceed 10% of its total assets to facilitate redemptions
or for emergency or extraordinary purposes, and any such borrowings
will be repaid before additional investments are made;
(5) pledge assets, except to secure indebtedness permitted by restriction
(4) above and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the Fund's total assets;
(6) underwrite securities of other issuers, except that the Fund may
purchase securities from the issuer thereof or others and dispose of
such securities in a manner consistent with its investment objective
and policies;
(7) purchase or sell real estate, except that the Fund may invest
in securities secured by real estate or interests therein or
issued by companies, including real estate investment trusts, which
invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except
transactions involving financial futures contracts in order to limit
transaction and borrowing costs and for hedging purposes;
(9) invest for the purpose of control or management;
(10) purchase securities on margin, except that the Fund may obtain such
short term credits as may be necessary for the clearance of purchases
and sales of securities and place up to 5% of the value of its net
assets in total margin deposits for positions in futures contracts;
(11) make short sales of securities or maintain short positions;
(12) make loans, except that the Fund may purchase or hold debt
obligations and repurchase agreements in a manner consistent with its
investment objective and restrictions;
(13) purchase any security if as a result more than 25% of its total assets
would be invested in a single industry;
(14) purchase securities of other investment companies, except in the open
market and at customary brokerage rates and in no event more than 3%
of the voting securities of any investment company or in connection
with a merger, consolidation, purchase of assets or similar
transaction approved by the Fund's shareholders;
(15) invest more than 10% of its total assets in "restricted securities"
which may not be publicly sold without registration under the
Securities Act of 1933 (the "1933 Act"). If and when the Fund sells
restricted securities, registration under the 1933 Act may be required.
In determining securities subject to the 10% restriction, the Fund will
include, in addition to restricted securities, other securities not
having readily available market quotations.
-1-
<PAGE>
Additional investment restrictions adopted by the Fund, which may be changed
by the Board of Trustees, provide that the Fund may not: (1) invest in
securities of foreign issuers if at the time of acquisition more than 25% of
its total assets, taken at market value, would be invested in such securities;
(2) purchase or sell interests in oil, gas or other mineral exploration or
development programs; (3) invest in warrants if at the time of acquisition more
than 5% of its total assets would be invested in warrants (for the purposes of
this restriction, warrants acquired by the Fund in units or attached to
securities will be deemed to be without value); (4) invest more than 5% of its
total assets in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, and securities
of issuers that are not readily marketable; and (5) purchase or retain
securities of an issuer if, to the knowledge of the Fund, officers, Trustees or
Directors of the Fund or Travelers Asset Management International Corporation
(TAMIC), each owning beneficially more than 0.5% of the securities of such
issuer, own in the aggregate more than 5% of the securities of such issuer, or
such persons or management personnel of the Fund or TAMIC have a substantial
beneficial interest in the securities of such issuer. Portfolio securities of
the Fund may not be purchased from or sold or loaned to TAMIC or any affiliate
thereof or any of its Directors, officers or employees.
The Fund has undertaken to a state insurance authority that, so long as the
state authority requires and shares of the Fund are offered for sale to fund
variable life insurance policies in that state, the Fund will comply with
certain foreign security diversification guidelines. These guidelines provide
that (1) as the percentage of the Fund's net asset value invested in foreign
securities increases, a corresponding increase will be made in the number of
countries in whose securities the Fund invests; and (2) the Fund will invest no
more than 20% of its net asset value in securities of issuers located in any
one country (other than the United States). Notwithstanding the above, these
guidelines permit the Fund to invest any amount in securities of issuers
located in the United States, and an additional 15% of its net asset value in
securities of issuers located in Australia, Canada, France, Japan, the United
Kingdom or Germany. These guidelines require that American Depository Receipts
be treated as if they were foreign securities. This undertaking is not a
fundamental investment restriction or policy and may be changed without a vote
of shareholders.
VALUATION OF SECURITIES
Current value for the Fund's portfolio securities is determined as follows:
Securities that are traded on an established exchange are valued on the basis
of the last sales price on the exchange where primarily traded prior to the
time of valuation. Securities traded in the over-the-counter market, for which
complete quotations are readily available, are valued at the mean of the bid
and asked prices at the time of valuation. Short term money market instruments
having maturities of sixty days or less are valued at amortized cost (original
purchase price as adjusted for amortization of premium or accretion of
discount) which, when combined with accrued interest, approximates market.
Short term money market instruments having maturities of more than sixty days,
for which complete quotations are readily available, are valued at current
market value. The Board of Trustees of the Fund values the following at prices
it deems in good faith to be fair: (1) securities, including restricted
securities, for which complete quotations are not readily available, (2) listed
securities if in the Board's opinion the last sales price does not reflect a
current market value or if no sale occurred, and (3) other assets.
The Fund believes that reliable market quotations generally are not readily
available for purposes of valuing fixed income securities. As a result,
depending on the particular securities owned by the Fund, it is likely that
most of the valuations for such securities will be based upon their fair value
determined under procedures which have been approved by the Trustees. The Board
of Trustees has authorized the use of a pricing service to determine the fair
value of its fixed income securities and certain other securities. Securities
for which market quotations are readily available are valued on a consistent
basis at that price quoted which, in the opinion of the Trustees or the person
designated by the Trustees to make the determination, most nearly represents
the market value of the particular security. Any securities for which market
quotations are not readily available or other assets are valued on a consistent
basis at fair value as determined in good faith using methods prescribed by the
Trustees.
DISTRIBUTIONS AND TAXES
It is the Fund's intention to distribute dividends from net investment income
and all net realized capital gains annually in shares or, at the option of the
shareholder, in cash.
When the Fund makes a distribution, it intends to distribute only its net
capital gains and such income as has been predetermined to the best of the
Fund's ability to be taxable as ordinary income. Therefore, net investment
income distributions will not be made on the basis of distributable income as
computed on the Fund's books, but will be made on a federal taxation basis.
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<PAGE>
If the Fund qualifies as a regulated investment company, shareholders will
not be subject to federal income taxes on distributions by the Fund but may be
subject to state and local taxes. See the accompanying separate account
prospectus for a discussion of the tax treatment applicable to purchasers of
variable annuity and variable life insurance contracts.
TRUSTEES AND OFFICERS
Name Present Position and Principal Occupation During Last Five Years
- ---- ----------------------------------------------------------------
*Heath B. McLendon
Chairman and Member
388 Greenwich Street
New York, New York
Age 61
Managing Director (1993-present), Smith Barney Inc. (Smith Barney); Chairman
(1993-present), Smith Barney Strategy Advisors, Inc.; President (1994-present),
Smith Barney Mutual Funds Management Inc.; Chairman and/or Director and
President of thirty investment companies associated with Smith Barney;
Chairman, Board of Trustees, Drew University; Trustees, The East New York
Savings Bank; Advisory Director, First Empire State Corporation; Chairman,
Board of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Chairman, Board of Trustees, five Mutual Funds sponsored by
The Travelers Insurance Company.++
Knight Edwards
Member
2700 Hospital Trust Tower
Providence, Rhode Island
Age 71
Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell, Attorneys;
Member, Advisory Board, (1973-1994) thirty-one mutual funds sponsored by
Keystone Group, Inc.; Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Robert E. McGill, III
Member
One Elm Street
Windsor Locks, Connecticut
Age 63
Director (1983-present), Executive Vice President (1989-1994), Senior Vice
President, Finance and Administration (1983-1989), The Dexter Corporation
(manufacturer of specialty chemicals and materials); Vice Chairman (1990-1992),
Director (1983-present), Life Technologies, Inc. (life science/present
products); Director (1993-present), Analytical Technology, Inc. (manufacturer
of measurement instruments); Director (1994-present), The Connecticut Surety
Corporation (insurance); Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Lewis Mandell
Member
368 Fairfield Road, U41F
Storrs, Connecticut
Age 52
Professor of Finance (1980-present) and Associate Dean (1993-present), School
of Business Administration, and Director, Center for Research and Development
in Financial Services (1980-present), University of Connecticut; Director
(1992-present), GZA Geoenvironmental Tech, Inc. (engineering services); Member,
Board of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers
Insurance Company.++
Frances M. Hawk
Member
222 Berkeley Street
Boston, Massachusetts
Age 47
Portfolio Manager (1992-present), HLM Management Company, Inc. (investment
management); Assistant Treasurer, Pensions and Benefits Management (1989-1992),
United Technologies Corporation (broad-based designer and manufacturer of high
technology products); Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Ernest J. Wright
Secretary to the Board
One Tower Square
Hartford, Connecticut
Age 54
Assistant Secretary (1994-present), Counsel (1987-present), The Travelers
Insurance Company; Secretary, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Secretary, Board of
Trustees, five Mutual Funds sponsored by The Travelers Insurance Company.++
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Ian R. Stuart
Treasurer
One Tower Square
Hartford, Connecticut
Age 38
Vice President and Financial Officer, Financial Services Department
(1994-present), Second Vice President and Financial Officer, Financial Services
Department (1991-1994), The Travelers Insurance Company; Senior Manager
(1986-1991), Price Waterhouse; Treasurer, Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance Company.++
+ These seven Variable Annuity Separate Accounts are: The Travelers
Growth and Income Stock Account for Variable Annuities, The Travelers Quality
Bond Account for Variable Annuities, The Travelers Money Market Account for
Variable Annuities, The Travelers Timed Growth and Income Stock Account for
Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable Annuities
and The Travelers Timed Bond Account for Variable Annuities.
++ These five Mutual Funds are: Capital Appreciation Fund, Cash Income
Trust, High Yield Bond Trust, Managed Assets Trust and The Travelers Series
Trust.
* Mr. McLendon is an "interested person" within the meaning of the 1940
Act by virtue of his position as director of TIMCO which serves as sub-adviser
to the Fund. Mr. McLendon also owns shares and options to purchase shares of
Travelers Group Inc., the indirect parent of The Travelers Insurance Company.
The Dexter Corporation, of which Mr. McGill is a director, entered into
contracts with The Travelers Insurance Company to provide short-term disability
and life insurance benefits to employees of The Dexter Corporation, and to
administer the health and dental benefits programs for employees of The Dexter
Corporation.
Members of the Board of Trustees who are also officers or employees of
Travelers Group Inc. or its subsidiaries are not entitled to any fee. Members
of the Board of Trustees who are not affiliated as employees of Travelers Group
Inc. or its subsidiaries receive an aggregate annual retainer of $10,000 for
service on the Boards of the five Mutual Funds sponsored by The Travelers
Insurance Company and the seven Variable Annuity Separate Accounts established
by The Travelers Insurance Company. They also receive an aggregate annual fee
of $1,800 for each meeting of such Boards attended.
DECLARATION OF TRUST
The Fund is organized as a Massachusetts business trust. Pursuant to certain
decisions of the Supreme Judicial Court of Massachusetts, shareholders of such
a trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, even if the Fund were held to be a
partnership, the possibility of its shareholders incurring financial loss for
that reason appears remote because the Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or the Trustees, and because
the Declaration of Trust provides for indemnification out of Fund property for
any shareholder held personally liable for the obligations of the Fund.
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, a Trustee
shall not be liable for the neglect or wrongdoing of any such person; provided,
however, that nothing in the Declaration of Trust shall protect a Trustee
against any liability for his willful misfeasance, bad faith, gross negligence
or the reckless disregard of his duties.
Shareholders first elected Trustees at a meeting held on April 23, 1984, and
most recently elected Trustees on April 23, 1993. No further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, and unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law and may appoint successor
Trustees. Trustees may voluntarily resign from office, or a Trustee may be
removed from office (1) at any time by two-thirds vote of the Trustees; (2) by
a majority vote of Trustees where any Trustee becomes mentally or physically
incapacitated; and (3) either by declaration in writing or at a meeting called
for such purpose by the holders of not less than two-thirds of the outstanding
shares or other voting interests of the Fund. The Trustees are required to call
a meeting for the purpose of considering the removal of a person serving as
trustee, if requested in writing to do so by the holders of not less than 10%
of the outstanding shares or other voting interests of the Fund. The Fund is
required to assist in Shareholders' communications. In accordance with current
laws, insurance companies using the Fund as an underlying investment option
within their variable contract will request voting instructions from contract
owners participating in such contracts, and will vote shares of the Fund in the
same proportion as the voting instructions received.
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<PAGE>
Voting rights are not cumulative, so that the holders of more than 50% of the
shares voting on the election of Trustees can, if they choose to do so, elect
all of the Trustees of the Fund, in which event the holders of the remaining
shares will be unable to elect any person as a Trustee.
No amendment may be made to the Declaration of Trust without a "vote of a
majority of the outstanding voting securities" of the Fund (as defined in the
1940 Act).
INVESTMENT ADVISORY SERVICES
THE INVESTMENT ADVISER
Travelers Asset Management International Corporation (TAMIC), an indirect
wholly-owned subsidiary of Travelers Group Inc., furnishes investment
management and advisory services to the Fund in accordance with the terms of an
Investment Advisory Agreement which was approved by shareholders on April 23,
1993.
As required by the 1940 Act, the Advisory Agreement will continue in effect
for a period more than two years from the date of its execution only so long as
its continuance is specifically approved at least annually (i) by a vote of a
majority of the Board of Trustees, or (ii) by a vote of a majority of the
outstanding voting securities of the Fund. In addition, and in either event,
the terms of the Advisory Agreement must be approved annually by a vote of a
majority of the Board of Trustees who are not parties to, or interested persons
of any party to, the Advisory Agreement, cast in person at a meeting called for
the purpose of voting on such approval and at which the Board of Trustees is
furnished such information as may be reasonably necessary to evaluate the terms
of the Advisory Agreement. The Advisory Agreement further provides that it will
terminate automatically upon assignment; may be amended only with prior
approval of a majority of the outstanding voting securities of the Fund; may be
terminated without the payment of any penalty at any time upon sixty days'
notice by the Board of Trustees or by a vote of a majority of the outstanding
voting securities of the Fund; and may not be terminated by TAMIC without prior
approval of a new investment advisory agreement by a vote of a majority of the
outstanding voting securities of the Fund.
Under the terms of the Advisory Agreement, TAMIC shall:
(1) obtain and evaluate pertinent economic, statistical and
financial data and other information relevant to the investment
policy of the Fund, affecting the economy generally and individual
companies or industries, the securities of which are included in the
Fund's portfolio or are under consideration for inclusion therein;
(2) be authorized to purchase supplemental research and other
services from brokers at an additional cost to the Fund;
(3) regularly furnish recommendations to the Board of Trustees with
respect to an investment program for approval, modification or
rejection by the Board of Trustees;
(4) take such steps as are necessary to implement the investment
program approved by the Board of Trustees; and
(5) regularly report to the Board of Trustees with respect to
implementation of the approved investment program and any other
activities in connection with the administration of the assets of
the Fund.
