GRAPHIC
Travelers Series Fund Inc.
Smith Barney International
Equity Portfolio
Smith Barney Pacific
Basin Portfolio
GT Global Strategic
Income Portfolio
- ------------------------------
ANNUAL REPORT
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October 31, 1998
LOGO Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Travelers Series
Fund Inc.
PHOTO
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the annual report for the Travelers Series Fund Inc.
- -- Smith Barney International Equity, Smith Barney Pacific Basin and GT Global
Strategic Income Portfolios ("Portfolios") for the year ended October 31, 1998.
For your convenience, we have summarized the period's prevailing economic and
market conditions and outlined each Portfolio's investment strategy. A detailed
summary of performance and current holdings can be found in the appropriate
sections that follow.
Portfolio Highlights
Smith Barney International Equity Portfolio
For the year ended October 31, 1998, the Smith Barney International Equity
Portfolio provided a negative total return of 4.76%. The Portfolio's total
return compares unfavorably to its Lipper Inc. fund peer group average of 3.93%
over the same period. (Lipper is an independent firm that tracks fund
performance.)
Significant financial forces buffeted global stock markets during 1998. The
first half of the year was characterized by positive returns from the developed
markets while emerging market performance lagged. The global financial crisis of
late summer engulfed all stock markets, eroding virtually all gains for the
early portion of the year and driving emerging market returns into sharply
negative territory.
The International Equity Portfolio's performance lagged its MSCI-EAFE benchmark
for the year ended October 31, 1998 due to the extreme investor aversion to risk
in the final quarter of the fiscal year. The investment team's all-
capitalization approach incorporating a modicum of emerging stock market
exposure underperformed the large capitalization index as investors reallocated
assets to more freely traded, large stocks.
The early months of the year were characterized by strong performance from
Europe's stock markets. The backdrop of corporate restructuring and
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Travelers Series Fund Inc. 1
<PAGE>
accelerating economies provided good operating earnings leverage. Those European
stock markets benefited from a liquidity surge into Europe, as globally mobile
capital withdrew from Asia and emerging markets at the same time that European
individual and institutional investors increased stock market commitments.
Asian markets underperformed European markets in the first half of the year as
expectations of macroeconomic growth for 1998 and 1999 declined. The pronounced
weakness of the Japanese yen cast a pall over the other Asian markets and raised
further fears of currency weakness. Civil unrest and financial pressure
ultimately led to the ouster of Indonesia's long-reigning President.
Global markets suffered significant declines during August as a most unusual
combination of financial circumstances drove investors to cash and bond
equivalents and out of stocks. Several of the major negative influences on the
markets included:
o The Russian financial debacle, which resulted in a setback of virtually
every emerging market as well as multi-billion dollar losses for
financial institutions.
o The decline of the Japanese economy into recession combined with the
inability of the political apparatus to effect meaningful reform of the
malfunctioning financial system.
o The appearance of free-market distorting actions by governments, such as
currency controls in Malaysia.
o Continued weak commodity prices, raising the specter of global deflation.
o Growing evidence of illiquidity in financial markets and within major
financial institutions.
Investors grappled with the short-term impact of these and tried to assess if
the global economy was decelerating (implying slowing economic growth and
potential profit downgrades) or in recession (implying far greater earnings
declines.)
Markets bottomed in mid-October as investor psychology turned from despair to a
positive view once the Federal Reserve cut short-term interest rates twice in
the U.S. and a number of other central banks also reduced interest rates to
restore liquidity and confidence to the global financial system. Another
positive influence during October was the resumption of merger and acquisition
activity, a sign that the managers of many companies viewed the declining values
since mid-Summer of acquisition targets as a real opportunity, and a slow
rebuild of corporate financing activities from a virtual standstill in the
preceding two months.
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2 1998 Annual Report to Shareholders
<PAGE>
The pronounced strength of the Japanese yen (which moved from Y136 per dollar at
September end to Y116 per dollar at October end) in conjunction with easing
global interest rates ignited a sharp rally in the Asian stock markets,
especially those with currencies closely allied with the dollar historically.
The Japanese stock market also rebounded off its lows as the Japanese government
approved a significant infusion of capital into the troubled Japanese banking
sector. The Japanese government also moved ahead with a variety of fiscal
stimuli to revive the contracting economy.
While European markets also rebounded sharply off their October low levels,
recent political changes in Germany and Italy combined with decelerating growth
expectations have made the Portfolio's managers modestly less enthused about
Europe. Over the final quarter of the fiscal year, the investment team took
profits in selected European stocks and used the proceeds to modestly increase
their Asian exposures.
During the variable conditions of the past twelve months, the international
stock markets proved resilient to numerous adverse economic and political
developments. During the past year, the Portfolio's investment team adjusted
their stock positions as industry and company trends warranted. Their common aim
has been to have the International Equity Portfolio positioned in the highest
quality growth stocks of the international marketplace, consistent with prudent
diversification to control risk.
Smith Barney Pacific Basin Portfolio
For the year ended October 31, 1998, the Smith Barney Pacific Basin Portfolio
generated a negative total return of 14.09%. The Portfolio's Lipper Inc. fund
peer group average posted a negative 19.95% return over the same period. (Lipper
is an independent firm that tracks fund performance.)
Events and market conditions in Asia have been changing very rapidly, and, as a
result, the investment team has addressed their commentary in this shareholder
report primarily to developments over the last six months. During this period,
Asia was rocked by an avalanche of bad news including political turmoil in
Indonesia, huge non-performing loans in Thailand, labor unrest in Korea and
nuclear bomb detonations in India. In August, this negative trend worsened as
Russian stocks and bonds collapsed, global bond yields widened and investors
everywhere sought out safety of U.S. Treasurys. Asian markets hit rock bottom in
August and in a desperate effort to stem further losses, the Malaysian
government introduced capital controls, while the Hong Kong government
intervened in the stock market.
In September and October, investor sentiment improved dramatically, as the U.S.
began to cut interest rates and Japan announced an historic reform and spending
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Travelers Series Fund Inc. 3
<PAGE>
package leading to a 25% increase in the value of the yen vis-a-vis the dollar.
In this environment, Asian currencies stabilized, current accounts moved into
surplus and interest rates started to come down. The result was a strong rally
in share prices over the last two months and a sense that much of the region is
on the road to economic recovery sooner than expected.
Asia (except-Japan)
Of the many eye-opening events that occurred in Asia ex-Japan, three really
stand out. First, in Indonesia, the world's third-most populous country,
widespread rioting caused much of the ethnic Chinese and foreign community to
flee the country and speedily led to the resignation of President Suharto. The
new Habibe regime has garnered some popular support and the IMF is repositioning
to help the country, but currently the Indonesian economy has come to a
standstill. The Portfolio's managers expect GDP to contract by 10% to 15% in
1998. Given the risks that remain, they are zero weighted in Indonesia.
Second, global investors were shocked by the Hong Kong government's sudden
purchase of over $15 billion in blue chip stocks and Hang Seng Index futures.
The government decided to use Hong Kong's sizable surplus directly to discourage
hedge fund manipulation of the stock market and relieve pressure on the Hong
Kong dollar peg to the U.S. dollar.
Investors were at first very negative about this action and felt it undermined
Hong Kong's "free market" status. However, as share prices stabilized and moved
higher, and the government emphasized the long-term nature of its efforts,
investors became more comfortable. The investment has increased their holdings
in Hong Kong over the last few months, and have become more bullish on the
prospects for recovery in Hong Kong.
Third, Malaysia introduced capital controls, effectively putting a concrete wall
around the country's capital markets. Locals can no longer send money out of the
country while foreigners have to wait 12 months before repatriating capital, and
then they can do so only under strict limitations. Unlike Hong Kong, Malaysia's
actions were a case of desperate times calling for desperate measures. The
Malaysian ringgit had devalued by over 50% while share prices had fallen by 80%
over the previous 18 months. The government hoped that its actions would lead to
a temporary respite from global funds flow pressures, allowing the country to
regroup and restart its economic engine. However, as a consequence of these
developments, Malaysia has been removed from many important benchmark indices,
including the MSCI EAFE index and all MSCI free indices. The Portfolio's
managers remain zero weighted in Malaysia.
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4 1998 Annual Report to Shareholders
<PAGE>
Japan
Japan also had its share of significant events during the period under review.
Most importantly, after many false starts the government announced a record
package, totaling about 60 trillion yen or 12% of GDP, aimed at stimulating
growth and helping the country's faltering banks. The measures were delayed by
bickering between the majority and opposition parties over terms and
requirements for the package, leading to some confusion as well as higher stock
price volatility. Moreover, figures released during past months indicated the
recession in Japan is worse than originally expected, while the size of the bad
loan problem may be as large as one trillion dollars. Nevertheless,when the plan
was finalized in October, the yen appreciated by nearly 20% against the dollar,
a strong vote of confidence that confounded most currency forecasters. The
managers steadily increased their weighting in Japanese stocks as the spending
and reform package became more concrete and Japanese shares now comprise over
half of the Portfolio.
The Portfolio's managers believe October marked a turning point for Asian stock
markets and that a variety of positive factors make Asia a compelling place to
invest going forward. Below they have highlighted some of these positive
factors:
o Lower interest rates in the U.S. and Europe.
o Asian currencies appreciating, interest rates down sharply.
o Asian economies set to bottom by second quarter 1999.
o Local investors are buying stocks again.
o The "three lows" are back. In the 1980s when Asia was thriving, economists
pointed to the "three lows" as a significant boost to the region: low oil
prices, low international interest rates and the low dollar vis-a-vis the
yen. The same beneficial conditions are in place today.
o China is growing and should not devalue its currency.
o Global funds are underweighted in Asia.
o Negative sentiment on Japan could be a contra-indicator.
Earlier in the year as most Asian economies were struggling, the portfolio
managers maintained a defensive posture in the Portfolio, with a heavy weighting
in utilities and export-oriented companies set to prosper from currency
devaluation. However, as the economic outlook for much of the region began to
improve, with interest rates falling and currencies appreciating, the portfolio
managers switched into many of the classic blue-chips in the region that they
felt would benefit from domestic stimulation measures. Going forward, the
Portfolio's investment team believes the outlook for Asian share price
appreciation is bright over the next year.
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Travelers Series Fund Inc. 5
<PAGE>
GT Global Strategic Income Portfolio
The investment objectives of the GT Global Strategic Income Portfolio are
primarily to seek high current income and secondarily to seek capital
appreciation. For the period ended October 31, 1998, the Portfolio returned a
negative 2.50% and underperformed its Lipper Inc. peer group average of 3.59%
over the same period. (Lipper is an independent firm that tracks fund
performance.)
The Asian flu has taken on a new meaning in financial markets in the last twelve
months. Once dismissed by the developed nations as a financial crisis isolated
to Asia with minor implications for the developed economies is now "the gravest
global crisis the world has faced in the post war period, "quoted U.S. Treasury
Secretary Robert Rubin recently.
Like the jet stream that circles the globe, occasionally touching down with
tornadoes, the global emerging markets tornado reached Japan. Already beset with
its self-induced economic problems, the depression in Asian economies pushed
Japan over the edge and into recession. The loss of a third of its export
markets plus policy missteps have resulted in four negative quarters of growth
and the Japanese Nikkei trading below 15,000. Banks' already poor capital
reserve ratios declined along with equity prices further exacerbating the credit
crunch in Japan. Investors fled Japan, and as a result the Japanese yen fell to
four-year lows in the summer.
The yen's decline roiled emerging markets as investors grew concerned with
competitive devaluation scenarios. The greatest concerns related to China and
the contagion impact if it devalued the reminibi. With the increasing
uncertainty, credit risk premiums expanded. The jet stream next touched down in
Russia.
Russian interest rates, in response to the growing crisis, were raised to
unsustainable double-digit levels in an effort to support the ruble. The
collapsing commodity based economy could ill afford these levels of interest
rates, and government tax revenues shrank. The crisis exploded with Russia's
devaluation and default of ruble denominated debt, and spread premiums expanded
dramatically.
Investors responded with their feet by fleeing any investments that were deemed
risky for the safety of government bonds, principally U.S. governments.
Contributing to this were the liquidation of several large hedge funds caught by
the expansion of spread premiums and emerging market losses. Liquidity in risky
assets disappeared. Led by the U.S. government bond market, developed market
long term bond yields set new historic lows.
Since August of 1997, the managers have been curtailing risk exposure by
lowering the Portfolio's allocation to emerging market debt. From the peak of
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6 1998 Annual Report to Shareholders
<PAGE>
50%, the emerging exposure has been reduced to 20%, an all-time low. To offset
the risk of the remaining allocation, they extended duration in developed market
bonds. Additionally, the managers increased the Portfolio's currency allocation
to unhedged European bonds, because their fundamental bullish view on the U.S.
dollar had changed early in the year, and, second, unhedged bonds traditionally
increase portfolio diversification during periods of financial stress.
The managers'outlook is cautiously optimistic. It is their view that the U.S.
economy will not slide into a recession in 1999, but slow down to a rate of
growth of 2% with benign inflation. Therefore, the risk to interest rates are to
the downside and not to the upside. While the risk is not insignificant, the
managers do not expect the global economy to spiral into a global
deflation/depression cycle. Supporting their view are the recent easing actions
by the Federal Reserve Board and the coordination of policy between the IMF and
G7.
Their macro economic outlook is more bearish than the consensus view of 2%- 2.5%
1999 U.S. GDP growth. Too much of the consensus view relies on the continued
strong performance of the consumer. While it is unlikely that consumption
contracts next year, the managers anticipate that the risk is a very significant
slowdown. Consumption is highly correlated to job growth and confidence. Both
these indicators are in decline, albeit from high levels, and the managers are
confident that it will only be a matter of time before consumption begins to
reflect the declining fundamentals. The investment component of the economy,
which has contributed 25% of GDP growth over the last few years will, in their
estimation, be a detractor to economic activity in 1999. Since 1992, real gross
capital investment per annum has been significantly higher than real GDP growth.
This has resulted in excess capacity as evidenced by the current low capacity
utilization rate of 79.6%; a level usually associated with a recession and not a
seven-year economic expansion.
And this is not a problem unique to the U.S. Global excess capacity is
substantial, and may take several years to normalize. Trade's contribution to
GDP growth will be negative and with substantial downside risk. Asia's negative
impact on trade has bottomed, but it is not yet improving. Latin America, which
is 20% of the U.S. export market, will experience a substantial slowdown next
year. Current consensus is not fully discounting this scenario. The managers'
outlook for Europe is relatively upbeat because their economies are early in the
economic recovery cycle, and the formation of monetary union should provide an
added boost to economic activity.
