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Registration Statement No. 2-79359
811-3568
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 23
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22
MANAGED ASSETS TRUST
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(Exact name of Registrant)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (860) 277-0111
ERNEST J. WRIGHT
Secretary to the Board of Trustees
Managed Assets Trust
One Tower Square
Hartford, Connecticut 06183
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
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It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b).
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X on May 1, 1998 pursuant to paragraph (b).
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60 days after filing pursuant to paragraph (a)(1).
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on ___________ pursuant to paragraph (a)(1).
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75 days after filing pursuant to paragraph (a)(2)
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on ___________ pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
______ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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MANAGED ASSETS TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Cover Page
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;
Securities Transaction; Fund Expenses;
Additional Information
6. Capital Stock and Other Securities Fund Description; Dividends and
Distributions; Shareholder Rights; Net
Asset Value
7. Purchase of Securities Being Offered Shareholder Rights
8. Redemption or Repurchase Net Asset Value
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 Adviser; Additional Information
Other Services
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 Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Additional Information
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
MANAGED ASSETS TRUST
One Tower Square
Hartford, Connecticut 06183
Telephone 860-277-0111
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Managed Assets Trust (the "Fund"or "MAT") 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 separate
accounts of The Travelers Insurance Company and The Travelers Life and Annuity
Company (the "Company" or "The Travelers"). The Fund serves as a funding option
for certain variable annuity and variable life insurance contracts issued by the
Company. The term "shareholder" as used in this prospectus refers to any
insurance company separate account that may use shares of the Fund as a funding
option now or 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 ("SAI") dated May 1, 1998 which has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to The Travelers,
Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030, by calling
1-860-277-0111, or by accessing the SEC's Website (http://www.sec.gov).
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR A VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT ISSUED BY THE TRAVELERS. 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, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS........................................ 3
FUND DESCRIPTION............................................ 4
INVESTMENT OBJECTIVE AND POLICIES........................... 4
INVESTMENT RESTRICTIONS..................................... 5
RISK FACTORS................................................ 5
BOARD OF TRUSTEES........................................... 5
INVESTMENT ADVISERS......................................... 6
TAMIC..................................................... 6
Portfolio Manager...................................... 6
TIMCO..................................................... 6
Portfolio Manager...................................... 6
FUND ADMINISTRATION......................................... 7
SECURITIES TRANSACTIONS..................................... 7
FUND EXPENSES............................................... 7
TRANSFER AGENT.............................................. 8
SHAREHOLDER RIGHTS.......................................... 8
NET ASSET VALUE............................................. 8
TAX STATUS.................................................. 9
DIVIDENDS AND DISTRIBUTIONS................................. 9
LEGAL PROCEEDINGS........................................... 9
YEAR 2000 COMPLIANCE........................................ 9
ADDITIONAL INFORMATION...................................... 10
EXHIBIT A................................................... 11
</TABLE>
MAT-2
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FINANCIAL HIGHLIGHTS
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MANAGED ASSETS TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
The following information for the year ended December 31, 1997, has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the financial statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
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PER SHARE DATA
Net asset value, beginning of
year............................. $ 14.98 $ 15.50 $ 12.85 $ 14.21 $ 14.02 $ 14.78 $ 12.77
Income from operations
Net investment income.............. 0.48 0.46 0.49 0.46 0.51 0.64 0.74
Net gains or losses on securities
(realized and unrealized)........ 2.70 1.50 2.83 (0.73) 0.72 0.01 1.91
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations..................... 3.18 1.96 3.32 (0.27) 1.23 0.65 2.65
Less distributions from (5)
Net investment income.............. (0.12) (0.89) (0.50) (0.67) (0.85) (1.04) (0.64)
Net realized gains................. (0.39) (1.59) (0.17) (0.42) (0.19) (0.37) --
-------- -------- -------- -------- -------- -------- --------
Total distributions.................. (0.51) (2.48) (0.67) (1.09) (1.04) (1.41) (0.64)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of year......... $ 17.65 $ 14.98 $ 15.50 $ 12.85 $ 14.21 $ 14.02 $ 14.78
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1)...................... 21.31% 13.78% 27.12% (2.24)% 9.33% 5.14% 21.70%
Net assets, end of year