ADVISORY FEES
For furnishing investment management and advisory services to the Fund, TAMIC
is paid an amount equivalent on an annual basis to 0.50% of the average daily
net assets of the Fund. The fee is computed daily and paid monthly. For the
three years ended December 31, 1992, 1993 and 1994 the advisory fees were
$679,671, $790,843 and $738,883, respectively.
THE SUB-ADVISER
The Travelers Investment Management Company (TIMCO), an indirect wholly owned
subsidiary of Travelers Group Inc., serves as sub-adviser to the Fund with
respect to its common stock investments pursuant to the terms of a Sub-Advisory
Agreement between TAMIC and TIMCO. The Sub-Advisory Agreement, which was
approved by shareholders of the Fund at a meeting held on April 23, 1993,
provides that TIMCO will receive from TAMIC a fee equal to 50% of the advisory
fee earned by TAMIC for its services as sub-adviser. For the fiscal years ended
December 31, 1993 and 1994, TIMCO received $395,537 and $369,442, respectively,
in advisory fees.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for
all redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property.
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<PAGE>
However, the Fund has obligated itself under the 1940 Act to redeem for cash
all shares presented for redemption by any one shareholder up to $250,000, or
1% of the Fund's net assets if that is less, in any 90-day period. Securities
delivered in payment of redemptions would be valued at the same value assigned
to them in computing the net asset value per share. Shareholders receiving such
securities would incur brokerage costs when these securities are sold.
BROKERAGE
Subject to approval of the Board of Trustees, it is the policy of TAMIC and
TIMCO, in executing transactions in portfolio securities, to seek best
execution of orders at the most favorable prices. The determination of what may
constitute best execution and price in the execution of a securities
transaction by a broker involves a number of considerations, including, without
limitation, the overall direct net economic result to the Fund, involving both
price paid or received and any commissions and other cost paid, the efficiency
with which the transaction is effected, the ability to effect the transaction
at all where a large block is involved, the availability of the broker to stand
ready to execute potentially difficult transactions in the future, and the
financial strength and stability of the broker. Such considerations are
judgmental and are weighed by management in determining the overall
reasonableness of brokerage commissions paid. Subject to the foregoing, a
factor in the selection of brokers is the receipt of research services,
analyses and reports concerning issuers, industries, securities, economic
factors and trends, and other statistical and factual information. Any such
research and other statistical and factual information provided by brokers,
TAMIC or TIMCO is considered to be in addition to and not in lieu of services
required to be performed by TAMIC under its Investment Advisory Agreement, or
by TIMCO under the Sub-Advisory Agreement with TAMIC. The cost, value and
specific application of such information are indeterminable and hence are not
practicably allocable among the Fund and other clients of TAMIC or TIMCO who
may indirectly benefit from the availability of such information. Similarly,
the Fund may indirectly benefit from information made available as a result of
transactions for such clients.
Purchases and sales of bonds and money market instruments will usually be
principal transactions and will normally be purchased directly from the issuer
or from the underwriter or market maker for the securities. There usually will
be no brokerage commissions paid for such purchases. Purchases from the
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include the spread between
the bid and asked prices. Where transactions are made in the over-the-counter
market, the Fund will deal with primary market makers unless more favorable
prices are otherwise obtainable. Brokerage fees will be incurred in connection
with futures transactions, and the Fund will be required to deposit and
maintain funds with brokers as margin to guarantee performance of future
obligations.
TAMIC and TIMCO may follow a policy of considering the sale of shares of the
Fund a factor in the selection of broker-dealers to execute portfolio
transactions, subject to the requirements of best execution described above.
The policy of TAMIC and TIMCO with respect to brokerage is and will be
reviewed by the Board of Trustees periodically. Because of the possibility of
further regulatory developments affecting the securities exchanges and
brokerage practices generally, the foregoing practices may be changed, modified
or eliminated.
The total brokerage commissions paid by the Fund for the fiscal years ended
December 31, 1992, 1993 and 1994 were $450,890, $330,394 and $374,918,
respectively. For the fiscal year ended December 31, 1994, portfolio
transactions in the amount of $177,929,724 were placed with certain brokers
because of research services, of which $252,121 was paid in commissions with
respect to such services. No formula was used in placing such transactions and
no specific amount of transactions was allocated for research services. No
brokerage business was placed with any brokers affiliated with TAMIC or TIMCO
during the past three fiscal years.
ADDITIONAL INFORMATION
The Travelers Insurance Company (the "Company") acts as transfer agent and
dividend disbursing agent for the Fund. The Company is a stock insurance
company chartered in 1864 in Connecticut and continuously engaged in the
insurance business since that time. The Company is a wholly owned subsidiary of
The Travelers Insurance Group Inc., which is indirectly owned, through a wholly
owned subsidiary, by Travelers Group Inc. On April 1, 1995, the Company owned
100% of the Fund's outstanding shares. The Company's Home Office is located at
One Tower Square, Hartford, Connecticut 06183, telephone (203) 277-0111.
Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York, New
York 11245, is the custodian of all securities and cash of the Fund.
Coopers & Lybrand L.L.P., Independent Accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for the Fund. The services
provided to the Fund include primarily the examination of the Fund's financial
statements.
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<PAGE>
The financial statements included or incorporated by reference in
the Prospectus, Statement of Additional Information and Registration Statement
have been audited by Coopers & Lybrand L.L.P., as indicated in their report
thereon, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing.
Except as otherwise stated in its prospectus or as required by law, the Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information or
to make any representation not contained in the Fund's prospectus, this
Statement of Additional Information or any supplemental sales literature issued
by the Fund, and no person is entitled to rely on any information or
representation not contained therein.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Fund's registration statement filed with
the Securities and Exchange Commission which may be obtained from the
Commission's principal office in Washington, D.C. upon payment of the fee
prescribed by the Rules and Regulations promulgated by the Commission.
FINANCIAL STATEMENTS
The financial statements contained in the Fund's December 31, 1994 Annual
Report to Shareholders are incorporated herein by reference. A copy may be
obtained by writing to The Travelers Insurance Company, Annuity Services -- 5
SHS, One Tower Square, Hartford, Connecticut 06183-5030, or by calling
1-800-842-0125.
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<PAGE>
APPENDIX
COMMON AND PREFERRED STOCK RATINGS
MOODY'S COMMON STOCK RATINGS
Moody's Investors Service, Inc. (Moody's) presents a concise statement of the
important characteristics of a company and an evaluation of the grade (quality)
of its common stock. Data presented includes: (a) capsule stock information
which reveals short and long term growth and yield afforded by the indicated
dividend, based on a recent price; (b) a long term price chart which shows
patterns of monthly stock price movements and monthly trading volumes; (c) a
breakdown of a company's capital account which aids in determining the degree
of conservatism or financial leverage in a company's balance sheet; (d) interim
earnings for the current year to date, plus three previous years; (e) dividend
information; (f) company background; (g) recent corporate developments; (h)
prospects for a company in the immediate future and the next few years; and (i)
a ten year comparative statistical analysis.
This information provides investors with information on what a company does,
how it has performed in the past, how it is performing currently and what its
future performance prospects appear to be.
These characteristics are then evaluated and result in a grading, or
indication of quality. The grade is based on an analysis of each company's
financial strength, stability of earnings and record of dividend payments.
Other considerations include conservativeness of capitalization, depth and
caliber of management, accounting practices, technological capabilities and
industry position. Evaluation is represented by the following grades:
(1) High Grade
(2) Investment Grade
(3) Medium Grade
(4) Speculative Grade
MOODY'S PREFERRED STOCK RATINGS
Preferred stock ratings and their definitions are as follows:
1. aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
2. aa: An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
3. a: An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
4. baa: An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
5. ba: An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
6. b: An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
7. caa: An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.
8. ca: An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
9. c: This is the lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating classification:
the modifier 1 indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a midrange ranking, and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
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<PAGE>
CORPORATE BOND RATINGS
S&P CORPORATE BOND RATINGS
A Standard & Poor's Corporation (S&P) corporate bond rating is a current
assessment of the creditworthiness of an obligor, including obligors outside
the United States, with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers, or lessees.
Ratings of foreign obligors do not take into account currency exchange and
related uncertainties. The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it considers reliable.
The ratings are based, in varying degrees, on the following considerations:
a. Likelihood of default capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
b. Nature of and provisions of the obligation; and
c. Protection afforded by and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
PLUS (+) OR MINUS (-): To provide more detailed indications of credit
quality, ratings from "AA" to "A" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Bond ratings are as follows:
1. AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
2. AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
3. A - Debt 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.
4. BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Although it normally exhibits 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 debt in this category than in higher
rated categories.
5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation, and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
MOODY'S CORPORATE BOND RATINGS
Moody's ratings are as follows:
1. Aaa - Bonds which are 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 not likely to impair the fundamentally strong position of such issues.
2. Aa - Bonds which are 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,
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.
3. A - Bonds which are 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 sometime in the
future.
4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments 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. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
5. Ba - Bonds which are 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.
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<PAGE>
6. B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a midrange ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
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<PAGE>
MANAGED ASSETS TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11172S TIC Ed.5-95
Printed in U.S.A.
<PAGE>
COPY OF ANNUAL REPORT DATED DECEMBER 31, 1994 TO
WHICH THE REGISTRANT'S FINANCIAL STATEMENTS ARE
INCORPORATED IN THE PROSPECTUS/STATEMENT OF
ADDITIONAL INFORMATION BY REFERENCE TO THIS FILING.
<PAGE>
THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS
ANNUAL REPORT
MANAGED ASSETS TRUST
DECEMBER 31, 1994
THETRAVELERS (logo with umbrella)
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE>
TIMCO (logo with globe)
A COMPANY OF THETRAVELERS (logo with umbrella)
The Travelers Investment Management Company ("TIMCO")
provides equity management and advisory services for the following
Travelers Variable Product Mutual Funds contained in this report:
The Capital Appreciation Fund and the Social Awareness Stock
Portfolio. Additionally, TIMCO is the sub-adviser for Managed
Assets Trust.
TAMIC (logo with globe and lines)
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION
Travelers Asset Management International Corporation
("TAMIC") provides fixed income management and advisory services
for the following Travelers Variable Product Mutual Funds contained
in this report: U.S. Government Securities Portfolio, High Yield
Bond Trust , Managed Assets Trust and Cash Income Trust.
JANUS CAPITAL
CORPORATION (logo with two faces)
Janus Capital Corporation ("Janus") is the sub-adviser for Capital
Appreciation Fund. As sub-adviser, Janus is responsible for the
daily management of Capital Appreciation Fund.
SMITH BARNEY (logo)
An asset management group of Smith Barney, Greenwich Street
Advisors provides management services for the Utilities Portfolio.
<PAGE>
THETRAVELERS (logo with umbrella)
THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS
INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1994
ECONOMIC REVIEW AND OUTLOOK
Economic growth kicked into high gear in 1994, and the economy used
up any excess capacity in product and labor markets. The fitful
recovery of the previous three years was replaced by a broad-based
expansion. Unemployment fell to 5.4% at year-end, from 7.0% at the
end of 1993. This robust economic activity was accompanied by few
signs of higher inflation. The Consumer Price Index rose just 2.7%
during 1994, the same as during the prior year. However, certain
commodity prices showed large gains, and there was evidence by
year-end of a modest acceleration in wage gains.
The Federal Reserve ("Fed") started a tightening policy in
February, while there still appeared to be slack in the economy.
Fed actions served to push 3-month T-bill rates up from 3.1% at the
start of the year to 5.7% at year-end. The yield curve rose and
flattened significantly during the year. Yields on one-year
Treasury bills rose by over 350 basis points, while yields on the
30-year bond were up over 150 basis points. At year-end, there
was little evidence that Fed tightening had started to slow growth.
In the fourth quarter, the economy grew at an annual rate of 4.5%,
well above the 2.0-2.5% pace that many economists think is
compatible with price stability.
There is normally a lag of 6-12 months between Federal Reserve
actions and the resulting impact on the economy. Coming into 1994,
Fed policy was very accommodative of economic growth, with real
money market interest rates (adjusted for inflation) close to zero.
Monetary policy became truly restrictive only with the last 2 or 3
rates hikes. With unemployment at levels that many economists view
as inflationary, we expect the Fed to push money market interest
rates somewhat higher in 1995. We think that the Federal Reserve
will succeed in slowing economic growth, and that inflation will
stay below 4% during 1995 and into 1996. However, convincing
evidence of the slowdown may take a while longer to emerge.
FIXED-INCOME MARKET COMMENTARY
Like a neutron bomb, which kills people but leaves buildings
intact, rising interest rates in 1994 decimated complicated
strategies much more than it hurt broad market averages. During
the fourth quarter, Orange County and emerging markets investors
were added to the casualty list, joining the hedge funds and
various corporate users of derivatives that were hurt earlier in
the year. While derivatives and mortgage backed securities have
taken much of the blame for these incidents, the rise in short-term
interest rates hurt any strategy that was based on leverage or
benefited from the prior three years of low short-term rates.
For the year, cash was the best performing asset, while stocks
treaded water and bonds had their worst year in recent history.
The Lehman Long Treasuries index showed a negative return of 7.6%
for the full year 1994. The long end of the yield curve stabilized
late in the year, allowing long Treasuries to outperform cash
during the fourth quarter. For the year as a whole, mortgage
backed securities and corporates outperformed similar duration
Treasuries. Late in the year, corporate spreads widened modestly
with growing concerns over the 1995 economic outlook; as a result,
long corporates underperformed similar duration Treasuries in the
fourth quarter.
<PAGE>
We have been concerned by tight spreads on corporate issues
throughout 1994. We expect issuance of new corporates to be light
in the first half of 1995; this will help to support prices of
corporate issues. Corporates are still likely to underperform
Treasuries if a significant economic slowdown develops. We think
inflation will stay below 4% in 1995. We also expect stable to
modestly lower yields on Treasuries with maturities of 5 years or
longer. If we are correct, bond investors will enjoy real returns,
after inflation, of 4-7% in 1995. If the Federal Reserve is
successful in containing economic growth and inflation, lower
interest rates (stronger bond prices) are likely in 1996.