While their view is relatively more negative than consensus, the managers do
think that the U.S. economy will avoid a recession. Chairman Greenspan and the
U.S. Federal Reserve have publicly acknowledged the risks faced by the global
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Travelers Series Fund Inc. 7
<PAGE>
economy and they anticipate that they will ease interest rates in conjunction
with any weakening in economic fundamentals.
Global economic policy makers at the IMF/G7 and the U.S. Treasury are also in
agreement with the Fed. Brazil will be the test case of the effectiveness of any
coordinated policy response and so far their actions have been in the medium
term positive. The portfolio managers are concerned that the current
fundamentals in Brazil are not sustainable, but believe that with the current
proposals in place,any further contagion or financial market turmoil will be
limited to the recent lows.
In closing, thank you for investing in the Smith Barney International Equity,
Smith Barney Pacific Basin and GT Global Strategic Income Portfolios. We look
forward to continue to help you achieve your financial goals in the years ahead.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 30, 1998
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8 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Smith Barney International Equity Portfolio
================================================================================
Historical Performance
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/98 $13.23 $12.60 $0.00 $0.00 (4.76)%
- -------------------------------------------------------------------------------------
10/31/97 12.18 13.23 0.01 0.00 8.73
- -------------------------------------------------------------------------------------
10/31/96 10.48 12.18 0.01 0.00 16.36
- -------------------------------------------------------------------------------------
10/31/95 10.55 10.48 0.00 0.00 (0.66)
- -------------------------------------------------------------------------------------
6/16/94(*)-10/31/94 10.00 10.55 0.00 0.00 5.50++
=====================================================================================
Total $0.02 $0.00
=====================================================================================
</TABLE>
================================================================================
Smith Barney Pacific Basin Portfolio
================================================================================
Historical Performance
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/98 $ 8.04 $ 6.81 $0.09 $0.00 (14.09)%
- -------------------------------------------------------------------------------------
10/31/97 9.75 8.04 0.06 0.00 (17.02)
- -------------------------------------------------------------------------------------
10/31/96 8.95 9.75 0.03 0.00 9.26
- -------------------------------------------------------------------------------------
10/31/95 10.10 8.95 0.00 0.00 (11.39)
- -------------------------------------------------------------------------------------
6/16/94(*)-10/31/94 10.00 10.10 0.00 0.00 1.00++
=====================================================================================
Total $0.18 $0.00
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
GT Global Strategic Income Portfolio
================================================================================
Historical Performance
================================================================================
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/98 $12.52 $10.97 $0.66 $0.64 (2.50)%
- -------------------------------------------------------------------------------------
10/31/97 12.45 12.52 0.46 0.58 9.32
- -------------------------------------------------------------------------------------
10/31/96 10.77 12.45 0.42 0.00 20.07
- -------------------------------------------------------------------------------------
10/31/95 9.95 10.77 0.10 0.00 9.37
- -------------------------------------------------------------------------------------
6/16/94(*)-10/31/94 10.00 9.95 0.00 0.00 (0.50)++
=====================================================================================
Total $1.64 $1.22
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Travelers Series Fund Inc. 9
<PAGE>
================================================================================
Average Annual Total Return+
================================================================================
Smith Barney Smith Barney GT Global
International Pacific Strategic
Equity Basin Income
Portfolio Portfolio Portfolio
================================================================================
Year Ended 10/31/98 (4.76)% (14.09)% (2.50)%
- --------------------------------------------------------------------------------
6/16/94(*) through 10/31/98 5.47 (7.91) 7.86
================================================================================
================================================================================
Cumulative Total Return+
================================================================================
Smith Barney Smith Barney GT Global
International Pacific Strategic
Equity Basin Income
Portfolio Portfolio Portfolio
================================================================================
6/16/94(*) through 10/31/98 26.28% (30.29)% 39.27%
================================================================================
+ Assumes the reinvestment of all dividends and capital gains distributions.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
(*) Commencement of operations.
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10 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
Smith Barney International Equity Portfolio vs.
MSCI EAFE-GDP Weighted Index and MSCI EAFE Index+
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June 1994 -- October 1998
LINE GRAPH
MSCI EAFE-GDP
International Equity Weighted Index++ MSCI EAFE Index++
- --------------------------------------------------------------------------------
6/16/94 10,000 10,000 10,000
10/94 10,550 10,345 10,443
4/95 9,610 10,585 10,588
10/95 10,480 10,398 10,436
4/96 11,884 11,749 11,832
10/96 12,194 11,533 11,563
4/97 12,628 12,015 11,762
10/97 13,259 12,546 12,133
4/98 14,872 15,118 14,024
10/31/98 12,628 14,728 13,340
+ Hypothetical illustration of $10,000 invested in shares of the Smith Barney
International Equity Portfolio on June 16, 1994 (commencement of
operations), assuming reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 1998. The Morgan Stanley Capital
International ("MSCI") EAFE-GDP Weighted Index and the MSCI EAFE Index are
composite portfolios consisting of equity total returns for the countries
of Europe, Australia, New Zealand and the Far East. The MSCI EAFE-GDP
Weighted Index is weighted based on each country's Gross Domestic Product
and the MSCI EAFE Index is weighted based on each company's market
capitalization. The indices are unmanaged and are not subject to the same
management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
++ It is the opinion of management that the MSCI EAFE Index is a more
appropriate broad-based benchmark for the market in which the Portfolio
invests than the MSCI EAFE-GDP Weighted Index. In future reporting, the
MSCI EAFE Index will be used as a basis of comparison of total return
performance rather than the MSCI EAFE-GDP Weighted Index.
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Travelers Series Fund Inc. 11
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
Smith Barney Pacific Basin Portfolio vs.
MSCI Pacific Index+
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June 1994 -- October 1998
LINE GRAPH
Pacific Basin MSCI Pacific Index
- --------------------------------------------------------------------------------
6/16/94 10,000 10,000
10/94 10,100 9,952
4/95 8,760 9,702
10/95 8,950 8,836
4/96 10,260 10,430
10/96 9,779 9,136
4/97 10,264 8,188
10/97 8,114 7,353
4/98 7,529 6,726
10/31/98 6,971 6,346
+ Hypothetical illustration of $10,000 invested in shares of the Smith Barney
Pacific Basin Portfolio on June 16, 1994 (commencement of operations),
assuming reinvestment of dividends and capital gains, if any, at net asset
value through October 31, 1998. The Morgan Stanley Capital International
("MSCI") Pacific Index is comprised of a sampling of large, medium and
small capitalization companies who are listed on the various Pacific
exchanges, such as Australia, Hong Kong, Japan, Malaysia, New Zealand and
the Singapore stock exchange. The index is unmanaged and is not subject to
the same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
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12 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
GT Global Strategic Income Portfolio vs.
J.P. Morgan Global Bond Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
LINE GRAPH
G.T. Global Strategic Income JP Morgan Global Bond Index - Unhedged
- --------------------------------------------------------------------------------
6/16/94 10,000 10,000
10/94 9,950 10,391
10/95 10,882 11,985
10/96 13,066 12,716
10/97 14,284 13,161
10/31/98 13,901 14,869
+ Hypothetical illustration of $10,000 invested in shares of the GT Global
Strategic Income Portfolio on June 16, 1994 (commencement of operations),
assuming reinvestment of dividends and capital gains, if any, at net asset
value through October 31, 1998. The J.P. Morgan Global Bond Index- Unhedged
is a daily, market capitalization weighted international fixed income index
consisting of 13 countries. The index is unmanaged and is not subject to
the same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 13
<PAGE>
================================================================================
Schedules of Investments October 31, 1998
================================================================================
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
====================================================================================
<S> <C>
STOCKS -- 89.2%
Australia -- 1.4%
470,418 Coca-Cola Amatil Ltd.(a) $ 1,729,223
460,499 Coca Cola Beverages PLC(a)+ 935,647
1,000,000 Portman Mining Ltd. 553,847
- -----------------------------------------------------------------------------------
3,218,717
- -----------------------------------------------------------------------------------
Austria -- 1.1%
40,000 Wolford AG(a) 2,406,007
- -----------------------------------------------------------------------------------
Brazil -- 1.0%
30,000 Telecomunicacoes Brasileiras S.A. ADR Preferred Block 2,278,125
- -----------------------------------------------------------------------------------
Canada -- 1.3%
160,000 Celestica Inc.+ 2,916,612
- -----------------------------------------------------------------------------------
Cayman Islands -- 1.2%
150,000 Santa Fe International Corp. 2,765,625
- -----------------------------------------------------------------------------------
Finland -- 4.2%
100,000 Nokia OYJ, Class A shares 9,306,249
- -----------------------------------------------------------------------------------
France -- 6.8%
35,000 Axa 3,955,371
10,000 Equant N.V.+ 433,327
100,000 Companie Generale de Geophysique S.A. ADR 1,325,000
100,000 Le Carbone-Lorraine 5,758,502
50,000 Sidel S.A. 3,689,040
- -----------------------------------------------------------------------------------
15,161,240
- -----------------------------------------------------------------------------------
Germany -- 5.1%
60,000 SAP AG ADR(a) 2,531,250
8,500 SAP AG Preferred(a) 4,136,577
100,000 Volkswagen AG Preferred 4,721,651
- -----------------------------------------------------------------------------------
11,389,478
- -----------------------------------------------------------------------------------
Hong Kong -- 4.7%
163,300 HSBC Holdings PLC(a) 3,742,028
600,000 Hutchison Whampoa Ltd. 4,298,993
330,000 Sun Hung Kai Properties Ltd. 2,300,542
- -----------------------------------------------------------------------------------
10,341,563
- -----------------------------------------------------------------------------------
Ireland -- 7.2%
292,416 Bank of Ireland 5,404,047
556,572 Independent Newspapers PLC 2,207,689
253,755 Irish Continental Group PLC 2,973,870
608,169 Irish Life PLC 5,391,245
- -----------------------------------------------------------------------------------
15,976,851
- -----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
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14 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
=========================================================================
Italy -- 7.7%
550,000 Alleanza Assicurazioni(a) $ 6,807,477
1,600,000 Istituto Nazionale delle Assicurazioni(a) 4,424,233
1,000,000 Telecom Italia Mobile S.p.A 5,810,468
- -------------------------------------------------------------------------
17,042,178
- -------------------------------------------------------------------------
Japan -- 7.0%
142,000 Canon, Inc. 2,686,947
16,500 Hosiden Corp. 270,870
59,000 Meitec Corp. 1,139,191
850 NTT Data Corp.(a) 3,596,069
60,000 Sony Corp. 3,810,177
196,000 Terumo Corp.(a) 4,120,827
- -------------------------------------------------------------------------
15,624,081
- -------------------------------------------------------------------------
Mexico -- 1.2%
1,939,700 Cifra SA de CV, Class C Shares+ 2,533,125
- -------------------------------------------------------------------------
Netherlands -- 7.4%
162,229 Getronics N.V. 6,731,673
83,321 Hunter Douglas N.V. 2,988,974
67,011 IHC Caland N.V. 3,031,766
300,000 ING Groep N.V. Warrants, Expire 3/15/01+ 3,710,446
- -------------------------------------------------------------------------
16,462,859
- -------------------------------------------------------------------------
Norway -- 2.3%
180,000 Tomra Systems ASA(a) 5,054,122
- -------------------------------------------------------------------------
Panama -- 0.9%
100,000 Panamerican Beverages Inc. 2,025,000
- -------------------------------------------------------------------------
South Africa -- 0.9%
429,562 Dimension Data Holdings Ltd. 1,967,868
- -------------------------------------------------------------------------
Spain -- 3.9%
60,000 Banco Popular Espanol S.A.(a) 3,698,979
48,000 Superdiplo S.A.+ 1,239,795
81,818 Telefonica S.A. 3,687,400
- -------------------------------------------------------------------------
8,626,174
- -------------------------------------------------------------------------
Sweden -- 1.0%
75,000 Electrolux AB, Class B Shares 1,127,336
150,000 Ortivus AB-B Shares 1,017,001
- -------------------------------------------------------------------------
2,144,337
- -------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 15
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Switzerland -- 5.9%
125,000 Mettler-Toledo International Inc. $ 2,734,375
3,100 Novartis AG, Registered Shares 5,585,585
400 Roche Holding AG Genuss 4,666,962
- --------------------------------------------------------------------------------
12,986,922
- --------------------------------------------------------------------------------