(thousands)...................... $223,870 $188,610 $171,276 $140,887 $156,767 $148,971 $126,021
RATIOS TO AVERAGE NET ASSETS
Expenses(2)........................ 0.63% 0.58% 0.58% 0.61% 0.56% 0.56% 0.56%
Net investment income.............. 2.91% 3.51% 3.49% 3.59% 3.65% 4.97% 5.49%
Portfolio turnover rate............ 90% 108% 110% 97% 86% 112% 141%
Average Commission Rate Paid(3).... $ 0.05 $ 0.06 -- -- -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1990(4) 1989 1988
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
year............................. $ 13.03 $ 10.25 $ 9.89
Income from operations
Net investment income.............. 0.65 0.52 0.48
Net gains or losses on securities
(realized and unrealized)........ (0.37) 2.26 0.43
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Total from investment
operations..................... 0.28 2.78 0.91
Less distributions from (5)
Net investment income.............. (0.54) -- (0.55)
Net realized gains................. -- -- --
------- ------- --------
Total distributions.................. (0.54) -- (0.55)
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Net asset value, end of year......... $ 12.77 $ 13.03 $ 10.25
======= ======= ========
TOTAL RETURN(1)...................... 2.47% 27.12% 9.18%
Net assets, end of year
(thousands)...................... $92,464 $84,223 $115,111
RATIOS TO AVERAGE NET ASSETS
Expenses(2)........................ 0.59% 0.71% 0.66%
Net investment income.............. 5.17% 4.41% 4.55%
Portfolio turnover rate............ 123% 56% 105%
Average Commission Rate Paid(3).... -- -- --
</TABLE>
(1) 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 MAT are only sold to The Travelers 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 The Travelers separate accounts.
(2) The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by The Travelers 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 years ended December 31, 1994, 1995, and 1996, and
1997 there were no expense reimbursements by The Travelers in connection
with the voluntary expense limitations.
(3) For the fiscal years beginning after 1995, the SEC instituted new guidelines
requiring the disclosure of average commissions per share on Funds which
held more than 10% of their assets in commissionable equitable securities.
(4) On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for the Fund.
(5) For the years ended December 31, 1996 and later, distributions from realized
gains include both net realized short-term and long-term capital gains.
Prior to 1996, net realized short-term capital gains were included in
distributions from net investment income.
MAT-3
<PAGE> 7
FUND DESCRIPTION
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Managed Assets Trust (the "Fund") is registered with the SEC 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
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The Fund's investment objective is to provide a high total investment return
through a fully managed investment policy. To do this, the Fund adjusts its
overall exposure to risk by spreading its investments among those 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 this flexibility, 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 a variation from
the stated investment policy. 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 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 rated Baa by
Moody's are considered 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
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. Uncertainty of position characterizes bonds in this class.
Travelers Asset Management International Corporation ("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
MAT-4
<PAGE> 8
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
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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 amended (the
"1940 Act"). 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 repurchase
agreements maturing in more than seven days and other illiquid 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.
RISK FACTORS
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The Fund's 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 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. 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
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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 SAI.
MAT-5
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INVESTMENT ADVISERS
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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. 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.
TAMIC is an indirect wholly owned subsidiary of Travelers Group Inc., a
financial services holding company, and its principal offices are located at One
Tower Square, Hartford, Connecticut 06183.
In addition to providing investment advice to the Fund, TAMIC acts as investment
adviser for other investment companies used to fund variable products issued by
the Company. TAMIC also provides investment advice to individual and pooled
pension and profit-sharing accounts, domestic insurance companies affiliated
with The Travelers, and nonaffiliated insurance companies.
PORTFOLIO MANAGER
The Fund's fixed income investments have been managed by David A. Tyson, Ph.D.
and CFA, since February 1994. Mr. Tyson is currently Senior 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 The Travelers 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
TIMCO is employed by TAMIC as the Fund's sub-adviser with respect to the
management of the Fund's common stock investments. For its services under the
Sub-Advisory Agreement, TIMCO receives from TAMIC 50% of the investment advisory
fees earned by TAMIC. TIMCO, a registered investment adviser, 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 acts as investment
adviser for other investment companies used to fund variable products issued by
The Travelers and The Travelers Life and Annuity Company. TIMCO also provides
investment advice to individual and pooled pension and profit-sharing accounts,
and affiliated companies of The Travelers.