EQUITY MARKET COMMENTARY
Despite increased pressure by the Federal Reserve Board and a
string of potentially dangerous financial crises, the U.S. stock
market managed to achieve a broad-based gain in the second half of
1994. Surprisingly strong corporate earnings offset the negative
effect of higher interest rates on equity valuations. During the
final six months of 1994, the S&P 500 Stock Index provided a total
return of 4.9%, including dividends. The stocks of small and
medium sized companies provided comparable returns over that
period, but with considerably higher volatility.
Technology stocks led the market during the second half. The
office and business equipment group was up over 25%, owing to
continued booming sales of personal computers and a sharp rebound
in networking stocks. Semi conductor stocks advanced in concert,
reflecting strong demand for memory chips and microprocessors.
Investors also returned to many defensive and recently out-of-favor
"growth" groups in the second half. In the consumer staples
sector, for example, beverage stocks rose 24% on earnings
surprising and improving international growth prospects. In the
health care sector, drug and medical product stocks rebounded over
20%.
On the negative side, rising interest rates and fears of an
impending economic slowdown hurt many interest sensitive and early
cycle groups. Airline, trucking and railroad stocks were down over
10%. Auto stocks were off 8%. Regional banks declined 12%. In the
energy sector, independent producers and drilling companies were
down 12%, due to weaker oil and gas prices and the poor outlook for
new production.
We remain constructive, but cautious, in our outlook for stocks in
1995. With the S&P 500 Stock Index trading at only 14.5 times
operating earnings, the equity market starts the year with
reasonable valuation support. A more stable interest rate
environment could even help to reverse the broad-based market price
to earnings ratio contraction that has occurred over the past year.
Where we think the stock market is most likely to run into problems
is on the earnings front. Corporate earnings are expected to grow
8-10% in 1995, but most of that growth is expected to occur in the
first half of the year. By the third quarter, we expect a
noticeable deceleration in earnings growth. With equity indices
near their all-time highs, the stock market is probably more
vulnerable than the bond market to negative surprises, given the
relative performance of the two asset classes over the past year.
TIMCO (logo of globe) TAMIC (logo globe with lines)
A COMPANY OF THETRAVELERS(logo TRAVELERS ASSET MANAGEMENT
with umbrella) INTERNATIONAL CORPORATION
<PAGE>
MANAGED ASSETS TRUST
Cash was the best performing asset in 1994, returning 4.6% for the
year. The S&P 500 Stock Index also managed a positive return of
1.3% for the year though smaller stock indexes had negative
returns. Stocks were helped by a 40% increase in reported
earnings. Bonds were the worst performing asset class, with the
Lehman Government/Corporate Index having a negative return of 3.5%.
The yield curve flattened significantly during the year with most
of the flattening occurring in the fourth quarter. The spread
between the 30-year and 2-year Treasury yields narrowed from 212
basis points at the beginning of the year to only 19 basis points
at the end of 1994. This caused intermediate maturity bonds to
perform poorly on a relative basis. The Lehman Intermediate
Government/Corporate Index was down 1.9%.
Managed Assets Trust enters 1995 with an overweighting in bonds and
a 10% underweighting in stocks. We feel that current yields in the
bond market are attractive relative to our inflation expectations
and to our view of how high the Federal Reserve will need to raise
interest rates before the economy begins to slow. Equity
valuations have been supported by the sharp rise in earnings. In
1995, we expect earnings growth to moderate, leaving the stock
market more vulnerable than the bond market to surprises like
increases in short term rates over 7%, a recession, or a general
move by investors (particularly mutual fund owners) to reduce
their risk profile.
The fixed-income portfolio benefited from the flattening in the
yield curve because of its underweighted position in intermediate
maturities. With the bulk of the flattening behind us, we have
shifted more of the portfolio's exposure into 1 to 5 year
maturities. Yield spreads over Treasuries for corporate and
mortgage-backed securities are relatively tight. We are reducing
the portfolio's exposure to longer maturity corporates because, as
the possibility of recession increases, investors will demand more
of a yield spread to own corporates, hurting their relative
performance.
Within the stock market, no consistent leadership developed in
1994 as different sectors moved into and then quickly out of favor.
In the fourth quarter, consumer-oriented companies began to
outperform cyclically oriented companies on worries about the
impact of continued Federal Reserve tightening. Managed Asset
Trust's equity portfolio continues to emphasize undervalued
individual stocks, while maintaining roughly neutral sector
weightings and portfolio beta versus the S&P 500 Stock Index.
<TABLE>
(Line chart representing the following table of numbers)
<CAPTION>
Managed Assets S&P 500 Index Lehman Brothers Consumer Price
Trust Gov't/Corporate Bond Index
Index
<C> <S> <C> <C> <C>
Initial Investment 10000 10000 10000 10000
12/85 12680 13203 12130 10379
12/86 15096 15652 14025 10503
12/87 15385 16469 14346 10967
12/88 16798 19239 15435 11450
12/89 21353 25305 17631 11982
12/90 21881 24501 19093 12731
12/91 26629 31991 22172 13110
12/92 27998 34451 23853 13501
12/93 30610 37892 26491 13870
12/94 29924 38381 25561 14251
Average Annual Total Returns Ended December 31, 1994:
1 year -2.24%
5 years 6.97%
10 years 11.58%
</TABLE>
This chart assumes an initial investment of $10,000
made on December 31, 1984. Returns include the reinvestment of all
distributions at Net Asset Value and the change in share price for
the stated period, but exclude insurance and administration charges
assessed by Travelers Insurance separate accounts.
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.
<PAGE>
<TABLE>
MANAGED ASSETS TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $138,954,376) $ 137,658,521
Recievables:
Dividends 207,775
Interest 1,021,660
Investment securities sold 6,096,369
Variation on futures margin 69,875
-------------
Total assets $ 145,054,200
-------------
LIABILITIES:
Cash overdraft 4,124
Payables:
Investment securities purchased 4,129,560
Investment management and advisory fees 7,746
Accrued expenses 25,862
-------------
Total Liabilities 4,167,292
-------------
NET ASSETS $ 140,886,908
-------------
-------------
NET ASSETS REPRESENTED BY:
Paid-in capital $ 135,473,729
Undistributed net investment income 5,313,706
Accumulated net realized gains (losses) on investment security transactions 1,395,328
Net unrealized depreciation on investment securities (1,295,855)
-------------
Total net assets (applicable to 10,960,700 shares outstanding at $12.85 per share) $ 140,886,908
-------------
-------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
MANAGED ASSETS TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,413,670
Interest 3,793,587
-------------
Total income $ 6,207,257
EXPENSES:
Investment management and advisory fees 738,883
Accounting and audit fees 101,533
Custodian fees 24,800
Printing and postage 19,800
Trustees' fees 5,733
Registration fees 2,802
Total expenses -------------
893,551
--------------
Net investment income 5,313,706
--------------
REALIZED AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold: 158,092,123
Cost of investment securities sold 156,184,429
-------------
Net realized gain 1,907,694
Change in unrealized gain (loss) on investment securities:
Unrealized gain at December 31, 1993 9,307,531
Unrealized loss at December 31, 1994 (1,295,855)
-------------
Net change in unrealized gain (loss) for the year (10,603,386)
--------------
Net realized and change in unrealized gain (loss) (8,695,692)
--------------
Net decrease in net assets resulting from operations $ (3,381,986)
--------------
--------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
MANAGED ASSETS TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,313,706 $ 5,769,935
Net realized gain from investment security transactions 1,907,694 5,655,477
Net change in unrealized gain (loss) on investment securities (10,603,386) 2,635,930
--------------- --------------
Net increase (decrease) in net assets resulting from operations (3,381,986) 14,061,342
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions (7,278,778) (9,092,309)
Net long-term realized gains from investment security transactions (4,589,354) (2,022,741)
--------------- --------------
Total distributions to shareholders (11,868,132) (11,115,050)
--------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,758,206 10,437,104
Dividend reinvestment 11,868,132 11,115,050
Payment for shares redeemed (17,256,475) (16,702,234)
--------------- --------------
Net increase (decrease) in net assets resulting from capital
share transactions (630,137) 4,849,920
--------------- --------------
Net increase (decrease) in net assets (15,880,255) 7,796,212
NET ASSETS:
Beginning of year 156,767,163 148,970,951
--------------- --------------
End of year (including undistributed net investment income as
follows: December, 1994 $5,313,706 and December, 1993
$5,769,935) $ 140,886,908 $ 156,767,163 --------------
--------------- --------------
--------------- --------------
See Notes to Financial Statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES
Managed Assets Trust ("Fund MA") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Shares of
Fund MA are currently offered, without a sales charge, to separate
accounts of The Travelers Insurance Company ("Travelers
Insurance"), an indirect wholly owned subsidiary of The Travelers
Inc., in connection with the issuance of certain variable annuity
and variable life insurance contracts.
The following is a summary of significant accounting policies
consistently followed by Fund MA in the preparation of its
financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of
the close of business of the New York Stock Exchange on the last
business day of the year; securities traded on the over-the-counter
market and listed securities with no reported sales are valued at the
mean between the last-reported bid and asked prices or on the basis
of quotations received from a reputable broker or other recognized
source.
When market quotations are not considered to be readily available
for long-term corporate bonds and notes, such investments are
generally stated at fair value on the basis of valuations furnished
by a pricing service. These valuations are determined for normal
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Securities, including restricted
securities, for which pricing services are not readily available
are valued by management at prices which it deems in good faith to
be fair.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity.
FUTURES CONTRACTS. Fund MA uses stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for
the purchase or sale of individual securities. When Fund MA enters
into a futures contract, it agrees to buy or sell a specified index
of stocks or debt securities at a future time for a fixed price,
unless the contract is closed prior to expiration. Fund MA is
obligated to deposit with a broker an "initial margin" equivalent
to a percentage of the face, or notional value of the contract.
It is Fund MA's practice to hold short-term investments in an
amount at least equal to the notional value of outstanding
purchased futures contracts. Generally, futures contracts are
closed prior to expiration.
Futures contracts purchased by Fund MA are priced and settled
daily; accordingly, changes in daily prices are recorded as
realized gains or losses and no asset is recorded in the Statement
of Investments. However, when Fund MA holds open futures
contracts, it assumes a market risk generally equivalent to the
underlying market risk of changes in the value of the specified
indexes associated with the futures contract.
OPTIONS. Fund MA may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number
of shares of the underlying asset at the stated price on or before
the stated expiration date. Fund MA may sell the options before
expiration. Options held by Fund MA are listed on either national
securities exchanges or on over-the-counter markets, and are
short-term contracts with a duration of less than nine months. The
market value of the options will be the latest sale price at the
close of the New York Stock Exchange, or, in the absence of such
sale, the latest bid quotation.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
REPURCHASE AGREEMENTS. When Fund MA enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to
repurchase the securities at a mutually agreed upon date and price),
the repurchase price of the securities will generally equal the
amount paid by Fund MA plus a negotiated interest amount. The seller
under the repurchase agreement will be required to provide to Fund MA
securities (collateral) whose market value, including accrued
interest, will be at least equal to 102% of the repurchase price.
Fund MA monitors the value of collateral on a daily basis.
Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit
risks. Fund MA's custodian will take actual or constructive receipt of
all securities underlying repurchase agreements until such agreements
expire.
TAXES. Fund MA has qualified, and intends to continue to qualify each
year, as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended. As a regulated
investment company, Fund MA is relieved of any federal income tax
liability by distributing all of its net taxable investment income
and net taxable capital gains, if any, to its shareholders. Fund
MA further intends to avoid excise tax liability by distributing
substantially all of its investment income. Therefore, no federal
income tax provision has been made by Fund MA in its financial
statements.
OTHER. Security transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date. Distributions to
shareholders are recorded at the close of business on the record
date.
2.INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $134,909,223 and $135,660,871, respectively for the year
ended December 31, 1994. Realized gains and losses from security
transactions are reported on an identified-cost basis.
At December 31, 1994, Fund MA held 43 open S&P 500 Stock Index
futures contracts with a maturity date of March 17, 1995. The face
value, or notional value, of these contracts at December 31, 1994,
amounted to $9,919,025. In connection with these contracts,
short-term investments with a par value of $590,000 had been
pledged as margin deposits.
Net realized gains (losses) resulting from futures contracts were
($471,650) and $456,739 for the years ended December 31, 1994 and
1993, respectively. These gains (losses) are included in the net
realized gain from investment securities transactions in both the
Statement of Operations and the Statement of Changes in Net Assets.
The cash settlement for December 31, 1994 is shown on the Statement
of Assets and Liabilities as a receivable for variation on futures
margin.
3.FUND CHARGES
Investment management and advisory fees are calculated daily at an
annual rate of 0.50% of Fund MA's average net asset value. These
fees are paid to Travelers Asset Management International
Corporation ("TAMIC"), an indirect wholly owned subsidiary of The
Travelers Inc.
Pursuant to a sub-advisory agreement between The Travelers
Investment Management Company ("TIMCO"), an indirect wholly owned
subsidiary of The Travelers Inc., and TAMIC, 50% of the investment
management and advisory fees earned by TAMIC are paid to TIMCO for
investment management and advisory services relating to the common
stock investments of Fund MA.
Travelers Insurance has agreed to reimburse Fund MA for the amount
by which all of Fund MA's aggregate annualized operating expenses,
excluding brokerage commissions and any interest charges and taxes,
exceed 1.25% of Fund MA's average net assets. Trustees and
officers of Fund MA who are also officers and employees of The
Travelers Inc., or its subsidiaries, receive no compensation
directly from Fund MA.
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest without par value.
Transactions in shares of Fund MA were as follows:
<TABLE>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
<S> <C> <C>
1994 1993
---- ----
Shares sold 365,254 769,440
Shares redeemed (1,321,839) (1,198,639)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized gains 542,808 687,727
from net long-term realized gains 340,238 153,666
-------- ------------
Net (73,539) 412,194
-------- ------------
-------- ------------
</TABLE>
As of December 31, 1994, all outstanding shares of beneficial
interest were owned by The Travelers Fund U for Variable Annuities
and The Travelers Fund UL for Variable Life Insurance, both of
which are separate accounts of Travelers Insurance.
5. SUBSEQUENT EVENT
On January 27, 1995, the Board of Trustees declared a distribution
of net investment income of $0.50 per share and a distribution from
net long-term realized gains of $0.17 per share, payable on January
30, 1995, to shareholders of record as of January 27, 1995. These
distributions are not reflected in the accompanying financial
statements.