United Kingdom -- 17.0%
200,000 Bodycote International PLC 2,888,866
600,000 Boxmore International PLC 1,160,570
500,000 Capita Group PLC 5,045,049
800,000 Compass Group PLC 8,078,778
300,000 Hays PLC 4,426,245
782,565 Misys PLC 5,465,059
700,000 Racal Electronic PLC 3,176,915
150,000 Select Appointments Holdings PLC 1,306,270
359,000 Serco Group PLC 6,252,679
- --------------------------------------------------------------------------------
37,800,431
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost-- $169,968,502) 198,027,564
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 10.8%
$24,000,000 CIBC Wood Gundy Securities Inc., 5.250% due 11/2/98;
Proceeds at maturity -- $24,010,500; (Fully collateralized
by U.S. Treasury Notes, 6.375% due 5/15/99; Market value --
$24,480,125) (Cost -- $24,000,000) 24,000,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $193,968,502*) $222,027,564
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY PACIFIC BASIN PORTFOLIO
SHARES SECURITIES VALUE
================================================================================
STOCKS -- 96.6%
Australia -- 7.2%
33,679 Australian Gas Light Co. Ltd.(a) $ 241,190
9,530 Brambles Industries Ltd. 208,102
9,230 Commonwealth Bank of Australia 114,244
50,000 Leighton Holdings Ltd. 184,823
36,000 Woolworths Ltd. 126,127
- --------------------------------------------------------------------------------
874,486
- --------------------------------------------------------------------------------
Hong Kong -- 10.0%
96,000 Asia Satellite Telecommunications Holdings Ltd. 169,790
24,000 Cheung Kong Holdings Ltd. 164,213
93 HSBC Holdings PLC(a) 2,131
94,000 New World Development Co. Ltd. 218,435
72,000 Shanghai Industrial Holdings Ltd. 166,382
34,000 Sun Hung Kai Properties Ltd. 237,025
70,000 VTech Holdings Ltd. 262,522
- --------------------------------------------------------------------------------
1,220,498
- --------------------------------------------------------------------------------
Japan -- 59.4%
9,500 Benesse Corp. 436,153
23,000 Canon, Inc. 435,209
56,000 Chugai Pharmaceutical Co., Ltd. 509,396
200 H.I.S. Co. Ltd. 3,775
32,000 Kao Corp. 648,096
5,400 Mabuchi Motor Co., Ltd. 352,183
11,400 Meitec Corp. 220,114
12,000 Murata Manufacturing Co., Ltd. 404,702
5,200 Nidec Corp.(a) 473,457
25,000 Nissin Food Products 496,653
1,300 NTT Data Corp.(a) 549,987
7,000 Orix Corp. 501,587
36,000 Sekisui House, Ltd. 358,671
8,000 Seven-Eleven Japan Co., Ltd. 608,255
1,680 Shohkoh Fund & Co., Ltd. 511,078
5,800 Sony Corp. 368,317
17,000 Terumo Corp. 357,418
- --------------------------------------------------------------------------------
7,235,051
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 17
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY PACIFIC BASIN PORTFOLIO
SHARES SECURITIES VALUE
================================================================================
New Zealand -- 0.9%
56,000 Telecom Corp. of New Zealand Ltd.(a) $ 109,098
- --------------------------------------------------------------------------------
Singapore-- 9.2%
48,000 City Developments Ltd. 173,923
135,000 Datacraft Asia Ltd. 434,700
246,900 Natsteel Electronics Ltd. 506,445
- --------------------------------------------------------------------------------
1,115,068
- --------------------------------------------------------------------------------
South Korea -- 4.6%
4,500 Samsung Electronics 184,160
15,000 Youngone Corp. 377,415
- --------------------------------------------------------------------------------
561,575
- --------------------------------------------------------------------------------
Taiwan -- 2.5%
63,000 Hon Hai Precision Industry 302,735
- --------------------------------------------------------------------------------
Thailand -- 2.8%
131,000 GSS Array Technology PLC+ 159,538
50,000 The Pizza Co. Ltd. 182,337
- --------------------------------------------------------------------------------
341,875
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost--$10,538,504) 11,760,386
================================================================================
FACE
AMOUNT++ SECURITY VALUE
================================================================================
CONVERTIBLE BONDS -- 3.4%
Thailand -- 2.2%
355,000 Tipco Asphalt Co., 2.750% due 9/19/06 260,924
- --------------------------------------------------------------------------------
United States -- 1.2%
215,000 International Container Terminal, 1.750% due 3/13/04 149,425
- --------------------------------------------------------------------------------
TOTAL BONDS
(Cost--$448,331) 410,349
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost--$10,986,835*) $12,170,735
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
GT GLOBAL STRATEGIC INCOME PORTFOLIO
FACE
AMOUNT++ SECURITY VALUE
================================================================================
BONDS -- 99.9%
Algeria -- 1.1%
550,000 Algeria Tranche IR, 6.688% due 9/4/06 $ 269,500
- --------------------------------------------------------------------------------
Argentina -- 3.8%
141,000 Banco Hipotecario SA, 10.000% due 4/17/03(c) 124,080
59,000 Mastellone Hermanos SA, 11.750% due 4/1/08 36,285
Republic of Argentina:
355,000 5.750% due 3/31/23 247,435
340,000 6.625% due 3/31/23(b) 231,625
250,000,000ITL 5.000% due 7/8/05(b) 113,306
235,000 12.110% due 4/10/05(b) 205,037
- --------------------------------------------------------------------------------
957,768
- --------------------------------------------------------------------------------
Belgium -- 2.6%
20,100,000BEF Belgium Kingdom, 5.750% due 3/28/08 651,484
- --------------------------------------------------------------------------------
Brazil -- 1.5%
Banco Nacional De Desen Econo:
50,000 10.800% due 6/16/08(b)(c) 35,000
258,000 10.300% due 6/16/08(b)(c) 180,600
296,000 Brazil Discount Bond, 6.125% due 4/15/24(b) 175,337
- --------------------------------------------------------------------------------
390,937
- --------------------------------------------------------------------------------
Bulgaria -- 1.6%
162,000 Bulgaria FLIRB Series A, 2.500% due 7/28/12(b) 89,505
442,000 Bulgaria Discount Series A, 6.563% due 10/27/14(b) 310,505
- --------------------------------------------------------------------------------
400,010
- --------------------------------------------------------------------------------
Canada -- 1.1%
390,000CAD Canada Government, 6.000% due 6/1/08 269,848
- --------------------------------------------------------------------------------
Colombia -- 1.0%
335,000 Republic of Colombia, 7.270% due 6/15/03(c) 265,487
- --------------------------------------------------------------------------------
Denmark -- 3.3%
Kingdom of Denmark Bullet:
1,500,000DKK 6.000% due 11/15/09 262,424
3,000,000DKK 7.000% due 11/10/24 566,541
- --------------------------------------------------------------------------------
828,965
- --------------------------------------------------------------------------------
Germany -- 9.9%
Bundesrepublik Deutschland:
1,075,000DEM 6.000% due 1/5/06 725,667
820,000DEM 6.000% due 7/4/07 558,780
560,000DEM 6.500% due 7/4/27 401,825
1,220,000DEM 6.500% due 10/14/05 846,014
- --------------------------------------------------------------------------------
2,532,286
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 19
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
GT GLOBAL STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT++ SECURITY VALUE
=========================================================================================
<S> <C> <C>
Greece -- 0.7%
50,000,000GRD Hellenic Republic, 9.200% due 3/21/02 $ 176,662
- -----------------------------------------------------------------------------------------
Italy -- 3.6%
Buoni Poliennali Del Tesoro:
220,000,000ITL 8.500% due 1/1/04 161,684
990,000,000ITL 7.250% due 11/1/26 760,515
- -----------------------------------------------------------------------------------------
922,199
- -----------------------------------------------------------------------------------------
Ivory Coast -- 1.3%
1,135,625 Ivory Coast, 2.000% due 3/29/18(b) 340,687
- -----------------------------------------------------------------------------------------
Jamaica -- 1.8%
37,000 Mechala Group, 12.750% due 12/30/99 26,825
575,000 Government of Jamaica, 10.875% due 6/10/05(c) 437,000
- -----------------------------------------------------------------------------------------
463,825
- -----------------------------------------------------------------------------------------
Mexico -- 5.8%
89,000 United Mexican States, 11.375% due 9/15/16 88,555
197,000 Monterrey Power SA De CV, 9.625% due 11/15/09(c) 130,513
164,000 Banco Nacional de Com, 8.000% due 7/18/02 148,780
150,000 Petroleos Mexicanos, 9.250% due 3/30/18(c) 122,250
725,000 United Mexican States, 6.476% due 12/31/19(b) 566,406
2,537,000 United Mexican States Value Recovery Rights, Expire 6/30/03+ 0
1,500,000FRF United Mexico States, 6.630% due 12/31/19 203,459
245,000 Mexican United States, 9.875% due 1/15/07 226,600
- -----------------------------------------------------------------------------------------
1,486,563
- -----------------------------------------------------------------------------------------
Netherlands -- 0.7%
300,000NLG Netherlands Government, 5.500% due 1/15/28 168,094
- -----------------------------------------------------------------------------------------
Panama -- 1.4%
145,000 Panama IRB, 4.000% due 7/17/14(b) 106,031
267,000 Panama, 8.875% due 9/30/27 244,780
- -----------------------------------------------------------------------------------------
350,811
- -----------------------------------------------------------------------------------------
Peru -- 1.1%
470,000 Peru PDI, 4.000% due 3/7/17(b) 270,250
- -----------------------------------------------------------------------------------------
Poland -- 1.0%
95,000 Poland Series PDIB, 5.000% due 10/27/14(b) 86,331
250,000 Poland Series PAR, 3.000% due 10/27/24(b) 166,250
- -----------------------------------------------------------------------------------------
252,581
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
GT GLOBAL STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT++ SECURITY VALUE
============================================================================================
<S> <C> <C>
Russia -- 0.5%
5,000 Ministry of Finance Russia, 3.000% due 5/14/06(c) $ 362
65,000 Mosenergo Finance BV, 8.375% due 10/9/02(c) 11,375
1,485,821 Russian Principal Loan, 6.625% due 12/15/20(d) 117,937
- --------------------------------------------------------------------------------------------
129,674
- --------------------------------------------------------------------------------------------
South Korea -- 1.2%
250,000 Korea Republic Restructured Note, 8.281% due 4/8/00 232,500
9,000,000JPY Pohang Iron & Steel, 2.000% due 10/9/00 66,806
- --------------------------------------------------------------------------------------------
299,306
- --------------------------------------------------------------------------------------------
Sweden -- 2.0%
Swedish Government:
2,100,000SEK 10.250% due 5/5/00 291,908
1,500,000SEK 6.500% due 10/25/06 216,037
- --------------------------------------------------------------------------------------------
507,945
- --------------------------------------------------------------------------------------------
United Kingdom -- 9.3%
150,000DEM Colt Telecom Group PLC, 7.625% due 7/31/08 81,059
1,050,000GBP United Kingdom Treasury, 9.000% due 10/13/08 2,293,533
- --------------------------------------------------------------------------------------------
2,374,592
- --------------------------------------------------------------------------------------------
United States -- 43.6%
U.S. Treasury Notes:
4,660,000 5.625% due 5/15/08 5,021,522
2,170,000 6.375% due 8/15/27 2,505,156
60,000 Allbritton Communication, 8.875% due 2/1/08 57,075
60,000 Anker Coal Group Inc., 9.750% due 10/1/07 26,400
60,000 BTI Telecom Corp., 10.500% due 9/15/07 49,500
45,000 Cemex International Cap LLC, 9.660% due 11/29/49(c) 37,800
100,000 Chancellor Media Corp., 8.125% due 12/15/07 95,000
95,000 Chase Manhattan, 6.250% due 1/15/06 94,881
100,000 Drypers Corp., 10.250% due 6/15/07 93,000
60,000 Duane Reade Inc., 9.250% due 2/15/08 58,950
65,000 Eagle Family Foods, 8.750% due 1/15/08 59,312
500,000NZD Federal National Mortgage Association, 7.250% due 6/20/02 273,633
65,000 Fisher Scientific International, 9.000% due 2/1/08 63,212
390,000DEM Ford Motor Credit Co., 5.250% due 6/16/08 238,210
330,000 General Motors Acceptance Corp., 6.625% due 10/15/05 344,850
150,000 Graham Packaging, 8.750% due 1/15/08 142,125
150,000 Hollywood Casino Corp., 12.750% due 11/1/03 153,000
150,000 Lin Television, 8.375% due 3/1/08 141,187
200,000 Merrill Lynch & Co., 7.250% due 5/2/02 208,800
50,000 Niagara Mohawk Power, 7.375% due 7/1/03 51,750
60,000 Penn International Gaming Inc., 10.625% due 12/15/04 60,750
30,000 Pillowtex Corp., 9.000% due 12/15/07 30,225
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 21
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
GT GLOBAL STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT++ SECURITY VALUE
===========================================================================================
<S> <C> <C>
United States -- 43.6% (continued)
85,000 Psinet Inc., 10.000% due 2/15/05 $ 83,300
60,000 Revlon Consumer Products, 8.625% due 2/1/08 53,100
150,000 Riddell Sports Inc., 10.500% due 7/15/07 140,812
150,000 Smithfield Foods Inc., 7.625% due 2/15/08 144,750
60,000 Syratech Corp., 11.000% due 4/15/07 50,250
150,000 Trump Atlantic City, 11.250% due 5/1/06 130,500
700,000 United Stationers Supply, 8.375% due 4/15/08 672,022
- -------------------------------------------------------------------------------------------
11,081,072
- -------------------------------------------------------------------------------------------
Venezuela -- 0.0%
4,110 Republic of Venezuela Oil Warrants, Expire 4/15/20 + 0
- -------------------------------------------------------------------------------------------
TOTAL BONDS
(Cost--$26,756,102) 25,390,546
===========================================================================================
CONVERTIBLE BOND -- 0.1%
Russia -- 0.1%
72,000 Lukinter Finance, 3.500% due 5/6/02(c) (Cost--$73,148) 24,120
===========================================================================================
TOTAL INVESTMENTS -- 100%
(Cost--$26,829,250*) $25,414,666
===========================================================================================
</TABLE>
(a) All or a portion of this security is on loan (See Note 9).
(b) Represents current rate on floating rate security.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be sold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(d) Effective rate at period end including "payment in kind" bonds.
+ Non-income
producing security.
++ Face amount denominated in U.S. dollars unless otherwise indicated.
(*) Aggregate cost for Federal income tax purposes is substantially the same.