PORTFOLIO MANAGER
The Fund's common stock investments 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 team of
experienced investment professionals selects 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 Fund's
common stock investments and is responsible for directing the activities of
TIMCO's portfolio management team. Mr. Kelley was
MAT-6
<PAGE> 10
President of TIMCO from November 1992 to December 1994. He became responsible
for management of the Fund in November 1992. Prior to his 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.
FUND ADMINISTRATION
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Managed Assets Trust ("Fund") has entered into an Administrative Services
Agreement, whereby Travelers Insurance will be responsible for the pricing and
bookkeeping services for the Fund at an annualized rate of 0.06% of the daily
net assets of the Fund. The Travelers Insurance Company, at its expense, may
appoint a sub-administrator to perform these services. The sub-administrator may
be affiliated with The Travelers Insurance Company.
SECURITIES TRANSACTIONS
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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 consider the number of Fund shares sold by
such broker-dealers. In addition, broker-dealers may from time to time be
affiliated with the Fund, TAMIC, TIMCO or their affiliates.
The Fund may pay higher commissions to broker-dealers that provide research
services. TAMIC and TIMCO may use these services in advising the Fund, as well
as in advising other clients for which they act as investment adviser.
FUND EXPENSES
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In addition to the investment advisory fees discussed above, other 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, semiannual 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. Additional, high portfolio turnover may involve 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.
Pursuant to a Management Agreement dated May 1, 1993 between the Fund and The
Travelers Insurance 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, 1997, the Fund paid .63% of its average
net assets in expenses.
MAT-7
<PAGE> 11
TRANSFER AGENT
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First Data Investor Services Group, Inc., Exchange Place, Boston, MA 02109,
serves as the Fund's transfer agent and dividend disbursing agent.
SHAREHOLDER RIGHTS
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Shares of the Fund are currently sold only to insurance company separate
accounts 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.
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.)
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 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.
NET ASSET VALUE
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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 ("Exchange") is open. 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 an established 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 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.
MAT-8
<PAGE> 12
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.
Fund shares are redeemed at the redemption value next determined after the Fund
receives a 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 between
purchase and redemption.
The Fund computes the redemption value at the close of the 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
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 SEC so that disposal of the Fund's investments or determination of its net
asset value is not reasonably practicable; or (4) the SEC, for the protection of
shareholders, so orders.
TAX STATUS
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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.
DIVIDENDS AND DISTRIBUTIONS
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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
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There are no pending material legal proceedings affecting the Fund.
YEAR 2000 COMPLIANCE
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Generally, computer programs were designed without considering the impact of the
upcoming change in the century. As a result, software and computer systems may
need to be upgraded or replaced in order to comply with "Year 2000"
requirements. If not corrected, these computer applications could fail or create
erroneous results by or at the Year 2000. The business, financial condition, and
result of operations of a company, investment advisor, separate account and/or a
mutual fund could be materially and adversely affected by the failure of its
systems and applications (or those either provided or operated by third-parties)
to properly operate or manage dates beyond the year 1999.
Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming
MAT-9
<PAGE> 13
with service providers that they are also in the process of replacing or
modifying their systems with the same goal. We expect that our principal systems
will be Year 2000 compliant by early 1999. While these efforts involve
substantial costs, we closely monitor associated costs and continue to evaluate
associated risks based on actual expenses. While it is likely that these efforts
will be successful, if necessary modifications and conversions are not completed
in a timely manner, the Year 2000 requirements could have a material adverse
effect on certain operations of 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-10
<PAGE> 14
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 (i.e., 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
MAT-11
<PAGE> 15
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.
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 the adviser'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 1940 Act 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.
MAT-12
<PAGE> 16
The adviser 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 experience a
gain or loss equal to the appreciation or depreciation in value from the
commitment date. The adviser 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.
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 liquid securities
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
MAT-13
<PAGE> 17
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.
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. The adviser 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 the adviser'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 the adviser 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.
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.
MAT-14
<PAGE> 18
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 Banks,
Federal Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal
Land Banks, Maritime Administration, The Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association 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
MAT-15
<PAGE> 19
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 the adviser
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 DEPOSITS
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-16
<PAGE> 20
MANAGED ASSETS TRUST
PROSPECTUS
TIC Ed. 5-98
L-11172 Printed in U.S.A.