<PAGE>
<TABLE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
6. FINANCIAL HIGHLIGHTS*
(Per share data for a share outstanding
throughout each year.)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA:
- ----------------
Net asset value, beginning of year $14.21 $14.02 $14.78
Income from operations
-----------------------
Net investment income 0.46 0.51 0.64
Net gains or losses on securities (realized
and unrealized) (0.73) 0.72 0.01
----- ----- -----
Total from investment operations (0.27) 1.23 0.65
Less distributions
------------------
Distributions from net investment income and
short-term realized gains (0.67) (0.85) (1.04)
Distributions from long-term realized gains (0.42) (0.19) (0.37)
---------- ---------- ----------
Total distributions (1.09) (1.04) (1.41)
Net asset value, end of year $ 12.85 $ 14.21 $ 14.02
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN*** (2.24)% 9.33% 5.14%
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of year (thousands) $ 140,887 $ 156,767 $ 148,971
Ratio of expenses to average net assets 0.61%** 0.56%** 0.56%**
Ratio of net investment income to average net assets 3.59% 3.65% 4.97%
Portfolio turnover rate 97% 86% 112%
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1991 1990#
--------- ---------
<S> <C> <C>
PER SHARE DATA:
- ----------------
Net asset value, beginning of year $12.77 $13.03
Income from operations
-----------------------
Net investment income 0.74 0.65
Net gains or losses on securities (realized
and unrealized) 1.91 (0.37)
---------- ----------
Total from investment operations 2.65 0.28
Less distributions
------------------
Distributions from net investment income and
short-term realized gains (0.64) (0.54)
-- --
Distributions from long-term realized gains ---------- ----------
Total distributions (0.64) (0.54) (0.54)
Net asset value, end of year $14.78 $12.77
---------- ----------
---------- ----------
TOTAL RETURN*** 21.70% 2.47%
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of year (thousands) $ 126,021 $ 92,464
Ratio of expenses to average net assets 0.56%** 0.59%**
Ratio of net investment income to average net assets 5.49% 5.17%
Portfolio turnover rate 141% 123%
</TABLE>
*The information set forth in Note 6 replaces the data
presented in prior years as supplementary
information.
**The ratio of expenses to average net assets for the
years 1990-1993 reflects an expense reimbursement
by Travelers Insurance in connection with voluntary
expense limitations. Without the expense
reimbursement, the ratios of operating expenses
to average net assets would have been 0.60%, 0.63%,
0.69% and 0.74% for the years ended December
31, 1993, 1992, 1991 and 1990, respectively.
For the year ended December 31, 1994, there was no
expense reimbursement by Travelers Insurance in
connection with the voluntary expense limitations
described in Note 3.
***Total return is determined by dividing the increase
(decrease) in value of a share during the year, after
reflecting the reinvestment of dividends declared
during the year, by the beginning of year share price.
As described in Note 1, shares in Fund MA are only sold
to Travelers Insurance separate accounts in connection
with the issuance of variable annuity and variable life
insurance contracts. The total return does not reflect
the deduction of any contract charges or fees assessed
by Travelers Insurance separate accounts.
#On May 1, 1990, TAMIC replaced Keystone Custodian
Funds, Inc. as the investment adviser for Fund MA.
<PAGE>
<TABLE>
MANAGED ASSETS TRUST
STATEMENT OF INVESTMENTS
DECEMBER 31, 1994
<CAPTION>
NO. OF SHARES MARKET VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (57.4%)
AMUSEMENTS (0.8%)
Promus Cos. (A) 12,300 $ 381,300
Walt Disney Co. 16,400 756,450
-----------
1,137,750
-----------
BANKING (2.8%)
Banc One Corp. 14,072 357,077
Bank of Boston Corp. 11,100 287,213
Barnett Banks, Inc. 3,600 138,150
Chase Manhattan Corp. 4,700 161,563
Citicorp 15,500 641,312
First Interstate Bancorp 2,400 162,300
First Union Corp. 16,800 695,100
Mellon Bank Corp. 12,400 379,750
NationsBank Corp. 14,500 654,312
Norwest Corp. 15,400 359,975
-----------
3,836,752
-----------
CHEMICALS, PHARMACEUTICALS AND
ALLIED PRODUCTS (7.2%)
Abbott Laboratories 10,500 342,563
Bristol-Myers Squibb Co. 22,300 1,290,612
Clorox Co. 1,400 82,425
Dow Chemical Co. 13,000 874,250
E.I. Dupont de Nemours & Co. 10,600 596,250
Eastman Chemical Company 4,500 227,250
Eli Lilly & Co. 6,900 452,812
Georgia Gulf Corp. (A) 7,300 283,788
Great Lakes Chemical Corp. 4,300 245,100
Johnson & Johnson 16,500 903,375
Merck & Co., Inc. 17,000 648,125
Morton International. Inc. 15,500 441,750
Pfizer, Inc. 8,500 656,625
Praxair, Inc. 12,500 256,250
Procter & Gamble Co. 22,000 1,364,000
Schering-Plough Corp. 12,700 939,800
Union Carbide Corp. 12,400 364,250
-----------
9,969,225
-----------
COMMUNICATION (6.2%)
Ameritech Corp. 18,800 759,050
AT&T Corp. 45,100 2,266,275
Bell Atlantic Corp. 11,600 577,100
Bellsouth Corp. 6,100 330,163
Capital Cities ABC, Inc. 5,700 485,925
CBS, Inc. 5,235 289,888
GTE Corp. 19,500 592,312
MCI Communications Corp. 31,900 588,140
Pacific Telesis Group 5,700 162,450
<CAPTION> <C> <C>
NO. OF SHARES MARKET VALUE
<S> -------------- -------------
COMMUNICATION (CONTINUED)
Southwestern Bell Corp. 21,700 $ 876,137
Sprint Corp. 19,500 538,688
Tele-Communications. Inc. (A) 22,000 479,864
U.S. West, Inc. 9,700 345,563
Viacom International, Inc. (A) 640 26,640
Viacom International, Inc. Warrant (A) 8,000 9,000
Viacom International, Inc. Cl. B (A) 4,549 184,803
----------
8,511,998
----------
CONTRACTORS (0.2%)
Fluor Corp. 6,900 297,562
----------
ELECTRICAL AND ELECTRONIC MACHINERY (4.7%)
Advanced Micro Device (A) 10,600 263,675
American Power Conversion (A) 6,900 112,553
General Electric Co. 50,100 2,555,100
General Instrument Corp. (A) 8,900 267,000
Intel Corp. 12,700 809,625
Micron Technology 7,000 308,875
Motorola, Inc. 15,400 891,275
Texas Instruments, Inc. 12,800 958,400
Varian Associates, Inc. 3,200 112,000
Whirlpool Corp. 3,100 155,775
----------
6,434,278
----------
FINANCE (2.6%)
American Express Co. 6,700 197,650
Beneficial Corp. 6,000 234,000
Dean Witter Discover & Co. 8,100 274,387
Federal Home Loan Corp. 9,800 494,900
Federal National Mortgage Association 9,000 655,875
Green Tree Financial Corp. 8,900 270,338
ITT Corp. 8,600 762,175
Lehman Brothers Holding, Inc. 15,400 227,150
Merrill Lynch & Co., Inc. 5,500 196,625
Transamerica Corp. 5,300 263,675
----------
3,576,775
----------
FOOD (4.2%)
Coca-Cola Co. 27,400 1,411,100
Conagra, Inc. 16,400 512,500
IBP, Inc. 15,100 456,775
Kellogg Co. 2,000 116,250
PepsiCo, Inc. 19,300 699,625
Philip Morris, Inc. 21,500 1,236,250
Quaker Oats Co. 3,200 98,400
Sara Lee Corp. 32,400 818,100
Seagram Co, Ltd. 8,300 244,850
Unilever N.V. 2,200 256,300
----------
5,850,150
----------
<PAGE>
</TABLE>
<TABLE>
STATEMENT OF INVESTMENTS - CONTINUED
<CAPTION>
NO. OF SHARES MARKET VALUE
<S> ------------ ------------
INSURANCE (1.3%) <C> <C>
American International Group, Inc. 5,100 $ 499,800
Chubb Corp. 5,200 402,350
General Reinsurance Corp. 1,000 123,750
Health Systems International, Inc. (A) 7,700 233,888
U.S. Healthcare, Inc. 5,250 215,906
United Healthcare Corp. 7,700 347,462
----------
1,823,156
----------
LUMBER AND WOOD PRODUCTS (0.3%)
Georgia-Pacific Corp. 2,400 171,600
Weyerhaeuser Co. 6,100 228,750
----------
400,350
----------
MACHINERY (3.3%)
Applied Materials (A) 13,500 567,000
Briggs & Stratton Corp. 5,600 183,400
Caterpillar, Inc. 5,000 275,625
Cisco Systems, Inc. (A) 6,600 231,409
Clark Equipment Co. (A) 4,900 265,825
Compaq Computer Corp. (A) 16,100 635,950
Deere & Co. 3,700 245,125
Dover Corp. 7,800 402,675
Hewlett Packard Co. 5,900 589,262
International Business Machines Corp. 13,500 992,250
Varity Corp. (A) 5,000 181,250
----------
4,569,771
----------
METAL PRODUCTS (1.2%)
Aluminum Company of America 4,100 355,162
Alumax, Inc. (A) 5,900 167,413
Gillette Co. 5,600 418,600
Nucor Corp. 7,800 432,900
USX - U.S. Steel Group 6,900 244,950
----------
1,619,025
----------
MINING (0.5%)
American Barrick Resources Corp. 17,800 396,050
Placer Dome, Inc. 11,100 241,425
----------
637,475
----------
MISCELLANEOUS MANUFACTURING (1.5%)
Callaway Golf Co. 12,300 407,438
Eastman Kodak Co. 8,500 405,875
Emerson Electric Co. 4,900 306,250
Medtronic, Inc. 7,500 417,187
Thermo Electronics Corp. (A) 7,400 332,075
Xerox Corp. 2,600 257,400
----------
2,126,225
----------
<CAPTION>
NO. OF SHARES MARKET VALUE
--------------- ---------------
<S> <C> <C>
OIL & GAS (0.7%)
Anadarko Petroleum 7,100 $ 273,350
Enron Oil & Gas Co. 10,000 187,500
Freeport-McMoRan Copper & Gold, Inc. 7,500 159,375
Schlumberger, Ltd. 6,200 312,325
----------
932,550
----------
PAPER AND ALLIED PRODUCTS (1.1%)
Champion International Corp. 6,700 244,550
International Paper Co. 3,300 248,737
Kimberly Clark Corp. 8,100 409,050
Mead Corp. 1,900 92,388
Stone Container Corp. (A) 28,300 488,175
----------
1,482,900
----------
PETROLEUM REFINING AND
RELATED INDUSTRIES (5.0%)
Amoco Corp. 11,900 703,587
Atlantic Richfield, Inc. 4,219 429,283
Chevron Corp. 4,100 182,963
Exxon Corp. 32,500 1,974,375
Kerr McGee Corp. 5,300 243,800
Mobil Corp. 14,300 1,204,775
Royal Dutch Petroleum Co. 13,700 1,472,750
Sun Co., Inc. 8,800 253,000
Tosco Corp. 13,700 399,013
----------
6,863,546
----------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (0.6%)
Central Newspapers, Inc. 5,800 163,125
Dow Jones & Co., Inc. 10,600 328,600
Time Warner, Inc. 7,700 270,463
----------
762,188
----------
RETAIL (2.9%)
Dayton Hudson Corp. 2,000 141,500
Home Depot, Inc. 7,700 354,200
J.C. Penney Co. 6,000 267,750
Kmart Corp. 9,000 117,000
Kroger Co. (A) 16,200 390,825
Lowe's Co.'s, Inc. 4,700 163,325
May Department Stores 6,900 232,875
McDonalds Corp. 17,000 497,250
Sears Roebuck & Co. 9,000 414,000
The GAP, Inc. 4,700 143,350
Toys R Us (A) 3,400 103,700
Wal-Mart Stores, Inc. 56,800 1,207,000
----------
4,032,775
----------
<PAGE>
STATEMENT OF INVESTMENTS - CONTINUED
<CAPTION> <C> <C>
NO. OF SHARES MARKET VALUE
--------------- ---------------
<S>
RUBBER AND PLASTIC PRODUCTS (0.6%)
Armstrong World Industries 10,500 $ 404,250
Premark International, Inc. 8,100 362,475
----------
766,725
----------
SERVICES (1.8%)
Columbia/HCA Healthcare Corp. 23,100 843,150
Computer Associates International 5,400 261,900
Microsoft (A) 15,200 931,000
Omnicom Group, Inc. 4,900 253,575
Oracle Systems Corp. (A) 5,400 238,950
----------
2,528,575
----------
STONE, CLAY, GLASS AND
CONCRETE PRODUCTS (0.2%)
Minnesota Mining & Manufacturing Co. 5,800 309,575
----------
TEXTILE MILL PRODUCTS (0.2%)
VF Corp. 4,700 228,538
----------
TOBACCO MANUFACTURERS(0.7%)
RJR Nabisco Holding Corp. (A)
182,900 1,005,950
----------
TRANSPORTATION (1.0%)
Burlington Northern Railroad 7,400 356,125
Conrail, Inc. 6,600 333,300
Delta Airlines, Inc. 1,800 90,900
Federal Express Corp. (A) 3,900 234,975
Illinois Central Corp. 7,900 242,925
Southwestern Airlines 7,400 123,950
----------
1,382,175
----------
TRANSPORTATION MANUFACTURING (3.6%)
Boeing Co. 4,300 201,025
Chrysler Corp. 15,400 754,600
Echlin, Inc. 9,900 297,000
Ford Motor Co. 38,600 1,080,800
General Dynamics Corp. 8,900 387,150
General Motors Corp. 13,500 570,375
General Motors Corp., Cl. H 3,400 118,575
Lockheed Corp. 6,000 435,750
McDonnell Douglas Corp. 3,000 426,000
Rockwell International Corp. 10,600 378,950
Superior Industries 2,800 73,850
Textron, Inc. 4,900 246,837
----------
4,970,912
----------
UTILITIES (2.0%)
Baltimore Gas & Electric Co. 7,000 154,875
Carolina Power & Light Co. 6,100 162,413
Central & Southwest Corp. 11,300 255,662
<CAPTION>
NO. OF SHARES MARKET VALUE
--------------- ---------------
<S> <C> <C>
UTILITIES (CONTINUED)
Florida Power & Light Co. 9,400 $ 330,175
NIPSCO Industries, Inc. 8,500 252,875
Pacific Enterprises 5,800 123,250
PECO Energy Co. 17,000 416,500
Public Service Co. of Colorado 8,500 249,688
Public Service Enterprises Group 9,200 243,800
Southern Co. 25,000 500,000
----------
2,689,238
-----------
WHOLESALE TRADE (0.2%)
Alco Standard Corp. 3,400 213,350
----------
TOTAL COMMON STOCKS
(COST $77,233,775) 78,959,489
----------
PREFERRED STOCKS (1.8%)
BANKING (0.6%)
Ahmanson (HF) & Co. 20,000 805,000
----------
MANUFACTURING (0.6%)
Cooper Industries, Inc. 38,675 792,838
----------
OIL AND GAS (0.6%)
Occidental Petroleum Corp. 19,000 926,250
----------
TOTAL PREFERRED STOCKS
(COST $2,973,499) 2,524,088
----------
<CAPTION>
PRINCIPAL AMOUNT
----------------
BONDS (12.5%)
BANKING (1.0%)
Bank of New York Co., Inc.,
6.50%, Notes, 2003 $1,000,000 865,600
Great Western Financial Corp.,
6.375% Notes, 2000 500,000 451,500
----------
1,317,100
----------
CHEMICALS AND ALLIED PRODUCTS (3.3%)
Eastman Chemical Company,
7.25% Debentures, 2024 2,500,000 2,061,775
Mallinckrodt Group, Inc.,
7.00% Debentures, 2013 3,000,000 2,521,140
----------
4,582,915
----------
FINANCE (2.5%)
General Motors Acceptance Corp.,
8.375% Bonds,1997 3,440,000 3,434,015
----------
<PAGE>
</TABLE>
<TABLE>
STATEMENT OF INVESTMENTS - CONTINUED
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