Currency Abbreviations
- ----------------------
ITL -- Italian Lira
BEF -- Belgian Franc
CAD -- Canadian Dollar
DKK -- Danish Krone
DEM -- German Mark
GRD -- Greek Drachma
FRF -- French Franc
NLG -- Netherland Guilder
JPY -- Japanese Yen
SEK -- Swedish Krona
GBP -- British Pound
NZD -- New Zealand Dollar
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Assets and Liabilities October 31, 1998
================================================================================
<TABLE>
<CAPTION>
Smith Barney Smith Barney GT Global
International Pacific Strategic
Equity Basin Income
Portfolio Portfolio Portfolio
==================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value
(Cost--$169,968,502, $10,986,835
and $26,829,250, respectively) $198,027,564 $12,170,735 $25,414,666
Repurchase agreement, at value
(Cost--$24,000,000) 24,000,000 -- --
Foreign currency, at value
(Cost--$982,034 and $20,237,
respectively) 988,619 20,404 --
Cash 620,179 847,609 1,810,399
Collateral for securities on loan (Note 9) 25,080,769 670,040 --
Receivable for securities sold 1,498,932 102,257 1,654,854
Dividends and interest receivable 141,997 20,338 600,018
Receivable for open forward foreign
currency contracts (Note 5) 225 16 --
- --------------------------------------------------------------------------------------------------
Total Assets 250,358,285 13,831,399 29,479,937
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 25,080,769 670,040 --
Payable for securities purchased 439,040 368,131 1,280,419
Payable for Fund shares purchased 354,894 1,939 5,789
Management fees payable 154,904 8,941 18,518
Payable for open forward foreign
currency contracts (Note 5) 151 348 2,329
Accrued expenses 121,531 53,696 42,352
- --------------------------------------------------------------------------------------------------
Total Liabilities 26,151,289 1,103,095 1,349,407
- --------------------------------------------------------------------------------------------------
Total Net Assets $224,206,996 $12,728,304 $28,130,530
==================================================================================================
NET ASSETS:
Par value of capital shares $ 178 $ 19 $ 26
Capital paid in excess of par value 206,837,913 18,164,533 29,025,124
Undistributed (overdistributed)
net investment income 882,524 (119,780) 1,482,634
Accumulated net realized loss from
security transactions, options
and foreign currencies (11,604,477) (6,503,905) (967,954)
Net unrealized appreciation (depreciation)
of investments and foreign currencies 28,090,858 1,187,437 (1,409,300)
- --------------------------------------------------------------------------------------------------
Total Net Assets $224,206,996 $12,728,304 $28,130,530
==================================================================================================
Shares Outstanding 17,796,849 1,867,801 2,565,305
- --------------------------------------------------------------------------------------------------
Net Asset Value $12.60 $6.81 $10.97
- --------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 23
<PAGE>
================================================================================
Statements of Operations For the Year Ended October 31, 1998
================================================================================
<TABLE>
<CAPTION>
Smith Barney Smith Barney GT Global
International Pacific Strategic
Equity Basin Income
Portfolio Portfolio Portfolio
=======================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 891,693 $ 56,961 $ 2,549,632
Dividends 2,551,189 173,592 456
Less: Foreign withholding tax (247,180) (12,938) --
- ---------------------------------------------------------------------------------------
Total Investment Income 3,195,702 217,615 2,550,088
- ---------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 2,099,425 127,738 244,014
Custody 126,181 51,994 22,136
Shareholder and system servicing fees 35,385 10,405 10,570
Shareholder communications 31,685 6,521 11,818
Audit and legal 23,542 16,680 18,857
Directors' fees 9,375 3,428 3,271
Registration fees 2,428 -- --
Other 8,250 5,567 5,192
- ---------------------------------------------------------------------------------------
Total Expenses 2,336,271 222,333 315,858
- ---------------------------------------------------------------------------------------
Net Investment Income (Loss) 859,431 (4,718) 2,234,230
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES (NOTES 3, 5 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding
short-term securities) (8,029,312) (4,073,074) (1,129,759)
Options purchased -- -- (37,002)
Foreign currency transactions 23,093 (15,905) (507,166)
- ---------------------------------------------------------------------------------------
Net Realized Loss (8,006,219) (4,088,979) (1,673,927)
- ---------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments, Options
and Foreign Currencies:
Beginning of year 31,667,556 (861,899) (64,516)
End of year 28,090,858 1,187,437 (1,409,300)
- ---------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation) (3,576,698) 2,049,336 (1,344,784)
- ---------------------------------------------------------------------------------------
Net Loss on Investments, Options
and Foreign Currencies (11,582,917) (2,039,643) (3,018,711)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(10,723,486) $(2,044,361) $ (784,481)
=======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the Years Ended October 31,
Smith Barney International Equity Portfolio 1998 1997
======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 859,431 $ 175,643
Net realized loss (8,006,219) (2,851,789)
Increase (decrease) in net unrealized appreciation (3,576,698) 16,129,028
- --------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (10,723,486) 13,452,882
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -- (160,617)
- --------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (160,617)
- --------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 12):
Net proceeds from sale of shares 304,843,574 155,537,213
Net asset value of shares issued
for reinvestment of dividends -- 160,617
Cost of shares reacquired (288,950,485) (93,275,280)
- --------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 15,893,089 62,422,550
- --------------------------------------------------------------------------------------
Increase in Net Assets 5,169,603 75,714,815
NET ASSETS:
Beginning of year 219,037,393 143,322,578
- --------------------------------------------------------------------------------------
End of year(*) $224,206,996 $219,037,393
======================================================================================
(*) Includes undistributed net
investment income of: $882,524 --
======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 25
<PAGE>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
<TABLE>
<CAPTION>
For the Years Ended October 31,
Smith Barney Pacific Basin Portfolio 1998 1997
==========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment loss $ (4,718) $ (15,530)
Net realized loss (4,088,979) (1,589,752)
Increase in net unrealized appreciation (depreciation) 2,049,336 (1,675,319)
- ------------------------------------------------------------------------------------------
Decrease in Net Assets From Operations (2,044,361) (3,280,601)
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (181,266) (111,296)
- ------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (181,266) (111,296)
- ------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 12):
Net proceeds from sale of shares 35,978,662 38,889,543
Net asset value of shares issued
for reinvestment of dividends 181,266 111,296
Cost of shares reacquired (39,430,568) (34,041,446)
- ------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (3,270,640) 4,959,393
- ------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,496,267) 1,567,496
NET ASSETS:
Beginning of year 18,224,571 16,657,075
- ------------------------------------------------------------------------------------------
End of year(*) $ 12,728,304 $ 18,224,571
==========================================================================================
(*) Includes overdistributed net investment income of: $(119,780) $(56,369)
==========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
<TABLE>
<CAPTION>
For the Years Ended October 31,
GT Global Strategic Income Portfolio 1998 1997
====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,234,230 $ 1,524,677
Net realized gain (loss) (1,673,927) 1,632,260
Increase in net unrealized depreciation (1,344,784) (1,113,109)
- ------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (784,481) 2,043,828
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (1,618,401) (782,233)
Net realized gains (1,549,073) (963,673)
- ------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (3,167,474) (1,745,906)
- ------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 12):
Net proceeds from sale of shares 4,608,510 10,442,393
Net asset value of shares issued
for reinvestment of dividends 3,167,474 1,746,011
Cost of shares reacquired (4,925,190) (2,406,873)
- ------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 2,850,794 9,781,531
- ------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (1,101,161) 10,079,453
NET ASSETS:
Beginning of year 29,231,691 19,152,238
- ------------------------------------------------------------------------------------
End of year(*) $28,130,530 $29,231,691
====================================================================================
(*) Includes undistributed net investment income of: $1,482,634 $1,616,547
====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 27
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The Smith Barney International Equity, Smith Barney Pacific Basin and GT Global
Strategic Income Portfolios ("Portfolio(s)") are separate investment portfolios
of the Travelers Series Fund Inc. ("Fund"). The Fund, a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company and consists of these
Portfolios and ten other separate investment portfolios: AIM Capital
Appreciation, Alliance Growth, MFS Total Return, Putnam Diversified Income,
Smith Barney High Income, Smith Barney Large Cap Value (formerly known as Smith
Barney Income and Growth Portfolio), Smith Barney Money Market, Smith Barney
Large Capitalization Growth, TBC Managed Income and Van Kampen American Capital
Enterprise Portfolios. Shares of the Fund are offered only to insurance company
separate accounts which fund certain variable annuity and variable life
insurance contracts. The financial statements and financial highlights for the
other portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices in the primary
exchange on which they are traded; securities listed or traded on certain
foreign exchanges or other markets whose operations are similar to the U.S.
over-the-counter market (including securities listed on exchanges where the
primary market is believed to be over-the-counter) and listed securities for
which no sales price was reported on that date are valued at the mean between
the bid and asked prices. Securities which are listed or traded on more than one
exchange or market are valued at the quotations on the exchange or market
determined to be the primary market for such securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount or minus amortized
premium, which approximates value; (d) gains or losses on the sale of securities
are calculated by using the specific identification method; (e) interest
income, adjusted for amortization of premium and accretion of discount, is
recorded on an accrual basis; (f) dividend income is recorded on the ex-dividend
date; foreign dividends are recorded on the ex-dividend date or as soon as
practical after the Portfolios determine the existence of a dividend declaration
after exercising reasonable due diligence; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) the accounting records of
the Portfolios are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities and income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
or expense amounts recorded and collected or paid are adjusted when reported by
the custodian; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At October 31, 1998, reclassifications
were made to the capital accounts of the Portfolios to reflect permanent
book/tax differences and income and gains available for distribution under
income tax regulations. Accordingly, for the Smith Barney Pacific Basin
Portfolio, a portion of overdistributed net investment income amounting to
$13,473 was reclassified to paid-in capital. Net investment income, net realized
gains and net assets were not affected by this change; (j) each Portfolio
intends to comply with the requirements of the Internal Revenue Code of 1986, as
amended pertaining to regulated investment companies and make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; and (k) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
In addition, the Portfolios may enter into forward exchange contracts in order
to hedge against foreign currency risk. These contracts are marked to market
daily, by recognizing the difference between the contract exchange rate and the
current market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager of the Smith Barney International
Equity ("SBIE") and the Smith Barney Pacific Basin ("SBPB") Portfolios. SBIE and
SBPB pay MMC a management fee calculated at the annual rate of 0.90% of the
average daily net assets of each Portfolio. In addition, Travelers Investment
Advisors, Inc., ("TIA"), an affiliate of MMC, acts as the investment manager of
the GT Global Strategic Income Portfolio ("GTGSI"). GTGSI pays TIA a management
fee calculated at an annual rate of 0.80% of its average daily net assets. These
fees are calculated daily and paid monthly.
Effective October 8, 1998, TIA entered into a subadvisory agreement with INVESCO
(NY), Inc. ("INVESCO"). Pursuant to the subadvisory agreement, INVESCO is
responsible for the day-to-day portfolio operations and investment decisions for
GTGSI and is compensated for such services. TIA pays INVESCO a monthly fee
calculated at the annual rate of 0.375% of the average daily net assets of
GTGSI. Prior to October 8, 1998, TIA had a subadvisory agreement with
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 29
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Chancellor LGT Asset Management, Inc. ("LGT"). TIA paid LGT a monthly fee
calculated at the annual rate of 0.375% of the average daily net assets of
GTGSI.
TIA has entered into a sub-administrative services agreement with MMC. TIA pays
MMC, as sub-administrator, a fee calculated at an annual rate of 0.10% of the
Portfolios' average daily net assets.
All officers and one Director of the Fund are employees of SSB.
3. Investments
For the year ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
SBIE SBPB GTGSI
================================================================================
Purchases $86,375,718 $18,297,729 $80,628,399
- --------------------------------------------------------------------------------
Sales 76,432,999 19,069,444 76,098,180
================================================================================
At October 31, 1998, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
SBIE SBPB GTGSI
================================================================================
Gross unrealized appreciation $ 49,368,734 $1,775,316 $ 494,751
Gross unrealized depreciation (21,309,672) (591,416) (1,909,335)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 28,059,062 $1,183,900 $(1,414,584)
================================================================================
4. Capital Loss Carryforward
At October 31, 1998, the Fund had capital loss carryforwards available to offset
future realized capital gains, if any, for Federal income tax purposes of
approximately $11,604,000, $6,496,000 and $852,000 for SBIE, SBPB and
GTGSI, respectively. To the extent that these carryforward losses are used to
offset capital gains, it is probable that the gains so offset will not be
distributed. The amounts and expiration of the carryforward losses are indicated
below. Expiration occurs on October 31 of the year indicated.
Portfolio 2003 2004 2005 2006
================================================================================
SBIE $947,000 -- $2,625,000 $8,032,000
- --------------------------------------------------------------------------------
SBPB 305,000 $452,000 1,549,000 4,190,000
- --------------------------------------------------------------------------------
GTGSI -- -- -- 852,000
================================================================================
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
5. Forward Foreign Currency Contracts
At October 31, 1998, the Portfolios had open forward foreign currency contracts
as described below. The Portfolios bear the market risk that arises from changes
in foreign currency exchange rates. The unrealized gain (loss) on the contracts
is reflected as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
Smith Barney International Equity
To Buy:
Mexican Peso 1,361,907 $134,536 11/3/98 $ 225
Mexican Peso 359,834 35,546 11/4/98 (151)
- --------------------------------------------------------------------------------
Total Unrealized Gain on Forward
Foreign Currency Contracts $ 74
================================================================================
Smith Barney Pacific Basin
To Sell:
Japanese Yen 4,732,091 $ 40,637 11/4/98 $ (175)
- --------------------------------------------------------------------------------
To Buy:
Hong Kong Dollar 1,584,356 204,250 11/2/98 16
Singapore Dollar 119,541 73,632 11/3/98 --
Singapore Dollar 146,837 90,383 11/4/98 (173)
- --------------------------------------------------------------------------------
Total Unrealized Loss on Forward
Foreign Currency Contracts $ (332)
================================================================================
GT Global Strategic Income
To Sell:
Canadian Dollar 410,000 $265,647 3/18/98 $ (764)
German Deutschemark 757,691 457,555 11/2/98 (97)
Japanese Yen 7,400,000 63,757 11/27/98 (1,468)
- --------------------------------------------------------------------------------
Total Unrealized Loss on Forward
Foreign Currency Contracts $(2,329)
================================================================================
6. Futures Contracts
Initial margin deposits are made upon entering into futures contracts and are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contracts. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are received or made and recognized as assets
due from or liabilities due to broker,
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 31
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolios' basis in the contract.
The Portfolios enter into such contracts to hedge a portion of their portfolios.
The Portfolios bear the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At October 31, 1998, the Portfolios had no open futures contracts.
7. Option Contracts
Premiums paid when put or call options are purchased by the Portfolios represent
investments, which are marked-to-market daily and are included in the schedules
of investments. When a purchased option expires,the Portfolios will realize a
loss in the amount of the premium paid. When the Portfolios enter into closing
sales transaction, the Portfolios will realize a gain or loss depending on
whether the proceeds from the closing sales transactions are greater or less
than the premium paid for the option. When the Portfolios exercise a put option,
they will realize a gain or loss from the sale of the underlying security and
the proceeds from such sale will be decreased by the premium originally paid.
When the Portfolios exercise a call option, the cost of the security which the
Portfolios purchase upon exercise will be increased by the premium originally
paid.
At October 31, 1998, the Portfolios did not hold any purchased call or put
options.
When the Portfolios write a covered call or put option, an amount equal to the
premium received by the Portfolios is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Portfolios
realize a gain equal to the amount of the premium received. When the Portfolios
enter into a closing purchase transaction, the Portfolios realize a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received, without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the cost of the security
sold will be decreased by the premium originally received. When a written put
option is exercised, the amount of the premium originally received will reduce
the cost of the security which the Portfolios purchased upon exercise. When
written index options are exercised, settlement is made in cash.
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolios enter into options for hedging purposes. The risk in
writing a covered call option is that the Portfolios give up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolios are
exposed to the risk of loss if the market price of the underlying security
declines.
During the year ended October 31, 1998, the Portfolios did not write any
options.
8. Reverse Repurchase Agreement
GTGSI may enter into reverse repurchase agreement transactions for leveraging
purposes. A reverse repurchase agreement involves a sale by GTGSI of securities
that it holds with an agreement by GTGSI to repurchase the same securities at an
agreed upon price and date. A reverse repurchase agreement involves the risk
that the market value of the securities sold by GTGSI may decline below the
repurchase price of the securities. GTGSI will establish a segregated account
with its custodian, in which GTGSI will maintain cash, U.S. government
securities or other liquid high grade debt obligations equal in value to its
obligations with respect to reverse repurchase agreements.