<PAGE> 21
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
MANAGED ASSETS TRUST
MAY 1, 1998
This Statement of Additional Information ("SAI") is not a prospectus
but relates to, and should be read in conjunction with, the Fund's prospectus
dated May 1, 1998. A copy of the prospectus is available from The Travelers
Insurance Company, Annuity Services, One Tower Square, Hartford, Connecticut
06183-5030, or by calling 860-277-0111. This SAI should be read in conjunction
with the accompanying 1997 Annual Report for the Fund.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
VALUATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PORTFOLIO TURNOVER. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 3
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DECLARATION OF TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT ADVISORY SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
The Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
The Subadviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
REDEMPTIONS IN KIND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
FUND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 23
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Managed Assets Trust (the "Fund") is
to provide a high total investment return. To do this, the Fund adjusts its
overall exposure to risk by spreading its investments among those 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;
1
<PAGE> 24
(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 illiquid securities.
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.
VALUATION OF SECURITIES
Current value for the Fund's portfolio securities is determined as
follows: Securities traded on national securities markets are valued at the
closing prices on such markets; securities for which no sales prices were
reported and U.S. Government and Agency obligations are valued at the mean
between the last reported bid and ask prices or on the basis of quotations
received from reputable brokers or other recognized sources; securities
maturing within 60 days are valued at cost plus accreted discount and, or minus
amortized premium, which approximates market value; and securities that have a
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity.
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.
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.
2
<PAGE> 25
PORTFOLIO TURNOVER
The Fund's portfolio turnover for the fiscal years ended December 31,
1995, 1996 and 1997 were 110%, 108% and 90%, respectively. High portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Fund.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name Present Position and Principal Occupation During Last Five Years
---- ----------------------------------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith Barney Inc. ("Smith Barney");
Chairman and Member Chairman (1993-present), Smith Barney Strategy Advisors, Inc.;
388 Greenwich Street President and Director (1994-present), Mutual Management Corp.;
New York, New York Director and President (1996-present) Travelers Investment Adviser,
Age 64 Inc.; Chairman and Director of forty-two investment companies
associated with Smith Barney; Chairman, Board of Trustees, Drew
University; Trustee, 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++; prior to
July 1993, Senior Executive Vice President of Shearson Lehman Brothers
Inc.
Knight Edwards Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell,
Member Attorneys; Member, Advisory Board (1973-1994), thirty-one mutual funds
2700 Hospital Trust Tower sponsored by Keystone Group, Inc.; Member, Board of Managers, seven
Providence, Rhode Island Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Age 74 Trustee, five Mutual Funds sponsored by The Travelers Insurance
Company.++
Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice
Member President (1989-1994) and Senior Vice President, Finance and
295 Hancock Street Administration (1983-1989), The Dexter Corporation (manufacturer of
Williamstown, Massachusetts specialty chemicals and materials); Vice Chairman (1990-1992), Director
Age 66 (1983-1995), Life Technologies, Inc. (life science/biotechnology
products); Director, (1994-present), The Connecticut Surety Corporation
(insurance); Director (1995-present), CN Bioscience, Inc. (life
science/biotechnology products); Director (1995-present), Chemfab
Corporation (specialty materials manufacturer); 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 Dean, College of Business Administration (1995-present), Marquette
Member University; Professor of Finance (1980-1995) and Associate Dean
606 N. 13th Street (1993-1995), School of Business Administration, and Director, Center
Milwaukee, WI 53233 for Research and Development in Financial Services (1980-1995),
Age 55 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.++
</TABLE>
3
<PAGE> 26
<TABLE>
<S> <C>
Portfolio Manager, (1992-present); HLM Management Company, Inc.
Frances M. Hawk, CFA, CFP (investment management); Assistant Treasurer, Pensions and Benefits.