---------------- ----------------
<S> <C> <C>
FOREIGN GOVERNMENT NON-NATIONAL (0.4%)
Ontario Province,
11.75% Debentures, 2013 $ 500,000 $ 566,440
----------
FOREIGN NATIONAL GOVERNMENT (1.2%)
United Mexican States,
8.50% Notes, 2002 2,000,000 1,602,520
----------
PHARMACEUTICAL AND
HEALTH CARE PRODUCTS (1.5%)
Becton Dickinson & Co.,
8.80%, Sinking Fund, 2001 2,000,000 2,046,420
----------
TRANSPORTATION (1.3%)
Delta Airlines, Inc.,
9.25% Sinking Fund, 2007 (E) 973,828 913,032
Delta Airlines, Inc.,
8.27% Sinking Fund, 2007 927,473 820,247
----------
1,733,279
----------
TRANSPORTATION MANUFACTURING (0.7%)
Arvin Industries, Inc.,
10.00% Debentures, 2000 1,000,000 1,031,420
----------
WHOLESALE TRADE (0.6%)
Supervalu, Inc.,
7.25% Notes, 1999 1,000,000 959,690
----------
TOTAL BONDS
(COST $19,010,619) 17,273,799
----------
U.S. GOVERNMENT AGENCY SECURITIES (2.5%)
Federal Home Loan Mortgage Corp.,
8.50% Pass Through, 2002 889,778 879,990
FNMA Pool,
8.50% Pass Through,2005 185,266 185,093
FNMA Pool,
8.50% Pass Through, 2005 393,631 393,265
GNMA Pool,
7.50% Pass Through, 2007 81,096 75,293
GNMA Pool,
7.50% Pass Through, 2007 419,864 389,818
GNMA Pool,
9.00% Pass Through, 2016 247,691 250,168
GNMA Pool,
9.00% Pass Through, 2019 346,912 350,382
GNMA Pool,
9.50% Pass Through, 2020 670,954 693,390
GNMA Pool,
9.50% Pass Through,2020 275,342 284,550
----------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(COST $3,408,183) 3,501,949
----------
</TABLE>
<TABLE>
STATEMENT OF INVESTMENTS - CONTINUED
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
---------------- ----------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (21.6%)
United States of America Treasury,
8.50% Bonds, 2020 $ 2,500,000 $ 2,632,825
United States of America Treasury,
5.875% Bonds, 2004 2,000,000 1,745,000
United States of America Treasury,
7.875% Bonds, 2021 7,300,000 7,204,224
United States of America Treasury,
0.00% Bonds, 2016 5,325,000 999,715
United States of America Treasury,
6.50% Notes, 1999 8,000,000 7,607,520
United States of America Treasury,
6.875% Notes, 1999 3,000,000 2,889,390
United States of America Treasury,
7.25% Notes, 2004 6,900,000 6,628,347
-------------
TOTAL U.S. GOVERNMENT
SECURITIES
(COST $ 30,633,592) 29,707,021
-------------
SHORT-TERM INVESTMENTS (4.2%)
COMMERCIAL PAPER (3.7%)
Commerzbank U.S. Finance, Inc.,
6.00% due January 3, 1995 2,076,000 2,074,632
General Electric Capital Corp.,
5.87% due January 23, 1995 3,000,000 2,984,407
-------------
5,059,039
-------------
U.S. GOVERNMENT SECURITIES (0.5%)
United States of America Treasury,
4.50% due March 9, 1995 (C) 50,000 47,974
United States of America Treasury,
5.87% due September 21, 1995 (C) 75,000 70,576
United States of America Treasury,
6.04% due September 21, 1995 (C) 100,000 94,271
United States of America Treasury,
6.22% due September 21, 1995 (C) 445,000 420,315
-----------
633,136
-----------
TOTAL SHORT-TERM
INVESTMENTS
(COST $ 5,694,708) 5,629,175
-----------
NOTIONAL VALUE
----------------
<C>
FUTURES CONTRACTS (0.0%)
S&P 500 Stock Index,
Exp. March, 1995 (D) $9,919,025 --
-----------
TOTAL INVESTMENTS (100%)
(COST $138,954,376) (B)(F) $137,658,521
------------
------------
<PAGE>
STATEMENT OF INVESTMENTS - CONTINUED
<CAPTION>
NOTES
<FN>
<F1> (A) Non-income Producing Security.
<F2> (B) At December 31,1994, net unrealized
depreciation for all securities was
$1,295,855. This consisted of aggregate gross
unrealized appreciation for all securities
in which there was an excess of market value
over cost of $5,625,569 and aggregate gross
unrealized depreciation for all securities
in which there was an excess of cost over
market value of $6,921,424.
<F3>(C) Par value of $590,000 is pledged to
cover margin deposits on futures contracts.
<F4>(D) As more fully discussed in Note 1 to the
financial statements, it is Fund MA's
practice to hold short-term investments in
an amount at least equal to the underlying
face value, or notional value, of outstanding
purchased futures contracts. Fund MA uses
futures contracts as a substitute for holding
individual securities.
<F5>
(E) Management Priced Security.
<F6>
(F) The cost of investments for federal
income tax purposes amounted to $139,470,800.
Gross unrealized appreciation and
depreciation of investments, based on
identified tax cost, at December 31, 1994
were as follows:
Gross unrealized appreciation $ 5,504,281
Gross unrealized depreciation (7,316,560)
-------------
Net unrealized depreciation $(1,812,279)
-------------
-------------
See Notes to Financial Statements
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Managed Assets Trust:
We have audited the accompanying statement of assets and
liabilities of
MANAGED ASSETS TRUST
including the statement of investments, as of December 31, 1994,
and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial
statements and financial highlights are the responsibility of
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of December 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Managed Assets Trust as of December 31, 1994,
the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 15, 1995
<PAGE>
This page intentionally left blank.
<PAGE>
Investment Advisers
------------------------
(CAPITAL APPRECIATION FUND AND
SOCIAL AWARENESS STOCK PORTFOLIO)
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Hartford, Connecticut
(MANAGED ASSETS TRUST, HIGH YIELD
BOND TRUST, CASH INCOME
TRUST AND U.S. GOVERNMENT SECURITIES PORTFOLIO)
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
(UTILITIES PORTFOLIO)
GREENWICH STREET ADVISORS
New York, New York
Independent Accountants
------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
------------------------
SHAWMUT BANK CONNECTICUT, N.A.
Hartford, Connecticut
This report is prepared for the general information
of contract owners and is not an offer of shares of Managed Assets
Trust, High Yield Bond Trust, Capital Appreciation Fund, Cash
Income Trust, U.S. Government Securities Portfolio, Social
Awareness Stock Portfolio or Utilities Portfolio. It should not be
used in connection with any offer except in conjunction with the
Prospectuses for the Variable Annuity and Variable Universal Life
Insurance products offered by The Travelers Insurance Company and
the Prospectuses of the underlying mutual funds, which collectively
contain all pertinent information, including the applicable selling
commissions.
VG-181 (Annual) (12-94) Printed in U.S.A.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Accountants are contained in the December 31, 1994 Annual Report to
Shareholders and are incorporated by reference in the Statement of
Additional Information. The Registrant's financial statements include:
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the years ended December 31,
1994 and 1993
Statement of Investments as of December 31, 1994
Notes to Financial Statements
(b) Exhibits
*1. Declaration of Trust. (Incorporated herein by reference to
Exhibit 1(b)(1) to the Registration Statement on Form N-1 filed on
September 15, 1982.)
*2. By-Laws of Managed Assets Trust. (Incorporated herein by reference to
Exhibit 1(b)(2) to the Registration Statement on Form N-1 filed on
September 15, 1982.) Amendments to the Registrant's By-Laws are also
incorporated herein by reference to Exhibits 24(b)(2) to Post-Effective
Amendment Nos. 5, 11 and 13 to the Registration Statement on Form N-1A.)
*5(A). Investment Advisory Agreement between the Registrant and Travelers Asset
Management International Corporation. (Incorporated herein by reference
to Exhibit 24(b)(5)(A) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A filed on February 17, 1993.)
*5(B). Sub-Advisory Agreement between Travelers Asset Management International
Corporation and The Travelers Investment Management Company.
(Incorporated herein by reference to Exhibit 24(b)(5)(B) to Post-
Effective Amendment No. 15 to the Registration Statement on Form N-1A
filed on February 17, 1993.)
8. Custody Agreement dated February 1, 1995 between the Registrant and
Chase Manhattan Bank, N.A., of Brooklyn, New York.
*9. Transfer and Recordkeeping Agreement between the Registrant and The
Travelers Insurance Company. (Incorporated herein by reference to
Exhibit 24(b)(9) to Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A filed on April 14, 1992.)
*10. An Opinion and Consent of counsel as to the legality of the securities
registered by the Registrant. (Incorporated herein by reference to the
Registrant's most recent 24f-2 Notice filed on February 27, 1995.)
11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants, to the
use of their name and opinion in Part A and Part B of this Form N-1A
and to the incorporation by reference of their report.
11(B). Powers of Attorney authorizing Ernest J. Wright as signatory for
Heath B. McLendon, Knight Edwards, Robert E. McGill, III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart.
* Previously filed and incorporated herein by reference.
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 17, 1995
-------------- -------------------------
Shares of beneficial interest, Two (2)
without par value
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers are
contained in the Fund's Declaration of Trust which was filed with
Pre-Effective Amendment No. 1 to the Fund's Registration Statement as
Exhibit 1(b)(1) and is incorporated by reference herein.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Officers and Directors of Travelers Asset Management International Corporation
(TAMIC), the Fund's Investment Adviser, are set forth in the following table:
Name Position with TAMIC Other Business
- ---- ------------------- ---------------
Marc P. Weill Director, Chairman and Senior Vice President**
President
David A. Tyson Director and Senior Vice Senior Vice President*
President
David Amaral Vice President Fixed Income Trader**
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Investment Officer**
Eric Dobbin Vice President Investment Officer**
Phillip A. Duncan Vice President Investment Officer**
Emil Molinaro Vice President Vice President**
F. Denney Voss Vice President Senior Vice President**
William H. White Treasurer Vice President and
Treasurer*
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer*
George C. Quaggin Assistant Treasurer Assistant Treasurer*
John R. Britt Secretary Assistant Secretary*
Marla A. Berman Assistant Secretary Assistant General Counsel**
Paul M. Danie Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director*
* Positions are held with The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut.
** Positions held with Travelers Group Inc., 388 Greenwich Street, New York,
New York.
<PAGE>
Officers and Directors of The Travelers Investment Management Company (TIMCO),
the Fund's Sub-Adviser, are set forth in the following table:
Name Position with TIMCO Other Business
- ---- -------------------- ---------------
Jeffrey B. Lane Director and Chairman Vice Chairman
Smith Barney Inc.**
Kent A. Kelley Director and Chief Not Applicable
Executive Officer*
Sandip A. Bhagat Director and President* Not Applicable
Heath B. McLendon Director Managing Director
Smith Barney Inc.**
Jacob E. Hurwitz Vice President* Not Applicable
Emil Molinaro Vice President Vice President
Travelers Group Inc.**
Daniel Willey Vice President* Not Applicable
Gloria G. Williams Assistant Vice President* Not Applicable
James W. Churm Corporate Secretary Senior Vice President
Smith Barney Inc.**
Michael Day Treasurer Managing Director
Smith Barney Inc.**
* Address: One Tower Square, Hartford, Connecticut 06183
** Address: Smith Barney Inc., 388 Greenwich Street, New York, New York 10013
<PAGE>
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
(2) Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes to provide to each person to whom
a prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Managed Assets Trust, certifies that it
meets all of the requirements for effectiveness of this post-effective
amendment to this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and that it has duly caused this amendment to this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut,
on April 19, 1995.
MANAGED ASSETS TRUST
(Registrant)
By: *HEATH B. McLENDON
__________________
Heath B. McLendon
Chairman, Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on April 19, 1995.
*HEATH B. McLENDON Chairman of the Board
- ---------------------
(Heath B. McLendon)
*KNIGHT EDWARDS Trustee
- ---------------------
(Knight Edwards)
*ROBERT E. McGILL, III Trustee
- ----------------------
(Robert E. McGill, III)
*LEWIS MANDELL Trustee
- ----------------------
(Lewis Mandell)
*FRANCES M. HAWK Trustee
- ----------------------
(Frances M. Hawk
*IAN R. STUART Treasurer and Chief Accounting Officer
- ----------------------
(Ian R. Stuart)
*By: /s/ Ernest J. Wright
------------------------------
Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
- ------- ------------ ----------------
1. Declaration of Trust. (Incorporated herein
by reference to Exhibit 1(b)(1) to the
Registration Statement on Form N-1 filed on
September 15, 1982.)