At October 31, 1998, GTGSI had no open reverse repurchase agreements.
9. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities, high quality money market instruments or other
securities that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in segregated accounts.
The Portfolios maintain exposure for the risk of any loss in the investment of
amounts received as collateral.
At October 31, 1998, the Portfolios listed below had loaned common stocks which
were collateralized by cash and securities. The market value for the securities
on loan for each portfolio was as follows:
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 33
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Portfolio Value
================================================================================
SBIE $24,425,010
- --------------------------------------------------------------------------------
SBPB 1,146,186
================================================================================
At October 31, 1998, the cash collateral received for these securities on loan
was invested as follows:
Smith Barney International Equity Portfolio
Security Description Value
================================================================================
Time Deposits:
Banque Bruxelles Lambert London, 5.563% due 11/2/98 $1,256,691
Banca Commerciale Italiano London, 5.594% due 11/2/98 1,256,691
Bank of Austria, 5.563% due 11/2/98 1,256,691
Deutsche Bank London, 5.500% due 11/2/98 1,256,691
Rabobank, London, 5.594% due 11/2/98 1,256,691
Generale Bank, 5.563% due 11/2/98 1,256,691
Den Norske Bank, 5.563% due 11/2/98 1,256,691
Credit Commerciale London, 5.625% due 11/2/98 1,256,691
Credit Local de France, 5.625% due 11/2/98 1,256,691
Dresdner Bank, 5.625% due 11/2/98 1,256,691
Bayerische Landesbank, London, 5.625% due 11/2/98 1,256,691
Citibank London, 5.781% due 11/2/98 1,256,691
Landesbank Hessen Thuringen, 5.750% due 11/2/98 1,256,691
Credit Communal de Belgique, G.C., 5.375% due 11/2/98 64,746
Commercial Paper:
General Electric Credit Corp., 5.693% due 11/2/98 1,256,094
Ford Motor Credit Corp., 5.693% due 11/2/98 1,256,094
Trident Capital Finance Inc., 5.803% due 11/2/98 1,256,082
New Center Asset Trust, 5.723% due 11/2/98 1,256,091
Associate Corp. of North America, 5.723% due 11/2/98 1,256,091
GoIdman Sachs Group LP, 5.753% due 11/2/98 1,141,898
Loan Participation:
J & H Marsh & McLennan Inc., 5.850% due 11/2/98 1,256,690
- --------------------------------------------------------------------------------
Total $25,080,769
================================================================================
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Smith Barney Pacific Basin Portfolio
Security Description Value
================================================================================
Time Deposits:
Banque Bruxelles Lambert London, 5.563% due 11/2/98 $33,573
Banca Commerciale Italiano London, 5.594% due 11/2/98 33,573
Bank of Austria, 5.563% due 11/2/98 33,573
Deutsche Bank London, 5.500% due 11/2/98 33,573
Rabobank, London, 5.594% due 11/2/98 33,573
Generale Bank, 5.563% due 11/2/98 33,573
Den Norske Bank, 5.563% due 11/2/98 33,573
Credit Commerciale London, 5.625% due 11/2/98 33,573
Credit Local de France, 5.625% due 11/2/98 33,573
Dresdner Bank, 5.625% due 11/2/98 33,573
Bayerische Landesbank, London, 5.625% due 11/2/98 33,573
Citibank London, 5.781% due 11/2/98 33,573
Landesbank Hessen Thuringen, 5.750% due 11/2/98 33,573
Credit Communal de Belgique, G.C., 5.375% due 11/2/98 1,730
Commercial Paper:
General Electric Credit Corp., 5.693% due 11/2/98 33,557
Ford Motor Credit Corp., 5.693% due 11/2/98 33,557
Trident Capital Finance Inc., 5.803% due 11/2/98 33,557
New Center Asset Trust, 5.723% due 11/2/98 33,557
Associate Corp. of North America, 5.723% due 11/2/98 33,557
Goldman Sachs Group LP, 5.753% due 11/2/98 30,506
Loan Participation:
J & H Marsh & McLennan Inc., 5.850% due 11/2/98 33,570
- --------------------------------------------------------------------------------
Total $670,040
================================================================================
In addition to the above noted cash collateral, the Portfolios held securities
collateral with market values of $123,608 and $465,748 for SBIE and SBPB,
respectively, as of October 31, 1998.
Interest income earned by the Portfolios from securities loaned for the year
ended October 31, 1998 was as follows:
================================================================================
SBIE $111,017
- --------------------------------------------------------------------------------
SBPB 4,432
- --------------------------------------------------------------------------------
GTGSI 5,814
================================================================================
10. Portfolio Concentration
The Portfolios' investments in foreign securities may involve risks not present
in domestic investments. Since securities may be denominated in a foreign
currency and may require settlement in foreign currencies and pay interest or
dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the
investments and earnings of the Portfolios. Foreign investments may also subject
the Portfolios to foreign government exchange restrictions, expropriation,
taxation or other political, social
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 35
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
or economic developments, all of which could affect the market and/or credit
risk of the investments. As of October 31, 1998, 59.4% of SBPB's total
investments were concentrated in Japan.
In addition to the risks described above, risks may arise from forward foreign
currency contracts with respect to the potential inability of counter-parties to
meet the terms of their contracts.
11. Securities Traded on a To-Be-Announced Basis
SBIE and GTGSI may trade securities on a "to-be-announced" ("TBA") basis. In a
TBA transaction, the Portfolios commit to purchasing or selling securities for
which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the
Portfolios, normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner as
for other securities.
At October 31, 1998, the Portfolios did not hold any TBA securities.
12. Capital Shares
At October 31, 1998, the Fund had six billion shares of capital stock authorized
with a par value of $0.00001 per share. Each share of a Portfolio represents an
equal proportionate interest in that Portfolio with each share of the same
Portfolio and has an equal entitlement to any dividends and distributions made
by the Portfolio.
Transactions in shares of each Portfolio were as follows:
Year Ended Year Ended
October 31, 1998 October 31, 1997
================================================================================
Smith Barney International Equity
Shares sold 22,047,632 11,728,929
Shares issued on reinvestment -- 12,902
Shares redeemed (20,807,481) (6,948,446)
- --------------------------------------------------------------------------------
Net Increase 1,240,151 4,793,385
================================================================================
Smith Barney Pacific Basin
Shares sold 5,029,477 3,912,494
Shares issued on reinvestment 29,142 11,185
Shares redeemed (5,458,082) (3,364,536)
- --------------------------------------------------------------------------------
Net Increase (Decrease) (399,463) 559,143
================================================================================
GT Global Strategic Income
Shares sold 363,584 847,390
Shares issued on reinvestment 274,478 147,094
Shares redeemed (407,668) (198,015)
- --------------------------------------------------------------------------------
Net Increase 230,394 796,469
================================================================================
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Smith Barney International
Equity Portfolio 1998 1997 1996 1995 1994(1)
=======================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $13.23 $12.18 $10.48 $10.55 $10.00
- ---------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(2) 0.05 0.01 0.02 0.03(*) (0.03)
Net realized and
unrealized gain (loss) (0.68) 1.05 1.69 (0.10) 0.58
- ---------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.63) 1.06 1.71 (0.07) 0.55
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.01) (0.01) -- --
- ---------------------------------------------------------------------------------------
Total Distributions -- (0.01) (0.01) -- --
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.60 $13.23 $12.18 $10.48 $10.55
- ---------------------------------------------------------------------------------------
Total Return (4.76)% 8.73% 16.36% (0.66)% 5.50%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $224,207 $219,037 $143,323 $53,538 $13,811
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.00% 1.01% 1.10% 1.44% 1.20%+
Net investment income (loss) 0.37 0.09 0.23 0.25 (0.73)+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 38% 41% 29% --
=======================================================================================
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager waived part of its fees for the year ended October 31, 1994. If
such fees were not waived, the effect on the net investment loss and the
expense ratio would have been as follows:
Per Share
Increase to Net Expense Ratios
Investment Loss Without Fee Waiver
--------------- ------------------
1994 $0.03 2.00%+
In addition, during the years ended October 31, 1996 and 1995, the
Portfolio had earned credits from the custodian which reduced service fees
incurred. When the credits are taken into consideration the expense ratios
are 1.05% and 1.21%, respectively; prior year numbers have not been
restated to reflect these adjustments.
(*) Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 37
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Smith Barney
Pacific Basin Portfolio 1998(1) 1997 1996 1995 1994(2)
=======================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $8.04 $9.75 $8.95 $10.10 $10.00
- ---------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(3) -- (0.01) 0.08 (0.04)(*) (0.04)
Net realized and
unrealized gain (loss) (1.14) (1.64) 0.75 (1.11) 0.14
- ---------------------------------------------------------------------------------------
Total Income (Loss) From Operations (1.14) (1.65) 0.83 (1.15) 0.10
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.09) (0.06) (0.03) -- --
- ---------------------------------------------------------------------------------------
Total Distributions (0.09) (0.06) (0.03) -- --
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.81 $8.04 $9.75 $8.95 $10.10
- ---------------------------------------------------------------------------------------
Total Return (14.09)% (17.02)% 9.26% (11.39)% 1.00%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $12,728 $18,225 $16,657 $7,122 $4,238
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.56% 1.38% 1.34% 1.83% 1.26%+
Net investment income (loss) (0.03) (0.08) 0.47 (0.51) (0.93)+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 136% 156% 59% 28% --
=======================================================================================
</TABLE>
(1) Per share amounts have been calculated using the average shares method,
rather than the undistributed net investment income method, because it more
accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager waived all or part of its fees for the years ended October 31,
1996, October 31, 1995 and the period ended October 31, 1994. In addition,
the Manager reimbursed the Portfolio for $9,778 in expenses for the period
ended October 31, 1994. If such fees were not waived and expenses not
reimbursed, the effect on the net investment loss and the expense ratios
would have been as follows:
Per Share Expense Ratios
(Increase) Without Fee Waiver,
Decrease to Net Reimbursement and
Investment Income (Loss) Custody Credits
------------------------ -------------------
1996 $0.02 1.58%
1995 0.03 2.23
1994 0.06 2.82+
In addition, during the years ended October 31, 1996 and 1995, the
Portfolio had earned credits from the custodian which reduced service fees
incurred. If the credits are taken into consideration the expense ratios
are 1.17% and 1.30%, respectively; prior year numbers have not been
restated to reflect these adjustments.
(*) Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
38 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
GT Global Strategic
Income Portfolio 1998 1997(1) 1996 1995 1994(2)
=======================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.52 $12.45 $10.77 $9.95 $10.00
- ---------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.84 0.75 0.74 0.64(*) 0.17
Net realized and
unrealized gain (loss) (1.09) 0.36 1.36 0.28 (0.22)
- ---------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.25) 1.11 2.10 0.92 (0.05)
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.66) (0.46) (0.42) (0.10) --
Net realized gains (0.64) (0.58) -- -- --
- ---------------------------------------------------------------------------------------
Total Distributions (1.30) (1.04) (0.42) (0.10) --
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.97 $12.52 $12.45 $10.77 $9.95
- ---------------------------------------------------------------------------------------
Total Return (2.50)% 9.32% 20.07% 9.37% (0.50)%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $28,131 $29,232 $19,152 $8,397 $2,624
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.03% 1.07% 1.23% 1.47% 1.07%+
Net investment income 7.31 6.05 6.87 6.44 4.58+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 280% 161% 192% 295% 56%
=======================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager waived all or part of its fees for the years ended
October 31, 1996, October 31, 1995 and the period ended October 31, 1994. In
addition, the Manager reimbursed the Portfolio for $18,556 in expenses for
the period ended October 31, 1994. If such fees were not waived and expenses
not reimbursed, the per share effect on net investment income and expense
ratios would have been as follows:
Expense Ratios
Without Fee Waiver,
Per Share Decreases Reimbursement and
to Net Investment Income Custody Credits
------------------------ -------------------
1996 $0.02 1.38%
1995 0.04 1.93
1994 0.13 4.53+
In addition, during the years ended October 31, 1996 and 1995, the
Portfolio had earned credits from the custodian which reduced service fees
incurred. If the credits are taken into consideration the expense ratios
are 1.11% and 1.11%, respectively; prior year numbers have not been
restated to reflect these adjustments.
(*) Includes realized gains and losses from foreign currency transactions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 39
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Smith Barney International Equity, Smith
Barney Pacific Basin and GT Global Strategic Income Portfolios of Travelers
Series Fund Inc. as of October 31, 1998, the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the years in the four-year period then ended and for the period from June 16,
1994 (commencement of operations) to October 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney International Equity, Smith Barney Pacific Basin and GT Global Strategic
Income Portfolios of Travelers Series Fund Inc. as of October 31, 1998, the
results of their operations for the year then ended, the changes in their net
assets for each of the years in the two-year period then ended and the financial
highlights for each of the years in the four-year period then ended and for the
period from June 16, 1994 to October 31, 1994, in conformity with generally
accepted accounting principles.
New York, New York
December 18, 1998
/s/ KPMG Peat Marwick LLP
- --------------------------------------------------------------------------------
40 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes GTGSI hereby designates for the fiscal year ended
October 31, 1998:
o Long-term capital gain distributions paid:
-GTGSI $528,150
o A total of 7.87% of the ordinary dividends paid by GTGSI from net
investment income are derived from Federal obligations and may be exempt
from taxation at the state level.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 41
<PAGE>
SalomonSmithBarney
---------------------------
A member of citigroup[LOGO]
Directors Investment Managers
Victor K. Atkins Mutual Management Corp.
A. E. Cohen Travelers Investment Advisers, Inc.
Robert A. Frankel
Rainer Greeven Custodian
Susan M. Heilbron The Chase Manhattan Bank
Heath B. McLendon, Chairman
Annuity Administration
Officers Travelers Annuity Investor Services
Heath B. McLendon 5 State House Square
President and 1 Tower Square
Chief Executive Officer Hartford, CT 06183
Lewis E. Daidone
Senior Vice President This report is submitted for the general
and Treasurer information of the shareholders of
Travelers Series Fund Inc. -- Smith
Jeffrey J. Russell Barney International Equity, Smith
Vice President Barney Pacific Basin and GT Global
Strategic Income Portfolios. It is not
Irving P. David authorized for distribution to prospective
Controller investors unless accompanied or preceded
by a current Prospectus for the Portfolios,
Christina T. Sydor which contains information concerning the
Secretary Portfolios' investment policies and expenses
as well as other pertinent information.
Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc.
Travelers Series Fund Inc.
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
IN0252 12/98
<PAGE>
[GRAPHIC]
Travelers Series Fund Inc.
Smith Barney High Income
Portfolio
Putnam Diversified Income
Portfolio
-------------
ANNUAL REPORT
-------------
October 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Travelers Series [PHOTO]
Fund Inc.
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the annual report for the Travelers Series Fund Inc. -
Smith Barney High Income and Putnam Diversified Income Portfolios ("Portfolios")
for the year ended October 31, 1998. In this report, we summarize the period's
prevailing economic and market conditions and outline the investment strategy
employed by each Portfolio. A detailed summary of performance and current
holdings can be found in the appropriate sections that follow.
Portfolio Highlights
Smith Barney High Income Portfolio
The Smith Barney High Income Portfolio seeks high current income. Capital
appreciation is a secondary objective. For the period ended October 31, 1998,
the Smith Barney High Income Portfolio returned a negative 3.38%. In comparison,
the Fund's Lipper Inc. ("Lipper") peer group averaged a negative total return of
11.08% for the same period. (Lipper is an independent fund-tracking
organization.)
The high yield bond market bottomed out during the month of October with the
decline in prices ending with the second Federal Reserve Board ("Fed") interest
rate cut on October 15, 1998. (The Fed reduced the federal-funds rate for the
third time in seven weeks on November 17, 1998 after this letter was written.)
During the first half of the month, the high yield bond market continued to
deteriorate with investors continuing to move to the safety of the U.S. Treasury
market and away from riskier asset classes such as high yield bonds. However,
when the Fed cut interest rates for the second time, the high yield bond market
responded favorably over the last two weeks of October and first two weeks of
November. Within the high yield bond market, returns were also directly
correlated to credit quality with higher-quality "BB"-rated issues outperforming
lower quality "B" and "CCC"-rated issues. The stock markets reacted much more
positively to this stimulative Fed monetary policy with total returns ranging
between 4% to 8%, with the highest returns generated by larger-capitalization
stocks in the S&P 500 and Dow Jones Industrial Average. The U.S. Treasury market
reacted poorly to the Fed's easing of monetary policy.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 1
<PAGE>
While the current U.S. economy remains generally supportive of a broad range of
U.S. companies and inflation continues to be modest, there is some concern that
the Asian economic crisis as well as recent financial market turmoil may force
the U.S. economy into a recession. So far, the portfolio manager has neither
seen nor does he expect to see a material increase in bankruptcies among most
companies that issue high-yield bonds.
While there could be some increase in failure rates of some companies, the
portfolio manager believes it will be confined to the more vulnerable
lower-quality companies in industries marked by significant competition and
declining prices. Yet, there is no question that the U.S. economy is slowing
down somewhat, especially among some commodity companies that either export
products overseas or compete with lower-cost imports.
During the reporting period, the High Income Portfolio remained cautiously
positioned with a heavy emphasis in better quality, intermediate maturity "B"
and "BB" rated high-yield bonds. In addition, the Portfolio continued to
emphasize telecommunication issues as well as cable and media issues.
As high yield bond spreads continued to widen during the past year, the
portfolio manager began to take advantage of what he believed were attractively
priced "B"-rated issues. Given the continued problems in Asia, the manager plans
to remain underweighted in basic commodity industries such as steel, forest
products and petrochemicals, industries that have been negatively affected by
deflationary trends over the past 12 months. (Deflation is when prices actually
fall. Deflation should not be confused with disinflation, which is the slowing
down of the rate at which prices increase.)
Moreover, the portfolio manager believes that it's still an open question
whether or not Asia's problems will have a significant negative impact on
overall U.S. economic growth. Nevertheless, the Fed remains vigilant about the
potential for a pronounced deterioration in U.S. economic growth as witnessed by
its recent reductions in short-term interest rates to prevent the current
slowdown from turning into a major recession. The portfolio manager anticipates
that this monetary policy on the part of the Fed should go a long way towards
stabilizing the financial markets both here and abroad.
The portfolio manager believes that the High Income Portfolio is appropriately
positioned for current economic conditions. While he still expects economic
growth to slow and corporate profit margins to deteriorate for the remainder of
1998, he does not anticipate a recession at this time, especially in light of
the Fed's actions in lowering short-term interest rates. Moreover, given the
higher volatility in the financial markets, he plans on maintaining the
Portfolio's relatively sound credit quality orientation.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
Putnam Diversified Income Portfolio
For the year ended October 31, 1998, the Putnam Diversified Income Portfolio
("Portfolio") returned a negative 0.65%. In comparison, the Lehman Brothers
Aggregate Bond Index posted a total return of 3.46% over the same period. (The
Lehman Brothers Aggregate Bond Index is an unmanaged index composed of the
Lehman Intermediate Government/Corporate Bond Index and the Mortgage-Backed
Securities Index and includes U.S. Treasury issues, agency issues, corporate
bond issues and mortgage-backed securities.)
Throughout the year ended October 31, 1998, resurgent financial and political
instability in many of the world's developing countries has had a dramatic
effect on securities markets around the globe. As Asia's woes intensified and
Russia's currency crisis hit the boiling point, all three of the Portfolio's
bond sectors -- U.S. taxable investment grade bonds, foreign bonds, and high
yield bonds -- were affected in some manner.
The Portfolio's investment strategy throughout the year was to hold firm in its
emphasis on the so-called spread sectors -- those areas of the bond market in
which the most attractive yields exist such as high-yield bonds, high-grade
corporate issues, mortgage-backed securities and a bit of emerging-markets debt.
The reasoning behind this approach involves a time-tested belief that by
overweighting the spread sectors in combination with some exposure to U.S.
Government securities, the Portfolio's holdings would offer the potential to
outperform the broad bond market over the long term.
While this approach has greatly benefited the Portfolio since its inception, a
dramatic about-face occurred in the final months of the reporting period. The
Portfolio's U.S. Treasury securities and mortgage-backed issues became the
dominant performers as a result of a global flight to quality, while the
high-yield and investment-grade corporate bond positions suffered a severe
setback. The Portfolio's focus on the core bond markets of Europe stood the
Portfolio in good stead and helped provide some support in the wake of capsizing
emerging-markets debt.
Seven years of price gains in the high-yield bond market were effectively
eradicated this past summer for reasons that had more to do with global investor
sentiment than with U.S. business and economic fundamentals. Signs of recession
in other countries, an unexpectedly weak U.S. jobs report, lower-than-expected
corporate earnings forecasts, Russia's financial collapse, and broad-based
selling of high-yield debt by highly leveraged, distressed hedge funds to meet
margin calls created a "sky-is-falling" atmosphere. In response, investors
exited out of just about any bond with credit risk. The spread between
high-yield bonds and U.S. Treasury securities (i.e., the difference in yield
between bonds with similar maturities) had widened by nearly 7% at the reporting
period's end.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 3
<PAGE>
As disturbing as the market rout has been, the Portfolio is holding firm to its
high-yield bond positions for what the managers believe are sound, fundamental
reasons. The forces that pushed U.S. Treasury bonds, stocks, and high-yield
bonds higher for most of the period -- solid economic growth, healthy corporate
profitability, subdued inflation and low interest rates -- remain in place and
continue to provide ideal conditions for high-yield bond investing. Indeed, the
high-yield bond sector was the top-performing global bond sector through June.
Merger and acquisition activity is still brisk, defaults remain low and the
fiscal health of corporate America and the U.S. government is far better than it
has been in years.
Bonds in the telecommunications, broadcasting, cable, and finance industries
remain the Portfolio's primary focus. The ongoing consolidation, deregulation,
and dynamic long-term growth potential of these industries bode well for
companies that are focused and driven.
Since Asia's troubles first attracted the attention of investors worldwide last
October, the U.S. Treasury market has experienced a most impressive and historic
rally. Investors flocked to the high credit quality of U.S. Treasury bonds
throughout the Portfolio's fiscal period. Because bond yields move in the
opposite direction from their prices, this surge in demand caused the yield on
the bellwether 30-year Treasury bond to ratchet steadily downward to below 5%, a
level not seen in the bond's 21-year history. The Portfolio's exposure to the
U.S. Treasury market significantly helped its performance, buoying its share
price as other bond sectors came under considerable pressure.
Higher-yielding, mortgage-backed securities, however, were the Portfolio's main
focus within the U.S. government sector. While this strategy prohibited the
Portfolio from participating fully in the U.S. Treasury market rally, the
managers' focus on securities with lower prepayment sensitivity, such as
adjustable-rate, lower-coupon, and 15-year maturity mortgage-backed securities,
did benefit the Portfolio's performance. Classified as intermediate-term
maturities, the mortgage-backed issues the Portfolio held provided the Portfolio
with what was believed to be the best duration exposure as the yield curve
flattened through June and then steepened near period's end. (Duration is a
measure of sensitivity to interest-rate changes. The yield curve is the
difference between short- and long-term interest rates.)
As did U.S. bonds, developed-country bonds in Europe benefited from the global
flight to quality, posting solid returns in local currency terms over the
period. The Portfolio focused on core European markets, such as Germany, France,
and Great Britain, at the expense of the higher-yielding peripheral markets,
such as Spain, Italy, and Sweden, which until recently had performed better.
As the U.S. dollar weakened against most other major currencies this past
summer, the Portfolio's managers elected, insofar as possible, to avoid hedging
currencies
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
back to the U.S. dollar. When translated back to U.S. dollars, its investment
strategy served to enhance the local foreign bond returns. The upcoming
unification of monetary policy and interest rates across 11 European countries
- -- and everything else that Europe's Economic and Monetary Union ("EMU")
promises -- convinced the Portfolio's managers to stay the course with their
core European holdings.
The Portfolio's exposure to emerging markets, although limited, hindered returns
as the crisis in Asia worsened and Russia's financial system collapsed. The
Portfolio held a small amount of Russian debt, which was sold before the worst
of the turmoil took place. The managers continue to avoid Japanese government
bonds, anticipating that the sad state of economic affairs in that country may
well continue for some time.
At the time of this writing, a good portion of the broad bond market is being
priced as if the domestic and global economic situation were in a dire state.
The Portfolio's managers do not hold that view, believing instead that
fundamental forces at work all over the globe -- the EMU, positive budget
developments in the United States and many other developed nations, low
inflation, stable-to-declining interest rates and economic recovery and/or
continued growth -- are providing a positive backdrop for bond investing
worldwide.
Having said that, however, the portfolio managers are not so naive as to suggest
that the current period of volatility is drawing to a close. Indeed, it may well
continue in the near term. But with volatility comes the opportunity to add
selectively -- at highly attractive prices -- to well-researched positions that
stand to benefit from a change in market sentiment. The portfolio managers look
forward to the challenges that may lie ahead, confident that the Portfolio's
multi-sector strategy should again demonstrate its full investment potential
over the long run.
In closing, thank you for your investment in the Travelers Series Fund Inc. -
Smith Barney High Income and Putnam Diversified Income Portfolios. We look
forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 16, 1998
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 5
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Smith Barney High Income Portfolio
================================================================================
================================================================================
Historical Performance
================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
====================================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/98 $13.25 $11.97 $0.74 $0.17 (3.38)%
- --------------------------------------------------------------------------------------------------------------------
10/31/97 12.09 13.25 0.66 0.06 16.24
- --------------------------------------------------------------------------------------------------------------------
10/31/96 11.26 12.09 0.50 0.00 12.17
- --------------------------------------------------------------------------------------------------------------------
10/31/95 10.07 11.26 0.22 0.00 14.30
- --------------------------------------------------------------------------------------------------------------------
6/16/94*-10/31/94 10.00 10.07 0.00 0.00 0.70++
====================================================================================================================
Total $2.12 $0.23
====================================================================================================================
<CAPTION>
================================================================================
Putnam Diversified Income Portfolio
================================================================================
================================================================================
Historical Performance
================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
====================================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/98 $12.31 $11.70 $0.42 $0.14 (0.65)%
- --------------------------------------------------------------------------------------------------------------------
10/31/97 11.99 12.31 0.56 0.09 8.44
- --------------------------------------------------------------------------------------------------------------------
10/31/96 11.46 11.99 0.39 0.13 9.43
- --------------------------------------------------------------------------------------------------------------------
10/31/95 10.18 11.46 0.09 0.00 13.55
- --------------------------------------------------------------------------------------------------------------------
6/16/94*-10/31/94 10.00 10.18 0.00 0.00 1.80++
====================================================================================================================
Total $1.46 $0.36
====================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Returns+
================================================================================
Smith Barney High Putnam Diversified
Income Portfolio Income Portfolio
================================================================================================
<S> <C> <C>
Year Ended 10/31/98 (3.38)% (0.65)%
- ------------------------------------------------------------------------------------------------
6/16/94* through 10/31/98 8.86 7.33
================================================================================================
<CAPTION>
================================================================================
Cumulative Total Returns+
================================================================================
Smith Barney High Putnam Diversified
Income Portfolio Income Portfolio
================================================================================================
<S> <C> <C>
6/16/94* through 10/31/98 45.00% 36.28%
================================================================================================
</TABLE>
+ Assumes the reinvestment of all dividends and capital gains distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
Smith Barney High Income Portfolio vs.
Salomon Smith Barney Intermediate High Yield Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon Smith Barney
Smith Barney High Intermediate
Income Poertfolio High Yield Index
----------------- ----------------
<S> <C> <C>
6/16/94 $10,000 $10,000
10/94 $10,070 $10,113
10/95 $11,510 $11,723
10/96 $12,912 $12,690
10/97 $15,008 $14,580
10/31/98 $14,500 $14,501
</TABLE>
+ Hypothetical illustration of $10,000 invested in shares of the Smith Barney
High Income Portfolio on June 16, 1994 (commencement of operations),
assuming reinvestment of dividends and capital gains, if any, at net asset
value through October 31, 1998. The Salomon Smith Barney Intermediate High
Yield Index is comprised of 434 issues, both cash-pay and deferred interest
bonds with a remaining maturity of at least seven years, but less than ten
years. The bonds are all public, non-convertible issues with at least $50
million outstanding. The index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 7
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
Putnam Diversified Income Portfolio vs. Lehman Brothers
Aggregate Bond Index and Salomon Smith Barney
Non-U.S. World Government Bond Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon Smith Barney Non-U.S.