Member Management (1989-1992), United Technologies Corporation (broad-based
222 Berkeley Street designer and manufacturer of high technology products); Member, Board
Boston, Massachusetts of Managers, seven Variable Annuity Separate Accounts of The Travelers
Age 50 Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
Ernest J. Wright Vice President and Secretary (1996-present), Assistant Secretary
Secretary to the Board (1994-1996), Counsel (1987-present), The Travelers Insurance Company;
One Tower Square Secretary, Board of Managers, seven Variable Annuity Separate Accounts
Hartford, Connecticut of The Travelers Insurance Company+; Secretary, Board of Trustees, five
Age 57 Mutual Funds sponsored by The Travelers Insurance Company.++
Kathleen A. McGah Assistant Secretary and Counsel (1995-present), The Travelers Insurance
Assistant Secretary to the Board Company; Assistant Secretary, Board of Managers, seven Variable Annuity
One Tower Square Separate Accounts of The Travelers Insurance Company+; Assistant
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 47 Travelers Insurance Company.++ Prior to January 1995, Counsel, ITT
Hartford Life Insurance Company.
Lewis E. Daidone Managing Director of Smith Barney, Senior Vice President and Treasurer
Treasurer of 41 investment companies associated with Smith Barney, and Director
388 Greenwich Street and Vice President of SBMFM and TIA; Treasurer, Board of Trustees, five
New York, NY Mutual Funds sponsored by The Travelers Insurance Company.++
Age 39
Irving David Vice President of Smith Barney, Asset Management Division (March
Controller 1994-present) ); Controller, Board of Trustees, five Mutual Funds
388 Greenwich Street sponsored by The Travelers Insurance Company.++
New York, NY
Age 36
Thomas M. Reynolds Director of Smith Barney, Asset Management Division; Controller and
Controller Assistant Secretary of 35 investment companies associated with Smith
388 Greenwich Street Barney, (September 1991-present) ); Controller, Board of Trustees, five
New York, NY Mutual Funds sponsored by The Travelers Insurance Company.++
Age 37
</TABLE>
+ 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, Money Market
Portfolio, 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 Managing Director of Smith Barney
Inc., an indirect wholly owned subsidiary of Travelers Group Inc. and also owns
shares and options to purchase shares of Travelers Group Inc., the indirect
parent of The Travelers Insurance Company.
4
<PAGE> 27
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 retainer of $19,000 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 fee of $2,500 for
each meeting of such Boards attended. Board Members with 10 years of service
may agree to provide services as an emeritus director at age 72 or upon
reaching 80 years of age and will receive 50% of the annual retainer and 50% of
meeting fees, if 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.
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).
5
<PAGE> 28
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, 1995, 1996 and 1997 the
advisory fees were $776,392, $891,042 and $1,035,501, respectively.
THE SUBADVISER
The Travelers Investment Management Company (TIMCO), an indirect
wholly owned subsidiary of Travelers Group Inc., serves as subadviser to the
Fund with respect to its common stock investments pursuant to the terms of a
Subadvisory Agreement between TAMIC and TIMCO. The Subadvisory Agreement,
which was approved by shareholders of the Fund at a meeting held on April 23,
1993, provides that TIMCO will receive from
6
<PAGE> 29
TAMIC a fee equal to 50% of the advisory fee earned by TAMIC for its services
as subadviser. For the fiscal years ended December 31, 1995, 1996 and 1997,
TIMCO received $388,196, $445,521 and $517,750, 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.
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 Subadvisory 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.
7
<PAGE> 30
The total brokerage commissions paid by the Fund for the fiscal years
ended December 31, 1995, 1996 and 1997 were $363,916, $197,655 and $163,320,
respectively. For the fiscal year ended December 31, 1997, portfolio
transactions in the amount of $119,541,660 were placed with certain brokers
because of research services, of which $133,854 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.
Commissions in the amount of $15,010 were paid to Smith Barney and $4,730 to
Robinson Humphrey, both affiliates of TAMIC and TIMCO, which equals 9.2% for
Smith Barney, and 2.9% for Robinson Humphrey, of Managed Assets Trust's
aggregate brokerage commissions paid to such affiliated brokers during 1997.
The percentage of the Managed Assets Trust's aggregate dollar amount of
transactions involving the payment of commissions was 10.2% and 2.6%
respectively, per affiliated broker.
FUND ADMINISTRATION
The Fund entered into an Administrative Services Agreement during 1996
with The Travelers Insurance Company to provide pricing and bookkeeping
services at an annualized rate of .06% of the daily net assets of the Fund.
Travelers Insurance at its expense may appoint a sub-administrator to perform
these services. Mutual Management Corp. ("MMC"), an affiliate of Travelers
Insurance, has been appointed to serve in this capacity. Travelers Insurance
pays MMC, as sub-administrator, a fee calculated at an annual rate of 0.06% of
the daily net assets of the Fund. For the period ended December 31, 1996 and
year ended December 31, 1997, the administration fees were $48,885 and
$121,093, respectively.