2. By-Laws of Managed Assets Trust.
(Incorporated herein by reference to
Exhibit 1(b)(2) to the Registration Statement
on Form N-1 filed on September 15, 1982.)
Amendments to the Registrant's By-Laws are
also incorporated herein by reference to
Exhibits 24(b)(2) to Post-Effective Amendment
Nos. 5, 11 and 13 to the Registration
Statement on Form N-1A.)
5(A). Investment Advisory Agreement between the
Registrant and Travelers Asset Management
International Corporation. (Incorporated
herein by reference to Exhibit 24(b)(5)(A)
to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A filed
on February 17, 1993.)
5(B). Sub-Advisory Agreement between Travelers Asset
Management International Corporation and The
Travelers Investment Management Company.
(Incorporated herein by reference to
Exhibit 24(b)(5)(B) to Post-Effective Amendment
No. 15 to the Registration Statement on Form
N-1A filed on February 17, 1993.)
8. Custody Agreement dated February 1, 1995 Electronically
between the Registrant and Chase Manhattan
Bank, N.A., of Brooklyn, New York.
9. Transfer and Recordkeeping Agreement between
the Registrant and The Travelers Insurance
Company. (Incorporated herein by reference to
Exhibit 24(b)(9) to Post-Effective Amendment
No. 14 to the Registration Statement on Form
N-1A filed on April 14, 1992.)
10. An Opinion and Consent of counsel as to the
legality of the securities registered by the
Registrant. (Incorporated herein by reference
to the Registrant's most recent 24f-2 Notice
filed on February 27, 1995.)
11(A). Consent of Coopers & Lybrand L.L.P., Electronically
Independent Accountants, to the use of their
name and opinion in Part A and Part B of this
Form N-1A and to the incorporation by reference
of their report.
11(B). Powers of Attorney authorizing Ernest J. Wright Electronically
as signatory for Heath B. McLendon, Knight
Edwards, Robert E. McGill, III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart.
<PAGE>
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of the 1st day of February, 1995 between each of the
registered management investment companies of The Travelers Insurance
Company listed below, and such others as may be added from time to time on
Schedule A attached hereto (each individually hereinafter called the
"Customer"), and The Chase Manhattan Bank, N.A., (hereinafter called the
"Bank"), whereby the Customer appoints the Bank, and the Bank hereby agrees
to act, as Custodian of the cash and securities ("Assets") of the Customer,
subject to the terms of this Agreement.
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or
other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing
or representing any other rights or interests therein and other
similar property whether certificated or uncertificated as may be
received by the Bank for the account of the Customer ("Securities");
and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank for the
account of the Customer, which cash shall not be subject to withdrawal
by draft or check. The Customer warrants its authority to: 1) deposit
the cash and Securities (Assets) received in the Accounts and 2) give
instructions (as defined in Section 9) concerning the Accounts. Upon
written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK.
Unless instructions (as defined in Section 9) specifically require another
location acceptable to the Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such
Securities are acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or it is
the legal currency for the payment of public or private debts.
Cash may be held pursuant to Instructions (as defined in Section 9) in
either interest or non-interest bearing accounts as may be available for the
particular currency. To the extent Instructions are issued and the Bank can
comply with such Instructions, the Bank is authorized to maintain cash
balances on deposit for the Customer with itself or one of its affiliates
at such reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct,
if acceptable to the Bank.
<PAGE>
3. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank will make payments from the Deposit Account upon receipt of
Instructions which include all information required by the Bank.
(b) In the event that any payment to be made under this Section 3 exceeds
the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall
be deemed a loan payable on demand, bearing interest at the rate
customarily charged by the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount
due, the Customer will promptly return any such amount upon oral or
written notification: (i) that such amount has not been received
in the ordinary course of business or (ii) that such amount was
incorrectly credited. If the Customer does not promptly return any
amount upon such notification, the Bank shall be entitled, upon oral
or written notification to the Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited.
The Bank shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency
proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
4. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank
upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the
Custody Account may be made in accordance with the customary or
established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery
of Securities out of the Custody Account may also be made in any
manner specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect
to any sale, exchange or purchase of Securities. Otherwise, such
transactions will be credited or debited to the Accounts on the
date cash or Securities are actually received by the Bank and
reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts
in its discretion if the related transaction fails to settle
within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 4 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
<PAGE>
5. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, to the extent
that the Bank is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of
Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of
the Assets. Unless the Customer sends the Bank a written exception or
objection to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In such event,
or where the Customer has otherwise approved any such statement, the Bank
shall, to the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or reasonably implied
therefrom as though it had been settled by the decree of a court of competent
jurisdiction in an action where the Customer and all persons having or claiming
an interest in the Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank of any payment, redemption or other transaction
regarding Securities in the Custody Account in respect of which the Bank has
agreed to take any action under this Agreement.
6. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"), the Bank will
give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a
Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it
deems in good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the
<PAGE>
appropriate nominee name relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner
in which such proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with Instructions.
7. NOMINIEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank or securities depository, as the case may be.
The Bank may without notice to the Customer cause any such Securities to
cease to be registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities registered in
a nominee name are called for partial redemption by the issuer, the Bank may
allot the called portion to the respective beneficial holders of such class
of security in any manner the Bank deems to be fair and equitable. The
Customer agrees to hold the Bank and their respective nominees harmless from
any liability arising directly or indirectly from their status as a mere
record holder of Securities in the Custody Account.
All securities accepted by the Bank on behalf of the Customer under the
terms of this Agreement shall be in "street name" or other good delivery from.
8. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
9. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, tested telex, TWX, facsimile
transmission, bank wire or other teleprocess or electronic instruction
or trade information system acceptable to the Bank which the Bank believes
in good faith to have been given by Authorized Persons or which are
transmitted with proper testing pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation
to conform to the telephone instructions received or the Bank's failure
to produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account or transactions
pursuant to the Agreement. The Customer shall be responsible from
safeguarding any testkeys, identification codes or other security devices
which the Bank shall make available to the Customer or its Authorized Persons.
The Bank agrees to safeguard and maintain the confidentiality of all
passwords or numbers and to limit access to this information for the purpose
of acting pursuant to this agreement.
<PAGE>
10. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this
Agreement as follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Assets. In the event of any loss to the Customer by reason
of the failure of the Bank to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss
at the date of discovery of such loss and without reference
to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which
it appoints unless such appointment was made negligently
or in bad faith.
(iii) The bank shall be indemnified by, and without liability
to the Customer for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the
scope of this Agreement if such act or omission was in
good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the
genuineness of any document which it believes in good faith
to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and
any related expenses with respect to income from or Assets
in the Accounts.
(v) The Bank will use its best efforts to maintain, during the
term of this Agreement, insurance coverage comparable to
the types, amounts and limits set forth below:
<TABLE>
<CAPTION>
Standard Limit Per
Form No. 24 Loss Aggregate
___________ _________ _________
<S> <C> <C>
* Insuring Agreements $75,000,000 $75,000,000
ABC-Basic Coverages
* Insuring Agreement 75,000,000 75,000,000
D-Forgery or Alteration
* Insuring Agreement 75,000,000 75,000,000
E-Securities (1)
* Extortion Coverage (2)
A. Threat to Persons 20,000,000 20,000,000
B. Threat to Property 20,000,000 20,000,000
* Computer Systems 75,000,000 75,000,000
Coverage (3)
* Deductible Amount 2,500,000
Notes:
_____
(1) An additional $125,000,000 insurance coverage for
securities located at custodian's head office or at
The Chase Manhattan Bank, N.A.,
<PAGE>
Chase MetroTech Center, Brooklyn, New York 11245,
Attention: Global Custody Division.
(2) No deductible (separate policy).
(3) This coverage is for electronic funds transfer systems.
There is additional coverage for all EDP equipment and
Media under Commercial Property Insurance. The limits
of this coverage are $583,000,000.
(vi) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(vii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited
to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 10, it is specifically acknowledged that the Bank shall
have no duty or responsibility to:
(i) question Instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security
other than as provided in Section 3(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or
other party to which Securities are delivered or payments
are made pursuant to this Agreement:
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons (as defined in
Section 8) issuing Instructions shall bear any responsibility
to review such confirmations against Instructions issued to
and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction,
or circumstances are such that the Bank may have a potential
conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to
other customers, act as financial advisor to the issuer of
Securities, act as a lender to the issuer of Securities, act
in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn
profits from any of the activities listed herein.
11. FEES AND EXPENSES.
<PAGE>
The Customer agrees to pay to the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket expenses.
12. MISCELLANEOUS.
(a) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States with its principal place of business
in the State of Connecticut and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or
the certification of such other facts as may be required to administer
the Bank's obligations under this Agreement. The Customer will
indemnify the Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.
(b) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their
examination of books and records pertaining to the Customer's affairs.
(c) Periodic Statements, Books and Records. The Bank shall notify the
Customer of each transaction involving securities in the Account and
will render a statement of transactions with respect to the Account
on a regular basis. Periodic statements shall be rendered as the
Customer may reasonably require, but not less frequently than monthly.
The Bank shall at all times maintain proper books and records that
shall separately identify the securities. Books and records of the
Bank (and of any agent or depository) relating to the Account shall
at all times during regular business hours of the Bank (or of any
agent or depository) be available for inspection by duly authorized
officers, employees or agents of Customer, or by legally authorized
regulatory officers who are then in the process of reviewing the
Customer's financial affairs upon adequate proof to the Bank of
such official status. The Bank agrees to maintain such records as
may be sufficient to determine and verify information concerning the
custodied securities which must be included in the Annual and
Semi-Annual Reports of the Customer, or any other report required by
applicable law.
(d) Books and Records Are Property of Customer. The Bank hereby
acknowledges that all books and records relating to the services
provided to Customer hereunder are the property of the Customer
and subject to its control; provided, however, that during the
term of the Agreement, the Customer shall not exercise such
control so as to interfere with the performance of the Bank's
duties hereunder.
(e) Governing Law; Successors and Assigns. This Agreement shall
be governed by the laws of the State of New York.
(f) Entire Agreement; Applicable Riders. Customer represents
that the Assets deposited in the Accounts are (Check one):
___ Employee Benefit Plan or other assets subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA");
_X_ Investment company assets subject to certain Securities and
Exchange Commission ("SEC") rules and regulations;
___ Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A and Exhibit 1.
<PAGE>
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between
the parties. Any amendment to this Agreement must be in writing,
executed by both parties.
(g) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect
on the basis of any particular circumstances or in any jurisdiction,
the validity, legality and enforceability of such provision or
provisions under other circumstances or in other jurisdictions and
of the remaining provisions will not in any way be affected or
impaired.
(h) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a
party of any provision of this Agreement, or waiver of any breach or
default, is effective unless in writing and signed by the party
against whom the waiver is to be enforced.
(i) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the
following addresses or such other addresses as may subsequently be
given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Customer: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department, Cashier Division
13. CONFIDENTIALITY OF RECORDS.
The Bank agrees to treat all records and other information relating to
the Customer or the Custody Account as confidential, except that it
may disclose such information after prior notification to and prior
approval of the Customer, which will not be unreasonably withheld.
Nothing in this paragraph shall prevent the Bank from divulging
information to civil, criminal, bank, or securities regulatory
authorities or where the Bank may be exposed to civil or criminal
proceedings or penalties for failure to comply.
14. RELIANCE UPON DATA.
The Bank may rely on the accuracy of all data received by it through
electronic means and initiated by any person authorized by the Customer.
Every person who uses the correct passwords to obtain information by
electronic means or to make permissible transactions shall be presumed
to have the Customer's authority unless the Customer can prove that:
(a) a person using a correct password was not authorized to have access
to this information;
(b) the person using the password obtained it through or as a result of
the Bank's disclosure (whether direct or indirect); and
<PAGE>
(c) the disclosure by the Bank was not authorized by the Customer prior
to its unauthorized use.
15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS.
The Customer covenants and agrees that in the event that the Bank shall
at any time at the Customer's request enter into an "Option Guarantee
Letter" or execute an "SD Option Clearing Corporation Escrow Receipt"
at the request of the Customer covering securities deposited with the
Bank pursuant to the Agreement, the Customer will hold the Bank harmless
from any and all loss, cost, or damage which the Bank may suffer by reason
of being requested to deliver securities or other property under such
Option Guarantee Letters or Escrow Receipts which securities and/or other
property were not in fact delivered to the Bank or to the Bank's agent for
transmittal to the Bank.
16. SUBROGATION OF RIGHTS.
At the election of the Customer, the Customer shall be entitled to be
subrogated to the rights of the Bank, with respect to any claim against
any other person or institution which the Bank may have, as a consequence
of any loss or damage to custodied securities. In such event, the Customer
shall consult with the Bank concerning selection of counsel and management
of any litigation to cover for such loss.
17. RESOLUTION OF DISPUTES.
In the event of any loss of or damage to custodied securities or dispute
between the Bank and the Customer concerning the Account, the Bank and
the Customer agree to attempt to resolve the dispute through negotiation
or a method of alternative dispute resolution. No litigation shall be
commenced without a certification by an authorized officer, employee,
or agent of either party that the dispute cannot be resolved by negotiation
or alternative dispute resolution provided in writing at least 10 days
before commencing legal action.
18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY LIABLE.
To the extent this Agreement is made on behalf of the mutual funds
(the "Funds"), it shall be made by an officer of the Fund, not
individually, but solely as an officer or Trustee of the Fund under
its Declaration of Trust, and the obligations under this Agreement are
not binding upon, nor shall any resort be had to the private property
of, any of the Trustees, shareholders, officers, employees or agents
of the Funds personally, but shall bind only the Funds' property.
19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE.
The Bank agrees that it shall furnish to the California Commissioner
of Insurance, at the Customer's expense, any information or reports
concerning the funds as the Commissioner, in the performance of his
or her duties, may request.
<PAGE>
20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM.
If the Customer wishes to deposit securities with the Bank to be held
in the Bank's account with one or more depositories or clearinghouses
or in the book-entry system authorized by the U.S. Department of the
Treasury or other federal agency (collectively referred to as
"Securities Systems") pursuant to an arrangement which is approved
by the Customer, then the Bank will do the following:
(a) The Bank's official records shall separately identify the securities
owned by the customer which are held in the account and indicate the
location of the securities.