Putnam Diversified World Government Lehman Brothers Aggregate
Income Portfolio Bond Index- Unhedged Bond Index
---------------- -------------------- ----------
<S> <C> <C> <C>
6/16/94 $10,000 $10,000 $10,000
10/94 $10,180 $10,554 $10,052
10/95 $11,560 $12,155 $11,626
10/96 $12,650 $12,818 $12,305
10/97 $13,706 $14,410 $13,399
10/31/98 $13,628 $16,254 $14,651
</TABLE>
+ Hypothetical illustration of $10,000 invested in shares of the Putnam
Diversified Income Portfolio on June 16, 1994 (commencement of operations),
assuming reinvestment of dividends and capital gains, if any, at net asset
value through October 31, 1998. The Lehman Brothers Aggregate Bond Index is
comprised of over 6,500 issues of U.S. Treasuries, Agencies, Corporate
Bonds and Mortgage-Backed Securities. The Salomon Smith Barney Non-U.S.
World Government Bond Index - Unhedged is comprised of fixed rate bonds
with a maturity of one year or longer, and at least $25 million
outstanding. This index includes securities from 10 countries, providing a
comprehensive measure of the total return performance of the domestic bond
markets in each country included, as well as the ten combined countries.
These indexes are unmanaged and are not subject to the same management and
trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 92.1%
Aerospace/Defense -- 2.1%
$2,550,000 BB Airplanes Pass Through Trust, Corporate Collateralized
Mortgage Obligation, Series D, 10.875% due 3/15/19 $ 2,710,625
565,000 B1* BE Aerospace Inc., Sr. Sub. Notes, 9.500% due 11/1/08 581,950
- -----------------------------------------------------------------------------------------------------
3,292,575
- -----------------------------------------------------------------------------------------------------
Banks/Savings and Loans -- 0.6%
1,000,000 BB- Ocwen Federal Bank, Sub. Debentures,
12.000% due 6/15/05 955,000
- -----------------------------------------------------------------------------------------------------
Broadcasting - TV, Cable and Radio -- 13.8%
680,000 B- Capstar Broadcasting Corp., Sr. Discount Notes,
step bond to yield 10.857% due 2/1/09 510,000
1,475,000 BB- Century Communications Corp., Sr. Notes,
8.750% due 10/1/07 1,548,750
2,250,000 Ba3* Chancellor Media Corp., Sr. Sub. Notes,
9.000% due 10/1/08(b) 2,261,250
1,025,000 B2* Comcast UK Cable Partners Ltd., Sr. Discount Debentures,
step bond to yield 10.729% due 11/15/07 799,500
CSC Holdings Inc., Sr. Sub. Debentures:
2,325,000 BB- 9.875% due 2/15/13 2,516,812
1,300,000 BB- 10.500% due 5/15/16 1,504,750
200,000 BB+ 7.625% due 7/15/18 185,000
1,250,000 BB- 9.875% due 4/1/23 1,375,000
Rogers Cablesystems Ltd.:
2,000,000 BB+ Debentures, 10.000% due 3/15/05 2,180,000
2,000,000 BB+ Sr. Secured Debentures, 10.000% due 12/1/07 2,180,000
1,400,000 BB- Sr. Sub. Debentures, 11.000% due 12/1/15 1,611,750
555,000 CCC+ Telemundo Holdings, Inc., Sr. Discount Notes,
zero coupon bond to yield 11.368% due 8/15/03(b) 288,600
TV Azteca SA de CV:
1,000,000 Ba3* Debentures, 10.125% due 2/15/04 740,000
1,700,000 Ba3* Sr. Notes, 10.500% due 2/15/07 1,232,500
6,950,000 B United International Holdings, Inc., Sr. Discount Notes,
step bond to yield 11.104% due 2/15/08 3,266,500
- -----------------------------------------------------------------------------------------------------
22,200,412
- -----------------------------------------------------------------------------------------------------
Building/Construction -- 0.4%
250,000 BB Building Materials Corp., Sr. Notes, step bond to yield
10.015% due 7/1/04 250,000
425,000 B+ Nortek Inc., Sr. Notes, 9.125% due 9/1/07 420,750
- -----------------------------------------------------------------------------------------------------
670,750
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 9
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Cellular and Other Wireless -- 7.9%
$3,400,000 B3* Clearnet Communications, Inc., Sr. Discount Notes,
step bond to yield 12.536% due 12/15/05 $ 2,754,000
Dolphin Telecom PLC:
1,575,000 B- Sr. Discount Notes, step bond to yield
14.103% due 6/1/08(b) 504,000
1,575,000+ B- Sr. Notes, step bond to yield 11.625% due 6/1/08 786,058
2,595,000 B- Iridium LLC Capital Corp., Sr. Notes, 14.000% due 7/15/05 2,179,800
3,200,000 B- Millicom International Cellular S.A., Sr. Discount Notes,
step bond to yield 13.303% due 6/1/06 1,664,000
675,000 B2* Nextel Communications Inc., Sr. Discount Notes,
step bond to yield 8.918% due 8/15/04 632,813
950,000 Ba3* Orange PLC, Sr. Notes, 8.000% due 8/1/08 935,750
1,000,000 B3* Pagemart Nationwide Inc., Sr. Discount Notes,
step bond to yield 12.278% due 2/1/05 877,500
1,775,000 Caa* Pagemart Wireless Inc., Sr. Discount Notes,
step bond to yield 11.250% due 2/1/08 974,031
Telesystems International Wireless Inc., Sr. Discount Notes:
2,550,000 CCC+ Step bond to yield 11.784% due 6/30/07 969,000
1,425,000 CCC+ Step bond to yield 10.980% due 11/1/07 456,000
- -----------------------------------------------------------------------------------------------------------
12,732,952
- -----------------------------------------------------------------------------------------------------------
Diversified/Conglomerate Manufacturing -- 3.1%
425,000 BB- CIA Latino Americana, Sr. Notes, 11.625% due 6/1/04 309,719
625,000 B- Eagle-Picher Industries, Sr. Sub. Notes, 9.375% due 3/1/08 566,406
950,000 B3* Interlake Corp., Sr. Sub. Notes, 12.125% due 3/1/02 907,250
1,100,000 B2* Intertek Finance PLC, Sr. Sub. Notes, 10.250% due 11/1/06 985,875
1,775,000 B Outboard Marine Corp., Sr. Notes, 10.750% due 6/1/08(b) 1,664,063
550,000 B+ Park-Ohio Industries, Sr. Sub. Notes, 9.250% due 12/1/07 530,750
- -----------------------------------------------------------------------------------------------------------
4,964,063
- -----------------------------------------------------------------------------------------------------------
Diversified/Conglomerate Services -- 1.4%
1,000,000 B- Axiohm Transaction Solutions, Inc., Sr. Sub. Notes,
9.750% due 10/1/07 920,000
1,350,000 B- Outsourcing Solutions, Inc., Sr. Sub. Notes,
11.000% due 11/1/06 1,235,250
- -----------------------------------------------------------------------------------------------------------
2,155,250
- -----------------------------------------------------------------------------------------------------------
Electric Utilities -- 2.9%
AES Corp., Sr. Sub. Notes:
325,000 Ba1* 10.250% due 7/15/06 334,750
2,225,000 Ba1* 8.500% due 11/1/07 2,113,750
Calpine Corp., Sr. Notes:
1,000,000 Ba2* 10.500% due 5/15/06 1,076,250
850,000 Ba2* 8.750% due 7/15/07 862,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Electric Utilities -- 2.9% (continued)
$ 13,661 BB Midland Cogeneration Venture Limited Partnership,
Midland Funding, Debentures, Sr. Secured Lease
Obligation Bond, Series C, 10.330% due 7/23/02 $ 14,515
400,000 BB- Niagara Mohawk Power Corp., Sr. Discount Notes,
step bond to yield 8.243% due 7/1/10 291,500
- -----------------------------------------------------------------------------------------------------------
4,693,515
- -----------------------------------------------------------------------------------------------------------
Electronics/Computers -- 6.3%
672,000 B+ Celestica International Inc., Sr. Sub. Notes,
10.500% due 12/31/06 719,040
1,350,000 B Fairchild Semiconductor Corp., Sr. Sub. Notes,
10.125% due 3/15/07 1,228,500
500,000 B- Graphic Controls Corp., Sr. Sub. Notes,
12.000% due 9/15/05 565,000
Unisys Corp., Sr. Notes:
2,000,000 Ba3* 12.000% due 4/15/03 2,240,000
3,200,000 Ba3* 11.750% due 10/15/04 3,616,000
1,900,000 B- Viasystems Inc., Sr. Sub. Notes, 9.750% due 6/1/07 1,681,500
- -----------------------------------------------------------------------------------------------------------
10,050,040
- -----------------------------------------------------------------------------------------------------------
Finance Companies/Consumer Credit -- 2.0%
Amresco, Inc., Sr. Sub. Notes:
500,000 B 10.000% due 3/15/04 310,000
700,000 B 9.875% due 3/15/05 420,000
700,000 NR Ocwen Asset Investment, Sr. Notes, 11.500% due 7/1/05(b) 420,000
1,075,000 B2* Ocwen Capital Trust, Notes, 10.875% due 8/1/27 827,750
1,400,000 BB- Ocwen Financial Corp., Sr. Notes, 11.875% due 10/1/03 1,246,000
- -----------------------------------------------------------------------------------------------------------
3,223,750
- -----------------------------------------------------------------------------------------------------------
Food -- 2.0%
600,000 B- B&G Foods, Inc., Sr. Sub. Notes, 9.625% due 8/1/07 564,000
1,150,000 Ba3* Carrols Corp., Sr. Notes, 11.500% due 8/15/03 1,198,875
1,250,000 B Imperial Holly Corp., Sr. Sub. Notes, 9.750% due 12/15/07 1,181,250
300,000 B SC International Services, Inc., Sr. Sub. Notes,
9.250% due 9/1/07 294,000
- -----------------------------------------------------------------------------------------------------------
3,238,125
- -----------------------------------------------------------------------------------------------------------
Healthcare/Drugs/Hospital Supplies -- 8.7%
Columbia/HCA Healthcare Corp., Notes:
600,000 BBB 7.000% due 7/1/07 571,500
200,000 BBB 7.250% due 5/20/08 192,750
200,000 BBB 6.630% due 7/15/45 198,000
150,000 B- Fisher Scientific International Inc., Sr. Sub. Notes,
9.000% due 2/1/08 145,875
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 11
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Healthcare/Drugs/Hospital Supplies -- 8.7% (continued)
$ 150,000 Ba3* Fresenius Medical Capital Trust, Notes, 7.875% due 2/1/08 $ 138,750
ICN Pharmaceuticals Inc., Sr. Notes:
2,100,000 BB 9.250% due 8/15/05 2,068,500
275,000 BB 8.750% due 11/15/08(b) 268,469
Integrated Health Services, Sr. Sub. Notes:
1,025,000 B2* 9.500% due 9/15/07 943,000
1,700,000 B2* 9.250% due 1/15/08 1,547,000
4,750,000 B- Magellan Health Services Inc., Sr. Sub. Notes,
9.000% due 2/15/08(b) 4,049,375
1,475,000 B- Mariner Post-Acute Network Inc., Sr. Sub. Notes,
9.500% due 11/1/07 1,371,750
Sun Healthcare Group, Inc., Sr. Sub. Notes:
1,600,000 B2* 9.500% due 7/1/07 1,200,000
1,750,000 B2* 9.375% due 5/1/08(b) 1,303,750
- ------------------------------------------------------------------------------------------------------------
13,998,719
- ------------------------------------------------------------------------------------------------------------
Hotel, Casinos and Gaming -- 1.7%
450,000 B Aztar Corp., Sr. Sub. Notes, 13.750% due 10/1/04 496,125
700,000 B- Courtyard by Marriott, Sr. Secured Notes,
10.750% due 2/1/08 703,500
900,000 BB Grand Casinos Inc., First Mortgage, 10.125% due 12/1/03 948,375
290,000 BB HMH Properties, Sr. Notes, 7.875% due 8/1/08 281,300
200,000 BB+ Mohegan Tribal Gaming Authority, Sr. Secured Notes,
13.500% due 11/15/02 258,250
- ------------------------------------------------------------------------------------------------------------
2,687,550
- ------------------------------------------------------------------------------------------------------------
Insurance Companies -- 0.9%
1,350,000 BB+ SIG Capital Trust, Sr. Notes, 9.500% due 8/15/27 1,026,000
450,000 BB- Veritas Capital Trust, Trust Certificates, 10.000% due 1/1/28 424,125
- ------------------------------------------------------------------------------------------------------------
1,450,125
- ------------------------------------------------------------------------------------------------------------
Leisure -- 0.7%
1,150,000 B3* SFX Entertainment Inc., Sr. Sub. Notes, 9.125% due 2/1/08 1,072,375
- ------------------------------------------------------------------------------------------------------------
Machinery -- 0.4%
525,000 B- Alvey Systems Inc., Sr. Sub. Notes, 11.375% due 1/31/03 521,719
150,000 B Columbus McKinnon Corp., Sr. Sub. Notes,
8.500% due 4/1/08 139,875
- ------------------------------------------------------------------------------------------------------------
661,594
- ------------------------------------------------------------------------------------------------------------
Metals/Mining -- 0.5%
800,000 B- Haynes International, Inc., Sr. Notes, 11.625% due 9/1/04 802,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
========================================================================================================
<S> <C> <C> <C>
Oil Services -- 1.7%
$ 455,000 B+ Cliffs Drilling Co., Sr. Notes, 10.250% due 5/15/03 $ 478,888
750,000 B- DeepTech International Inc., Sr. Notes,
12.000% due 12/15/00 825,000
450,000 B+ ICO Inc., Sr. Notes, 10.375% due 6/1/07 420,750
400,000 BB- J. Ray McDermott SA, Sr. Sub. Notes, 9.375% due 7/15/06 419,500
650,000 BB Pride Petroleum, Sr. Notes, 9.375% due 5/1/07 579,313
- --------------------------------------------------------------------------------------------------------
2,723,451
- --------------------------------------------------------------------------------------------------------
Oil/Natural Gas -- 5.8%
500,000 B Canadian Forest Oil Ltd., Sr. Sub. Notes,
8.750% due 9/15/07 446,250
2,100,000 B+ Clark USA, Inc., Sr. Notes, 10.875% due 12/1/05 1,974,000
Ocean Energy Inc.:
850,000 BB- Sr. Sub. Debentures, 9.750% due 10/1/06 874,438
3,300,000 BB- Sr. Sub. Notes, 10.375% due 10/15/05 3,448,500
900,000 BB- Sr. Sub. Notes, 8.875% due 7/15/07 895,500
1,000,000 BB- Santa Fe Energy Resources, Sr. Sub. Debentures,
11.000% due 5/15/04 1,055,000
675,000 B2* Stone Energy Corp., Sr. Sub. Notes, 8.750% due 9/15/07 651,375
- --------------------------------------------------------------------------------------------------------
9,345,063
- --------------------------------------------------------------------------------------------------------