ADDITIONAL INFORMATION
On April 1, 1998, The Travelers Insurance Company and its affiliates
owned 100% of the Fund's outstanding shares. The Travelers Insurance Company
is a stock insurance company chartered in 1864 in Connecticut and continuously
engaged in the insurance business since that time. It is a wholly owned
subsidiary of The Travelers Insurance Group Inc., which is an indirect wholly
owned subsidiary of Travelers Group Inc., a financial services holding company.
The Company's Home Office is located at One Tower Square, Hartford, Connecticut
06183, telephone number 860-277-0111.
First Data Investor Services Group, Inc., 53 State Street, Exchange
Place, Boston, MA, 02109, acts as transfer agent and dividend disbursing agent
for the Fund.
PNC Bank NA, 200 Stevens Drive, Lester, PA, 19113 and Morgan Stanley
Trust Company, One Pierrepont Plaza, Brooklyn, NY, 11201 are the custodians of
all securities and cash of the Fund.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154, has been
selected as independent auditors to examine and report on the Fund's financial
statements for the fiscal year ending December 31, 1998.
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 SAI 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 SAI 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.
8
<PAGE> 31
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.
9
<PAGE> 32
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.
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.
10
<PAGE> 33
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.
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.
11
<PAGE> 34
MANAGED ASSETS TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11172S TLC Ed. 5-98
Printed in U.S.A.
<PAGE> 35
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 Fund's Annual Report which is
incorporated in the Statement of Additional Information by reference.
The Registrant's financial statements for the period ending December 31,
1997 include:
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31,
1997
Statement of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Statement of Investments as of December 31, 1997
Notes to Financial Statements
(b) Exhibits
1. Declaration of Trust. (Incorporated herein by reference to Exhibit
1 to Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A filed on April 11, 1996.)
2. By-Laws of Managed Assets Trust (Incorporated herein by reference
to Exhibit 2 to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A filed on April 11, 1996.)
5(A). Investment Advisory Agreement between the Registrant and Travelers
Asset Management International Corporation. Incorporated herein by
reference to Exhibit 5(A) to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A filed on April 11, 1996.)
5(B). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and The Travelers Investment Management
Company. (Incorporated herein by reference to Exhibit 5(B) to
Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A filed on April 11, 1996.)
8(A). Form of Custody Agreement between the Registrant and PNC Bank,
N.A., Lester, PA. (Incorporated herein by reference to Exhibit
8(a) to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
8(B). Form of Subcustody Agreement between Morgan Stanley Trust Company
and Subcustodian. (Incorporated herein by reference to Exhibit 8(b)
to Post-Effective Amendment No. 27 to the Registration Statement on
Form N-1, File No. 2-76640, filed April 21, 1998.)
9. Administrative Services Agreement between the Registrant and The
Travelers Insurance Company. (Incorporated herein by reference to
Exhibit 9 to Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A filed on February 20, 1997.)
9(b) Form of Transfer Agency and Registrar Agreement between the
Registrant and First Data Investor Services Group, Inc.
(Incorporated herein by reference to Exhibit 9(b) to Post-Effective
Amendment No. 27 to the Registration Statement on Form N-1, File
No. 2-76640, filed April 21, 1998.)
<PAGE> 36
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 Rule 24f-2 Notice filing
on March 24, 1998.)
11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants.
11(A). Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants.
11(B). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Heath B. McLendon, Knight Edwards, Robert E.
McGill III, Lewis Mandell, Frances M. Hawk and Ian R. Stuart.
(Incorporated herein by reference to Exhibit 11(B) to
Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1 filed April 11, 1996.)
Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Lewis E. Daidone. (Incorporated herein by
reference to Exhibit 11(B) to Post-Effective Amendment No. 20 to
the Registration Statement on Form N-1A filed on February 20,
1997.)