(b) All registered securities held by the Bank pursuant to the agreement
shall be registered in the name of the Customer or its nominee, the
Bank or its nominee, or a Securities System or its nominee.
(c) The Bank will send to the Customer a confirmation of the transfer of
securities held for the Customer and furnish regular reports of
holdings of securities in the account.
(d) Upon written instructions from an authorized officer of the Customer,
any representative of the Connecticut Insurance Department shall be
entitled to examine, on the Bank's premises, the Bank's records
relating to the securities held in the account.
(e) The Bank shall maintain records sufficient to determine and verify
information relating to securities held in the account that may be
reported in the Annual and Semi-Annual Reports of the Customer, as
filed with regulatory authorities.
(f) The Bank shall be responsible for any loss of the securities held in
the account caused by the negligence of the Bank or its agents.
(g) In the event of loss of any of the securities held in the account,
the Bank shall promptly replace the securities or the value
thereof and the value of any loss of rights or privileges resulting
from said loss or securities.
(h) The Bank will hold the securities in the account subject to the
instructions of the Customer and will permit withdrawal thereof upon
the demand of the Customer.
(i) The Bank shall send to the Customer all (i) reports which it receives
from the Securities System on its systems of internal accounting control
and (ii) reports prepared by outside auditors with respect to the
Bank's systems of internal accounting control pertaining to custodian
recordkeeping, promptly upon the Bank's receipt of such reports.
(j) Securities in the account may be held only in Connecticut or in
reciprocal states under the Insurers Supervision, Rehabilitation and
Liquidation Model Act or a similar act (the Model Act).
(k) If a reciprocal state under the Model Act repeals or modifies the
Model Act so as to impair the Connecticut Insurance Commissioner's
authority over the assets of an insolvent insurer, any securities
held in the account and located in that state will be relocated to
another reciprocal state or Connecticut prior to the effective date
of said repeal or modification, unless the Connecticut Insurance
Commissioner deems the repeal or modification acceptable.
(l) The Bank may only deposit the securities in a nonproprietary account
with the Securities System that includes only assets held for the
Bank's customers.
<PAGE>
(m) Should a Securities System cease to act on behalf of the Bank, then
the securities in the account shall be promptly transferred to the
Bank or another Securities System approved by the Customer.
21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT.
This Agreement shall become effective as of the effective date named
herein, shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto, and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however, that the
Bank shall not act under paragraph 20 hereof in the absence of receipt
of an initial certificate of the Secretary that the board of the
Customer has approved the initial use of a particular Securities System
and the receipt of an annual certificate of the Secretary that the Board
has reviewed the use by the Customer of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended, and provided further, however, that the Customer
shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of its Rules
and Regulations or by-laws and further provided, that the Customer may
at any time by action of its Board (a) substitute another bank or trust
company for the Bank by giving notice as described above to the Bank,
or (b) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Bank by the Comptroller
of the Currency or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Customer shall pay the Bank such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Bank for its costs, expenses and disbursements.
This Agreement may not be assigned by the Bank without the consent of
the Customer, authorized or approved by a resolution of its Board
(The Board of Managers of the Variable Annuity Accounts or the Board
of Trustees of the Mutual Funds).
Additional Investment Company Separate Accounts or mutual funds may be
added to this Agreement upon the execution by the Bank and any additional
party of an amended "Schedule A" to be attached to this Agreement,
which shall list such additional Separate Accounts or mutual funds.
22. INDEMNIFICATION AND HOLD HARMLESS.
The Customer agrees to indemnify and hold harmless the Bank and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it
or its nominees in Connecticut with the performance of this Agreement
in good faith, except such as may arise from the Bank's or its
nominee's own negligent action, negligent failure to act or willful
misconduct.
<PAGE>
IN WITNESS WHEREOF, the Customer and the Bank have each executed
this Custody Agreement as of the 1st day of February, 1995, by their
duly authorized representatives.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE
ANNUITIES
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
By: /s/Heath B. McLendon
____________________
Chairman
Board of Managers
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
HIGH YIELD BOND TRUST
MANAGED ASSETS TRUST
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
By: /s/Heath B. McLendon
____________________
Chairman
Board of Trustees
THE CHASE MANHATTAN BANK, N.A.
By: /s/George S. Snyder
Title: Vice President
<PAGE>
EXHIBIT I
_________
MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE TRAVELERS INSURANCE COMPANY AND
THE CHASE MANHATTAN BANK N.A.
EFFECTIVE FEBRUARY 1, 1995
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the "1940 Act"), as the
same may be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or
under the authority of the Securities and Exchange Commission ("SEC") or
the Exemptive Order applicable to accounts of this nature issued to the
Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981),
as amended, or unless the Bank has otherwise specifically agreed, the
Customer shall be solely responsible to assure that the maintenance of
Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority
of the SEC.
The following modifications are made to the Agreement:
Section 9. Instructions.
Add the following language to the end of Section 9:
Deposit Account Payments and Custody Account Transactions made pursuant
to Section 3 and 4 of this Agreement may be made only for the purposes
listed below. Instructions must specify the purpose for which any
transaction is to be made and Customer shall be solely responsible to
assure that Instructions are in accord with any limitations or restrictions
applicable to the Customer by law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;
<PAGE>
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of
the Bank or the Customer's transfer agent, such shares to be
purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc., relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released
only upon payment to the Bank of monies for the premium due and a
receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, the Bank will received from
brokers the Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the delivery of
Securities to be held in escrow and will have no responsibility
or liability for any such Securities which are not returned promptly
when due other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement
of the purpose for which the delivery or payment is to be made,
the amount of the payment or specific Securities to be delivered,
the name of the person or persons to whom delivery or payment is to
be made, and a certification that the purpose is a proper purpose
under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 21.
Section 10. Standard of Care; Liabilities.
Add the following subsection (c) to Section 10:
(c) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, holding the
Customer's Securities, pursuant to this Agreement afford protection
for such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities held by
the Bank and its securities depositories in New York.
Section 12. Access to Records.
Add the following language to the end of Section 12(b):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal account controls applicable to the Bank's duties under this
Agreement.
<PAGE>
SCHEDULE A
__________
</TABLE>
<TABLE>
<CAPTION>
Short Name Long Name
__________ _________
<S> <C>
VTM The Travelers Timed Short-Term Bond Account for Variable Annuities
VTA The Travelers Timed Growth and Income Stock Account for Variable Annuities
VA1 The Travelers Quality Bond Account for Variable Annuities
VAA The Travelers Growth and Income Stock Account for Variable Annuities
VM The Travelers Money Market Account for Variable Annuities
MAT Managed Assets Trust
AST Capital Appreciation Fund
HYBT High Yield Bond Trust
CIT Cash Income Trust
USGF US Government Securities Portfolio
SOAP Social Awareness Stock Portfolio
VTAS The Travelers Timed Aggressive Stock Account for Variable Annuities
VTB The Travelers Timed Bond Account for Variable Annuities
GRUF Utilities Portfolio
</TABLE>
<PAGE>
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of the 1st day of February, 1995 between each of the
registered management investment companies of The Travelers Insurance
Company listed below, and such others as may be added from time to time on
Schedule A attached hereto (each individually hereinafter called the
"Customer"), and The Chase Manhattan Bank, N.A., (hereinafter called the
"Bank"), whereby the Customer appoints the Bank, and the Bank hereby agrees
to act, as Custodian of the cash and securities ("Assets") of the Customer,
subject to the terms of this Agreement.
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or
other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing
or representing any other rights or interests therein and other
similar property whether certificated or uncertificated as may be
received by the Bank for the account of the Customer ("Securities");
and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank for the
account of the Customer, which cash shall not be subject to withdrawal
by draft or check. The Customer warrants its authority to: 1) deposit
the cash and Securities (Assets) received in the Accounts and 2) give
instructions (as defined in Section 9) concerning the Accounts. Upon
written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK.
Unless instructions (as defined in Section 9) specifically require another
location acceptable to the Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such
Securities are acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or it is
the legal currency for the payment of public or private debts.
Cash may be held pursuant to Instructions (as defined in Section 9) in
either interest or non-interest bearing accounts as may be available for the
particular currency. To the extent Instructions are issued and the Bank can
comply with such Instructions, the Bank is authorized to maintain cash
balances on deposit for the Customer with itself or one of its affiliates
at such reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct,
if acceptable to the Bank.
<PAGE>
3. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank will make payments from the Deposit Account upon receipt of
Instructions which include all information required by the Bank.
(b) In the event that any payment to be made under this Section 3 exceeds
the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall
be deemed a loan payable on demand, bearing interest at the rate
customarily charged by the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount
due, the Customer will promptly return any such amount upon oral or
written notification: (i) that such amount has not been received
in the ordinary course of business or (ii) that such amount was
incorrectly credited. If the Customer does not promptly return any
amount upon such notification, the Bank shall be entitled, upon oral
or written notification to the Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited.
The Bank shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency
proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
4. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank
upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the
Custody Account may be made in accordance with the customary or
established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery
of Securities out of the Custody Account may also be made in any
manner specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect
to any sale, exchange or purchase of Securities. Otherwise, such
transactions will be credited or debited to the Accounts on the
date cash or Securities are actually received by the Bank and
reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts
in its discretion if the related transaction fails to settle
within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 4 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
<PAGE>
5. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, to the extent
that the Bank is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of
Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of
the Assets. Unless the Customer sends the Bank a written exception or
objection to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In such event,
or where the Customer has otherwise approved any such statement, the Bank
shall, to the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or reasonably implied
therefrom as though it had been settled by the decree of a court of competent
jurisdiction in an action where the Customer and all persons having or claiming
an interest in the Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank of any payment, redemption or other transaction
regarding Securities in the Custody Account in respect of which the Bank has
agreed to take any action under this Agreement.
6. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"), the Bank will
give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a
Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it
deems in good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the
<PAGE>
appropriate nominee name relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner
in which such proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with Instructions.
7. NOMINIEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank or securities depository, as the case may be.
The Bank may without notice to the Customer cause any such Securities to
cease to be registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities registered in
a nominee name are called for partial redemption by the issuer, the Bank may
allot the called portion to the respective beneficial holders of such class
of security in any manner the Bank deems to be fair and equitable. The
Customer agrees to hold the Bank and their respective nominees harmless from
any liability arising directly or indirectly from their status as a mere
record holder of Securities in the Custody Account.
All securities accepted by the Bank on behalf of the Customer under the
terms of this Agreement shall be in "street name" or other good delivery from.
8. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
9. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, tested telex, TWX, facsimile
transmission, bank wire or other teleprocess or electronic instruction
or trade information system acceptable to the Bank which the Bank believes
in good faith to have been given by Authorized Persons or which are
transmitted with proper testing pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation
to conform to the telephone instructions received or the Bank's failure
to produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account or transactions
pursuant to the Agreement. The Customer shall be responsible from
safeguarding any testkeys, identification codes or other security devices
which the Bank shall make available to the Customer or its Authorized Persons.
The Bank agrees to safeguard and maintain the confidentiality of all
passwords or numbers and to limit access to this information for the purpose
of acting pursuant to this agreement.
<PAGE>
10. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this
Agreement as follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Assets. In the event of any loss to the Customer by reason
of the failure of the Bank to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss
at the date of discovery of such loss and without reference
to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which
it appoints unless such appointment was made negligently
or in bad faith.
(iii) The bank shall be indemnified by, and without liability
to the Customer for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the
scope of this Agreement if such act or omission was in
good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the
genuineness of any document which it believes in good faith
to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and
any related expenses with respect to income from or Assets
in the Accounts.
(v) The Bank will use its best efforts to maintain, during the
term of this Agreement, insurance coverage comparable to
the types, amounts and limits set forth below:
<TABLE>
<CAPTION>
Standard Limit Per
Form No. 24 Loss Aggregate
___________ _________ _________
<S> <C> <C>
* Insuring Agreements $75,000,000 $75,000,000
ABC-Basic Coverages
* Insuring Agreement 75,000,000 75,000,000
D-Forgery or Alteration
* Insuring Agreement 75,000,000 75,000,000
E-Securities (1)
* Extortion Coverage (2)
A. Threat to Persons 20,000,000 20,000,000
B. Threat to Property 20,000,000 20,000,000
* Computer Systems 75,000,000 75,000,000
Coverage (3)
* Deductible Amount 2,500,000
Notes:
_____
(1) An additional $125,000,000 insurance coverage for
securities located at custodian's head office or at
The Chase Manhattan Bank, N.A.,
<PAGE>
Chase MetroTech Center, Brooklyn, New York 11245,
Attention: Global Custody Division.
(2) No deductible (separate policy).
(3) This coverage is for electronic funds transfer systems.
There is additional coverage for all EDP equipment and
Media under Commercial Property Insurance. The limits
of this coverage are $583,000,000.
(vi) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(vii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited
to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 10, it is specifically acknowledged that the Bank shall
have no duty or responsibility to:
(i) question Instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security
other than as provided in Section 3(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or
other party to which Securities are delivered or payments
are made pursuant to this Agreement:
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons (as defined in
Section 8) issuing Instructions shall bear any responsibility
to review such confirmations against Instructions issued to
and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction,
or circumstances are such that the Bank may have a potential
conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to
other customers, act as financial advisor to the issuer of
Securities, act as a lender to the issuer of Securities, act
in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn
profits from any of the activities listed herein.
11. FEES AND EXPENSES.
<PAGE>
The Customer agrees to pay to the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket expenses.
12. MISCELLANEOUS.
(a) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States with its principal place of business
in the State of Connecticut and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or
the certification of such other facts as may be required to administer
the Bank's obligations under this Agreement. The Customer will
indemnify the Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.
(b) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their
examination of books and records pertaining to the Customer's affairs.
(c) Periodic Statements, Books and Records. The Bank shall notify the
Customer of each transaction involving securities in the Account and
will render a statement of transactions with respect to the Account
on a regular basis. Periodic statements shall be rendered as the
Customer may reasonably require, but not less frequently than monthly.
The Bank shall at all times maintain proper books and records that
shall separately identify the securities. Books and records of the
Bank (and of any agent or depository) relating to the Account shall
at all times during regular business hours of the Bank (or of any
agent or depository) be available for inspection by duly authorized
officers, employees or agents of Customer, or by legally authorized
regulatory officers who are then in the process of reviewing the
Customer's financial affairs upon adequate proof to the Bank of
such official status. The Bank agrees to maintain such records as
may be sufficient to determine and verify information concerning the
custodied securities which must be included in the Annual and
Semi-Annual Reports of the Customer, or any other report required by
applicable law.