27. Financial Data Schedule.
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of April 1, 1998
-------------- ---------------------------------
<S> <C>
Shares of beneficial interest, Four (4)
without par value
</TABLE>
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 Post-Effective
Amendment No. 19 to this Registration Statement as Exhibit 1 on April 11, 1996.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liability (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
<PAGE> 37
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 38
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:
<TABLE>
<CAPTION>
Name Position with TAMIC Other Business
- ---- ------------------- --------------
<S> <C> <C>
Marc P. Weill Director and Chairman Senior Vice President **
Chief Investment Officer
David A. Tyson Director, President and Senior Vice President *
Chief Investment Officer
Joseph E. Rueli, Jr. Director, Senior Vice President Vice President*
and Chief Financial Officer
F. Denney Voss Director and Senior Vice Senior Vice President*
President
John R. Britt Director and Secretary Assistant Secretary *
Harvey Eisen Senior Vice President Senior Vice President*
Joseph M. Mullally Senior Vice President Vice President*
David Amaral Vice President Assistant Director*
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Vice President*
John F. Green Vice President Second Vice President*
Thomas Hajdukiewicz Vice President Vice President*
Edward Hinchliffe III Vice President and Cashier Second Vice President and Cashier*
Richard E. John Vice President Vice President*
Kathryn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
Emil J. Molinaro Vice President Vice President*
Andrew Sanford Vice President Investment Officer*
Charles H. Silverstein Vice President Second Vice President*
Robert Simmons Vice President Assistant Investment Officer*
Jordan M. Stitzer Vice President Vice President*
Joel Strauch Vice President Vice President*
William H. White Treasurer Vice President and Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George M. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
Marla A. Berman Assistant Secretary Assistant Secretary**
Andrew Feldman Assistant Secretary Senior Counsel*
Millie Kim Assistant Secretary Senior Counsel*
Patricia A. Uzzel Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
</TABLE>
* Positions are held with The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc., 388 Greenwich Street, New
York, N.Y. 10013.
<PAGE> 39
Officers and Directors of The Travelers Investment Management Company (TIMCO),
the Fund's Sub-Adviser, are set forth in the following table:
<TABLE>
<CAPTION>
Name Position with TIMCO Other Business
- ---- ------------------- --------------
<S> <C> <C>
Thomas W. Jones Director and Chairman Vice Chairman
Travelers Group Inc.*
Chief Executive Officer
Asset Management Div.
Smith Barney Inc.
Sandip A. Bhagat Director, President and ** Not Applicable
Chief Executive Officer
Virgil H. Cumming Director Managing Director
Smith Barney Inc.*
Chief Investment Officer
Asset Management Div.
Smith Barney Inc.
Heath B. McLendon Director Managing Director
Smith Barney Inc.*
Jacob E. Hurwitz Senior Vice President** Not Applicable
Emil J. Molinaro, Jr. Vice President Vice President
Travelers Group Inc.**
Daniel B. Willey Vice President** Not Applicable
Gloria G. Williams Vice President** Not Applicable
John W. Lau Assistant Vice President** Not Applicable
Feng Zhang Assistant Vice President** Not Applicable
Michael F. Rosenbaum Corporate Secretary General Counsel to
Asset Management Div.
Smith Barney Inc.*
Michael Day Treasurer Managing Director
Smith Barney Inc.*
</TABLE>
*Address: 388 Greenwich Street, New York, New York 10013
**Address: One Tower Square, Hartford, Connecticut 01683
<PAGE> 40
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) Mutual Management Corp.
388 Greenwich Street
New York, NY 10013
(2) PNC Bank, N.A.
200 Stevens Drive
Lester, PA 19113
(3) Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, NY 11201
(4) First Data Investor Services Group, Inc.
53 State Street
Boston, MA 02109
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> 41
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 the 23rd day of
April, 1998.
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 post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on April 23, 1998.
<TABLE>
<S> <C>
*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
*LEWIS E. DAIDONE Treasurer
--------------------------------
(Lewis E. Daidone)
</TABLE>
*By:
-----------------------------------------
Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
1. Declaration of Trust. (Incorporated herein by reference to
Exhibit 1 to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A filed on April 11, 1996.)
2. By-Laws of Managed Assets Trust. (Incorporated herein by reference
to Exhibit 2 to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A filed on April 11, 1996.)
5(A). Investment Advisory Agreement between the Registrant and Travelers
Asset Management International Corporation. (Incorporated herein by
reference to Exhibit 5(A) to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A filed on April 11, 1996.)
5(B). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and The Travelers Investment Management
Company. (Incorporated herein by reference to Exhibit 5(B) to
Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A filed on April 11, 1996.)
8(A). Form of Custody Agreement between the Registrant and PNC Bank,
of Lester, PA. (Incorporated herein by reference to Exhibit 8(a) to
Post-Effective Amendment No. 27 to the Registration Statement on
Form N-1, File No. 2-76640, filed April 21, 1998.)
8(B). Form of Subcustody Agreement between Morgan Stanley Trust
Company and Subscustodians. (Incorporated herein by reference to
Exhibit 8(b) to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
9. Administrative Services Agreement between the Registrant and
The Travelers Insurance Company. (Incorporated herein by reference
to Exhibit 9 to Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A filed on February 20, 1997.)
9(b) Form of Transfer Agency and Registrar Agreement between the Trust
First Data Investor Services Group, Inc. (Incorporated herein by reference
to Exhibit 9(b) to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
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 Rule 24f-2 Notice filing on March 24, 1998.)
11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants. Electronically
11(B). Consent of KPMG Peat Marwick LLP, Independent Certified Electronically
Public Accountants.
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C>
11(C). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Heath B. McLendon, Knight Edwards,
Robert E. McGill III, Lewis Mandell, Frances M. Hawk and
Ian R. Stuart. (Incorporated herein by reference to Exhibit 11(B)
to Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A filed on April 11, 1996.)
Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Lewis E. Daidone. (Incorporated herein
by reference to Exhibit 11(B) to Post-Effective Amendment
No. 20 to the Registration Statement on Form N-1A filed on
February 20, 1997.)
27. Financial Data Schedule. Electronically
</TABLE>
<PAGE> 1
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this post-effective
amendment No. 27 to the registration statement of Managed Assets Trust (the
"Fund") on Form N-1A (File Nos. 2-79359; 811-3568) of our report dated February
24, 1997, on our audits of the financial statements and financial highlights of
the Fund, which report is incorporated by reference in the post-effective
amendment to the registration statement.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 21, 1998
<PAGE> 1
EXHIBIT 11(A)
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
Managed Assets Trust
We consent to the use of our report dated February 10, 1998 for Managed
Assets Trust incorporated herein by reference and to the references to our Firm
under the headings "Financial Highlights" in the Prospectus and "Additional
Information" in the Statement of Additional Information.
KPMG Peat Marwick LLP
New York, New York
April 20, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000706453
<NAME> MANAGED ASSETS TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 176,744,268
<INVESTMENTS-AT-VALUE> 223,400,621
<RECEIVABLES> 5,545,862
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 751
<TOTAL-ASSETS> 228,947,234
<PAYABLE-FOR-SECURITIES> 4,907,054
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169,900
<TOTAL-LIABILITIES> 5,076,954
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 160,370,796
<SHARES-COMMON-STOCK> 12,682,454
<SHARES-COMMON-PRIOR> 12,594,215
<ACCUMULATED-NII-CURRENT> 6,032,308
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,907,773
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 46,559,403
<NET-ASSETS> 223,870,280
<DIVIDEND-INCOME> 2,263,576
<INTEREST-INCOME> 5,078,799
<OTHER-INCOME> 0
<EXPENSES-NET> 1,307,330
<NET-INVESTMENT-INCOME> 6,035,045
<REALIZED-GAINS-CURRENT> 12,928,663
<APPREC-INCREASE-CURRENT> 20,882,409
<NET-CHANGE-FROM-OPS> 39,846,117
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,469,979
<DISTRIBUTIONS-OF-GAINS> 4,813,889
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 430,658
<NUMBER-OF-SHARES-REDEEMED> 707,124
<SHARES-REINVESTED> 364,705
<NET-CHANGE-IN-ASSETS> 35,259,799
<ACCUMULATED-NII-PRIOR> 689,249
<ACCUMULATED-GAINS-PRIOR> 3,570,992
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,035,501
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,307,330
<AVERAGE-NET-ASSETS> 207,235,204
<PER-SHARE-NAV-BEGIN> 14.98
<PER-SHARE-NII> 00.48
<PER-SHARE-GAIN-APPREC> 02.70
<PER-SHARE-DIVIDEND> 00.12
<PER-SHARE-DISTRIBUTIONS> 00.39
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.65
<EXPENSE-RATIO> 00.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