(d) Books and Records Are Property of Customer. The Bank hereby
acknowledges that all books and records relating to the services
provided to Customer hereunder are the property of the Customer
and subject to its control; provided, however, that during the
term of the Agreement, the Customer shall not exercise such
control so as to interfere with the performance of the Bank's
duties hereunder.
(e) Governing Law; Successors and Assigns. This Agreement shall
be governed by the laws of the State of New York.
(f) Entire Agreement; Applicable Riders. Customer represents
that the Assets deposited in the Accounts are (Check one):
___ Employee Benefit Plan or other assets subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA");
_X_ Investment company assets subject to certain Securities and
Exchange Commission ("SEC") rules and regulations;
___ Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A and Exhibit 1.
<PAGE>
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between
the parties. Any amendment to this Agreement must be in writing,
executed by both parties.
(g) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect
on the basis of any particular circumstances or in any jurisdiction,
the validity, legality and enforceability of such provision or
provisions under other circumstances or in other jurisdictions and
of the remaining provisions will not in any way be affected or
impaired.
(h) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a
party of any provision of this Agreement, or waiver of any breach or
default, is effective unless in writing and signed by the party
against whom the waiver is to be enforced.
(i) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the
following addresses or such other addresses as may subsequently be
given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Customer: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department, Cashier Division
13. CONFIDENTIALITY OF RECORDS.
The Bank agrees to treat all records and other information relating to
the Customer or the Custody Account as confidential, except that it
may disclose such information after prior notification to and prior
approval of the Customer, which will not be unreasonably withheld.
Nothing in this paragraph shall prevent the Bank from divulging
information to civil, criminal, bank, or securities regulatory
authorities or where the Bank may be exposed to civil or criminal
proceedings or penalties for failure to comply.
14. RELIANCE UPON DATA.
The Bank may rely on the accuracy of all data received by it through
electronic means and initiated by any person authorized by the Customer.
Every person who uses the correct passwords to obtain information by
electronic means or to make permissible transactions shall be presumed
to have the Customer's authority unless the Customer can prove that:
(a) a person using a correct password was not authorized to have access
to this information;
(b) the person using the password obtained it through or as a result of
the Bank's disclosure (whether direct or indirect); and
<PAGE>
(c) the disclosure by the Bank was not authorized by the Customer prior
to its unauthorized use.
15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS.
The Customer covenants and agrees that in the event that the Bank shall
at any time at the Customer's request enter into an "Option Guarantee
Letter" or execute an "SD Option Clearing Corporation Escrow Receipt"
at the request of the Customer covering securities deposited with the
Bank pursuant to the Agreement, the Customer will hold the Bank harmless
from any and all loss, cost, or damage which the Bank may suffer by reason
of being requested to deliver securities or other property under such
Option Guarantee Letters or Escrow Receipts which securities and/or other
property were not in fact delivered to the Bank or to the Bank's agent for
transmittal to the Bank.
16. SUBROGATION OF RIGHTS.
At the election of the Customer, the Customer shall be entitled to be
subrogated to the rights of the Bank, with respect to any claim against
any other person or institution which the Bank may have, as a consequence
of any loss or damage to custodied securities. In such event, the Customer
shall consult with the Bank concerning selection of counsel and management
of any litigation to cover for such loss.
17. RESOLUTION OF DISPUTES.
In the event of any loss of or damage to custodied securities or dispute
between the Bank and the Customer concerning the Account, the Bank and
the Customer agree to attempt to resolve the dispute through negotiation
or a method of alternative dispute resolution. No litigation shall be
commenced without a certification by an authorized officer, employee,
or agent of either party that the dispute cannot be resolved by negotiation
or alternative dispute resolution provided in writing at least 10 days
before commencing legal action.
18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY LIABLE.
To the extent this Agreement is made on behalf of the mutual funds
(the "Funds"), it shall be made by an officer of the Fund, not
individually, but solely as an officer or Trustee of the Fund under
its Declaration of Trust, and the obligations under this Agreement are
not binding upon, nor shall any resort be had to the private property
of, any of the Trustees, shareholders, officers, employees or agents
of the Funds personally, but shall bind only the Funds' property.
19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE.
The Bank agrees that it shall furnish to the California Commissioner
of Insurance, at the Customer's expense, any information or reports
concerning the funds as the Commissioner, in the performance of his
or her duties, may request.
<PAGE>
20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM.
If the Customer wishes to deposit securities with the Bank to be held
in the Bank's account with one or more depositories or clearinghouses
or in the book-entry system authorized by the U.S. Department of the
Treasury or other federal agency (collectively referred to as
"Securities Systems") pursuant to an arrangement which is approved
by the Customer, then the Bank will do the following:
(a) The Bank's official records shall separately identify the securities
owned by the customer which are held in the account and indicate the
location of the securities.
(b) All registered securities held by the Bank pursuant to the agreement
shall be registered in the name of the Customer or its nominee, the
Bank or its nominee, or a Securities System or its nominee.
(c) The Bank will send to the Customer a confirmation of the transfer of
securities held for the Customer and furnish regular reports of
holdings of securities in the account.
(d) Upon written instructions from an authorized officer of the Customer,
any representative of the Connecticut Insurance Department shall be
entitled to examine, on the Bank's premises, the Bank's records
relating to the securities held in the account.
(e) The Bank shall maintain records sufficient to determine and verify
information relating to securities held in the account that may be
reported in the Annual and Semi-Annual Reports of the Customer, as
filed with regulatory authorities.
(f) The Bank shall be responsible for any loss of the securities held in
the account caused by the negligence of the Bank or its agents.
(g) In the event of loss of any of the securities held in the account,
the Bank shall promptly replace the securities or the value
thereof and the value of any loss of rights or privileges resulting
from said loss or securities.
(h) The Bank will hold the securities in the account subject to the
instructions of the Customer and will permit withdrawal thereof upon
the demand of the Customer.
(i) The Bank shall send to the Customer all (i) reports which it receives
from the Securities System on its systems of internal accounting control
and (ii) reports prepared by outside auditors with respect to the
Bank's systems of internal accounting control pertaining to custodian
recordkeeping, promptly upon the Bank's receipt of such reports.
(j) Securities in the account may be held only in Connecticut or in
reciprocal states under the Insurers Supervision, Rehabilitation and
Liquidation Model Act or a similar act (the Model Act).
(k) If a reciprocal state under the Model Act repeals or modifies the
Model Act so as to impair the Connecticut Insurance Commissioner's
authority over the assets of an insolvent insurer, any securities
held in the account and located in that state will be relocated to
another reciprocal state or Connecticut prior to the effective date
of said repeal or modification, unless the Connecticut Insurance
Commissioner deems the repeal or modification acceptable.
(l) The Bank may only deposit the securities in a nonproprietary account
with the Securities System that includes only assets held for the
Bank's customers.
<PAGE>
(m) Should a Securities System cease to act on behalf of the Bank, then
the securities in the account shall be promptly transferred to the
Bank or another Securities System approved by the Customer.
21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT.
This Agreement shall become effective as of the effective date named
herein, shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto, and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however, that the
Bank shall not act under paragraph 20 hereof in the absence of receipt
of an initial certificate of the Secretary that the board of the
Customer has approved the initial use of a particular Securities System
and the receipt of an annual certificate of the Secretary that the Board
has reviewed the use by the Customer of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended, and provided further, however, that the Customer
shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of its Rules
and Regulations or by-laws and further provided, that the Customer may
at any time by action of its Board (a) substitute another bank or trust
company for the Bank by giving notice as described above to the Bank,
or (b) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Bank by the Comptroller
of the Currency or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Customer shall pay the Bank such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Bank for its costs, expenses and disbursements.
This Agreement may not be assigned by the Bank without the consent of
the Customer, authorized or approved by a resolution of its Board
(The Board of Managers of the Variable Annuity Accounts or the Board
of Trustees of the Mutual Funds).
Additional Investment Company Separate Accounts or mutual funds may be
added to this Agreement upon the execution by the Bank and any additional
party of an amended "Schedule A" to be attached to this Agreement,
which shall list such additional Separate Accounts or mutual funds.
22. INDEMNIFICATION AND HOLD HARMLESS.
The Customer agrees to indemnify and hold harmless the Bank and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it
or its nominees in Connecticut with the performance of this Agreement
in good faith, except such as may arise from the Bank's or its
nominee's own negligent action, negligent failure to act or willful
misconduct.
<PAGE>
IN WITNESS WHEREOF, the Customer and the Bank have each executed
this Custody Agreement as of the 1st day of February, 1995, by their
duly authorized representatives.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE
ANNUITIES
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
By: /s/Heath B. McLendon
____________________
Chairman
Board of Managers
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
HIGH YIELD BOND TRUST
MANAGED ASSETS TRUST
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
By: /s/Heath B. McLendon
____________________
Chairman
Board of Trustees
THE CHASE MANHATTAN BANK, N.A.
By: /s/George S. Snyder
Title: Vice President
<PAGE>
EXHIBIT I
_________
MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE TRAVELERS INSURANCE COMPANY AND
THE CHASE MANHATTAN BANK N.A.
EFFECTIVE FEBRUARY 1, 1995
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the "1940 Act"), as the
same may be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or
under the authority of the Securities and Exchange Commission ("SEC") or
the Exemptive Order applicable to accounts of this nature issued to the
Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981),
as amended, or unless the Bank has otherwise specifically agreed, the
Customer shall be solely responsible to assure that the maintenance of
Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority
of the SEC.
The following modifications are made to the Agreement:
Section 9. Instructions.
Add the following language to the end of Section 9:
Deposit Account Payments and Custody Account Transactions made pursuant
to Section 3 and 4 of this Agreement may be made only for the purposes
listed below. Instructions must specify the purpose for which any
transaction is to be made and Customer shall be solely responsible to
assure that Instructions are in accord with any limitations or restrictions
applicable to the Customer by law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;
<PAGE>
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of
the Bank or the Customer's transfer agent, such shares to be
purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc., relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released
only upon payment to the Bank of monies for the premium due and a
receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, the Bank will received from
brokers the Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the delivery of
Securities to be held in escrow and will have no responsibility
or liability for any such Securities which are not returned promptly
when due other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement
of the purpose for which the delivery or payment is to be made,
the amount of the payment or specific Securities to be delivered,
the name of the person or persons to whom delivery or payment is to
be made, and a certification that the purpose is a proper purpose
under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 21.
Section 10. Standard of Care; Liabilities.
Add the following subsection (c) to Section 10:
(c) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, holding the
Customer's Securities, pursuant to this Agreement afford protection
for such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities held by
the Bank and its securities depositories in New York.
Section 12. Access to Records.
Add the following language to the end of Section 12(b):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal account controls applicable to the Bank's duties under this
Agreement.
<PAGE>
SCHEDULE A
__________
</TABLE>
<TABLE>
<CAPTION>
Short Name Long Name
__________ _________
<S> <C>
VTM The Travelers Timed Short-Term Bond Account for Variable Annuities
VTA The Travelers Timed Growth and Income Stock Account for Variable Annuities
VA1 The Travelers Quality Bond Account for Variable Annuities
VAA The Travelers Growth and Income Stock Account for Variable Annuities
VM The Travelers Money Market Account for Variable Annuities
MAT Managed Assets Trust
AST Capital Appreciation Fund
HYBT High Yield Bond Trust
CIT Cash Income Trust
USGF US Government Securities Portfolio
SOAP Social Awareness Stock Portfolio
VTAS The Travelers Timed Aggressive Stock Account for Variable Annuities
VTB The Travelers Timed Bond Account for Variable Annuities
GRUF Utilities Portfolio
</TABLE>
<PAGE>
Coopers Coopers & Lybrand L.L.P.
& Lybrand
a professional
services firm
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 18 of this Registration Statement on Form N-1A of our
report dated February 15, 1995, on our audits of the financial
statements and financial highlights of Managed Assets Trust. We also
consent to the reference to our Firm as experts under the caption
"Additional Information".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 18, 1995
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Heath B. McLendon of Summit, New Jersey,
Chairman of the Board of Trustees of Managed Assets Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and KATHLEEN A. McGAH, Assistant Secretary of
said Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of Managed Assets
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
28th day of February, 1995.
/s/Heath B. McLendon
Chairman of the Board of Trustees
Managed Assets Trust
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Knight Edwards of Providence, Rhode Island, a
member of the Board of Trustees of Managed Assets Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said
Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of Managed Assets
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Knight Edwards
Member of the Board of Trustees
Managed Assets Trust
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Robert E. McGill, III of Williamstown, Massa-
chusetts, a member of the Board of Trustees of Managed Assets
Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secre-
tary of said Trust, either one of them acting alone, my true and
lawful attorney-in-fact, for me, and in my name, place and
stead, to sign registration statements of said Trust on Form
N1-1A or other applicable form under the Securities Act of 1933
for the registration of shares of Beneficial Interest of Managed
Assets Trust and to sign any and all amendments, including
post-effective amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Robert E. McGill, III
Member of the Board of Trustees
Managed Assets Trust
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis Mandell of Storrs, Connecticut, a member
of the Board of Trustees of Managed Assets Trust, do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said
Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust,
either one of them acting alone, my true and lawful attorney-
- -in-fact, for me, and in my name, place and stead, to sign
registration statements of said Trust on Form N1-1A or other
applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of Managed Assets
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Lewis Mandell
Member of the Board of Trustees
Managed Assets Trust
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Frances M. Hawk of Sherborn, Massachusetts, a
member of the Board of Trustees of Managed Assets Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said
Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of Managed Assets
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Frances M. Hawk
Member of the Board of Trustees
Managed Assets Trust
<PAGE>
Exhibit 11(B)
MANAGED ASSETS TRUST
____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Ian R. Stuart of East Hampton, Connecticut,
Treasurer of Trustees of Managed Assets Trust, do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said
Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust,
either one of them acting alone, my true and lawful attorney-
- -in-fact, for me, and in my name, place and stead, to sign
registration statements of said Trust on Form N1-1A or other
applicable form under the Securities Act of 1933 for the regis-
tration of shares of Beneficial Interest of Managed Assets Trust
and to sign any and all amendments, including post-effective
amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Ian R. Stuart
Treasurer, Managed Assets Trust