Packaging/Containers -- 0.8%
775,000 B Huntsman Packaging Corp., Sr. Sub. Notes,
9.125% due 10/1/07 689,750
550,000+ B Impress Metal Packaging, Sr. Sub. Notes,
9.875% due 5/29/07 332,085
250,000 B- Tekni-Plex, Inc., Sr. Sub. Notes, 9.250% due 3/1/08 246,250
- --------------------------------------------------------------------------------------------------------
1,268,085
- --------------------------------------------------------------------------------------------------------
Paper/Forest Products/Printing -- 2.4%
875,000 BB Malette, Inc., Sr. Secured Notes, 12.250% due 7/15/04 945,000
2,600,000 B+ SD Warren Co., Sr. Sub. Notes, 12.000% due 12/15/04 2,856,750
- --------------------------------------------------------------------------------------------------------
3,801,750
- --------------------------------------------------------------------------------------------------------
Personal Care Products/Cosmetics -- 2.2%
1,900,000 B- Revlon Consumer Products, Sr. Sub. Notes,
8.625% due 2/1/08 1,681,500
3,100,000 B- Revlon Worldwide, Series B, Sr. Discount Notes,
zero coupon bond to yield 12.182% due 3/15/01 1,829,000
- --------------------------------------------------------------------------------------------------------
3,510,500
- --------------------------------------------------------------------------------------------------------
Pollution Control/Waste Removal -- 0.3%
500,000 B+ Allied Waste, Inc., Sr. Sub. Notes, 10.250% due 12/1/06 545,000
- --------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 13
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Publishing -- 1.0%
$1,125,000+ NR Middleweb PLC, Sr. Notes, 10.500% due 5/30/08 $ 1,639,117
- -----------------------------------------------------------------------------------------------------------
Real Estate Development/REITs -- 1.2%
625,000 B- BF Saul REIT, Sr. Notes, 9.750% due 4/1/08 520,313
1,200,000 Baa3* Trizec Finance Ltd., Sr. Notes, 10.875% due 10/15/05 1,324,500
- -----------------------------------------------------------------------------------------------------------
1,844,813
- -----------------------------------------------------------------------------------------------------------
Retail -- 0.7%
300,000 B- Advance Holdings, Sr. Discount Notes, step bond to
yield 12.592% due 4/15/09(b) 162,000
1,000,000 B- Advance Stores Co., Inc., Sr. Sub. Notes,
10.250% due 4/15/08(b) 950,000
- -----------------------------------------------------------------------------------------------------------
1,112,000
- -----------------------------------------------------------------------------------------------------------
Telephone/Communications -- 18.6%
Colt Telecommunications Group PLC:
200,000+ B Sr. Notes, 10.125% due 11/30/07 326,567
2,400,000+ B Sr. Notes, 7.625% due 7/31/08 1,296,944
1,250,000 B Sr. Sub. Notes, step bond to yield 11.726% due 12/15/06 956,250
2,725,000 NR E.Spire Communications, Inc. Sr. Notes, step bond to
yield 11.349% due 7/1/08(b) 1,348,875
Esprit Telecom Group PLC, Sr. Notes:
300,000+ B- 11.500% due 12/15/07 152,155
575,000 B- 11.500% due 12/15/07 517,500
400,000 B- 10.875% due 6/15/08 350,000
1,100,000 NR Facilicom International Inc., Sr. Notes, 10.500% due 1/15/08 848,375
1,250,000 B Hermes Europe Railtel, Sr. Notes, 11.500% due 8/15/07 1,275,000
800,000 B+ Impsat Corp., Sr. Notes, 12.375% due 6/15/08(b) 630,000
1,600,000 B Intermedia Communications of Florida, Sr. Discount Notes,
step bond to yield 11.212% due 5/15/06 1,252,000
1,550,000 B Level 3 Communications Inc., Sr. Notes, 9.125% due 5/1/08 1,464,750
400,000 B+ McLeod, Inc., Sr. Discount Notes, step bond to yield
11.046% due 3/1/07 280,000
Metronet Communications:
4,675,000 B Sr. Discount Notes, step bond to yield
10.044% due 6/15/08 2,618,000
2,025,000 B Sr. Notes, 12.000% due 8/15/07 2,166,750
1,300,000 B Nextlink Communications, Inc., Sr. Notes,
12.500% due 4/15/06 1,391,000
NTL Inc., Sr. Notes:
575,000 B- 11.500% due 10/1/08 593,688
1,320,000 B- Step bond to yield 12.375% due 10/1/08 732,666
1,500,000 B- Primus Telecom Group, Sr. Notes, 11.750% due 8/1/04 1,372,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Telephone/Communications -- 18.6% (continued)
PSINet Inc., Sr. Notes:
$1,325,000 B- 10.000% due 2/15/05 $ 1,298,500
700,000 B- 11.500% due 11/1/08 721,000
Qwest Communications Inc.:
2,100,000 B+ Sr. Discount Notes, step bond to yield
9.248% due 10/15/07 1,590,750
400,000 B+ Sr. Notes, 10.875% due 4/1/07 463,000
RCN Corp.:
2,500,000 B3* Sr. Discount Notes, step bond to yield
10.553% due 10/15/07 1,300,000
600,000 B3* Sr. Notes, 10.000% due 10/15/07 531,000
490,000 B- RSL Communications Ltd., Sr. Notes,
12.250% due 11/15/06 502,250
1,625,000 NR Splitrock Services Inc., Units, 11.750% due 7/15/08(b) 1,486,875
1,000,000 NR Telewest Communications PLC, Sr. Notes,
11.250% due 11/1/08 1,050,000
1,050,000 NR Versatel Telecommunications, Sr. Notes,
13.250% due 5/15/08(b) 992,250
700,000 NR Wam!Net Inc., Sr. Discount Notes, step bond to yield
13.066% due 3/1/05 389,375
- -------------------------------------------------------------------------------------------------------
29,898,020
- -------------------------------------------------------------------------------------------------------
Textiles/Apparel -- 0.4%
1,450,000+ B Texon International PLC, Sr. Notes, 10.000% due 2/1/08 691,643
- -------------------------------------------------------------------------------------------------------
Transportation -- 1.6%
300,000 B+ American Reefer Co. Ltd., First Mortgage Notes,
10.250% due 3/1/08 234,000
1,000,000 BB- Sea Containers Ltd., Sr. Sub. Debentures,
12.500% due 12/1/04 1,100,000
800,000 B+ Stena Line AB, Sr. Notes, 10.625% due 6/1/08 716,000
650,000 B+ TBS Shipping International Ltd., First Mortgage Notes,
10.000% due 5/1/05(b) 474,500
- -------------------------------------------------------------------------------------------------------
2,524,500
- -------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $161,784,751) 147,752,737
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 15
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
================================================================================================
<S> <C> <C>
PREFERRED STOCK -- 0.5%
Banks/Savings and Loans -- 0.2%
10,100 California Federal Capital, Series A, 9.125% Exchangeable $258,813
- ------------------------------------------------------------------------------------------------
Broadcasting - TV, Cable and Radio -- 0.3%
4,500 SFX Broadcasting, 12.625% Exchangeable 528,750
- ------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost-- $775,625) 787,563
================================================================================================
WARRANTS(c) -- 0.4%
Broadcasting - TV, Cable and Radio -- 0.0%
1,075 Australis Holdings Ltd., Expire 10/30/01(b) 0
1,950 UIH Australia, Expire 5/15/06 9,750
750 Wireless One Inc., Expire 10/15/03 188
- ------------------------------------------------------------------------------------------------
9,938
- ------------------------------------------------------------------------------------------------
Cellular and Other Wireless -- 0.2%
4,950 Clearnet Communications Inc., Expire 9/15/05 29,700
875 Globalstar LP, Expire 2/15/04(b) 78,750
925 Iridium LLC Corp., Expire 7/15/05(b) 129,500
200 Nextel Communications, Inc., Expire 4/25/99(b) 0
- ------------------------------------------------------------------------------------------------
237,950
- ------------------------------------------------------------------------------------------------
Telephone/Communications -- 0.2%
1,750 Allegiance Telecommunications, Inc., Expire 2/3/08 21,000
1,250 Colt Telecommunications Group PLC, Expire 12/31/06 237,500
15,250 Metronet Communications Corp., Expire 8/15/07 61,000
1,000 Primus Telecommunications Group, Inc., Expire 8/1/04 5,000
700 RSL Communications Ltd., Expire 11/15/06 28,000
1,050 Versatel Telecom Inc., Expire 5/15/08(b) 10,500
2,100 Wam!Net Inc., Expire 3/1/05(b) 16,800
- ------------------------------------------------------------------------------------------------
379,800
- ------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $353,114) 627,688
================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY HIGH INCOME PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 7.0%
$11,272,000 Morgan Stanley, 5.380% due 11/2/98;
Proceeds at maturity -- $11,277,054;
(Fully collateralized by U.S. Treasury Bills,
due 10/14/99; Market value -- $11,553,345)
(Cost -- $11,272,000) $ 11,272,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $174,185,490**) $160,439,988
================================================================================
(a) All ratings are by Standard & Poor's Rating Services ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's
Investors Services Inc. ("Moody's").
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(c) Non-income producing security.
+ Represents local currency.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 44 for definitions of ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 17
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
=======================================================================================================
<S> <C> <C>
U.S. GOVERNMENT SECTOR -- 29.9%
U.S. Treasury Obligations -- 14.2%
$ 3,035,000 U.S. Treasury Notes, 5.500% due 5/31/03(a) $ 3,180,862
2,485,000 U.S. Treasury Notes, 5.250% due 8/15/03(a) 2,593,594
1,810,000 U.S. Treasury Notes, 5.625% due 5/15/08(a) 1,950,420
2,905,000 U.S. Treasury Bond, 6.375% due 8/15/27(a) 3,353,677
5,340,000 U.S. Treasury Bond, 6.125% due 11/15/27(a) 6,023,520
5,055,000 U.S. Treasury Bond, 5.500% due 8/15/28(a) 5,322,561
- -------------------------------------------------------------------------------------------------------
22,424,634
- -------------------------------------------------------------------------------------------------------
U.S. Government Agencies -- 15.7%
257,401 Federal National Mortgage Association, 7.000% due 5/1/11 262,708
34,498 Federal National Mortgage Association, 6.500% due 5/1/13 35,015
1,295,626 Federal National Mortgage Association,
6.000% due 5/1/13-7/1/13 1,335,824
10,473,146 Federal National Mortgage Association,
6.500% due 6/1/28-8/1/28 10,558,182
670,000 Federal National Mortgage Association, 6.500% 30 Year(b) 674,396
1,340,000 Federal National Mortgage Association,
6.500% 30 Year Dwarf(b) 1,348,790
1,111,880 Government National Mortgage Association,
7.500% due 1/15/23-10/15/23 1,145,579
1,794,298 Government National Mortgage Association,
8.000% due 10/15/24-3/15/28 1,862,434
980,726 Government National Mortgage Association,
6.500% due 4/15/28 992,367
6,379,872 Government National Mortgage Association,
7.000% due 11/15/25-5/15/28 6,537,757
- -------------------------------------------------------------------------------------------------------
24,753,052
- -------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR
(Cost -- $45,724,568) 47,177,686
=======================================================================================================
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.9%
52,000 AAA Chase Credit Card Master Trust, 6.230% due 6/15/03 565,181
10,000 AAA Chase Mortgage Financial Corp., 6.750% due 7/25/28 312,325
50,000 AAA Commercial Mortgage Acceptance Corp.,
7.057% due 12/15/30 250,000
95,000 AAA Contimortgage Home Equity Loan Trust,
7.670% due 3/15/28 97,523
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
======================================================================================================
<S> <C> <C> <C>
Collateralized Mortgage Obligations -- 4.9% (continued)
First Union-Lehman Brothers Commercial Mortgage:
$ 290,000 AAA 6.600% due 5/18/07 $ 300,161
240,000 AAA 6.650% due 6/18/08 248,017
415,000 AAA 7.120% due 11/18/12 400,037
940,000 AAA 6.778% due 3/18/13 877,357
1,800,000 AAA GMAC Commercial Mortgage Securities Inc.,
6.500% due 5/15/31 1,701,914
GS Mortgage Securities Corp.:
440,000 AAA 6.562% due 4/13/31 447,837
240,000 AAA 6.970% due 4/13/31 225,000
Green Tree Financial Corp.:
535,000 AAA 6.240% due 3/18/16 539,263
153,298 AAA 6.550% due 7/15/28 157,818
135,000 AAA Mortgage Capital Funding Inc., 6.663% due 1/18/08 138,754
149,000 AAA Merrill Lynch Mortgage Investors Inc.,
6.960% due 2/15/30 147,742
140,000 AAA Morgan Stanley Capital Inc., 7.150% due 6/5/30 141,181
363,829 AAA PNC Mortgage Securities Corp., 6.600% due 7/24/27 364,397
709,883 AAA Residential Asset Securitization Trust,
6.750% due 8/25/28 715,207
153,145 AAA Rural Housing Trust, 6.330% due 4/1/26 159,352
- ---------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost -- $7,981,153) 7,789,066
=========================================================================================================
CORPORATE BONDS AND NOTES -- 34.4%
Advertising -- 0.7%
425,000 B Adams Outdoor Advertising L.P., Sr. Notes,
10.750% due 3/15/06 447,312
150,000 B Lamar Advertising Co., Sr. Sub. Notes,
9.625% due 12/1/06 158,437
300,000 B Outdoor Communications Inc., Sr. Sub. Notes,
9.250% due 8/15/07 309,000
Outdoor Systems, Inc., Sr. Sub. Notes:
15,000 B 9.375% due 10/15/06 15,581
100,000 NR 8.875% due 6/15/07 101,875
- ---------------------------------------------------------------------------------------------------------
1,032,205
- ---------------------------------------------------------------------------------------------------------
Aerospace -- 0.7%
290,000 B- Argo-Tech Corp., Sr. Sub. Notes, 8.625% due 10/1/07 267,525
BE Aerospace Inc., Sr. Sub. Notes:
300,000 B1* 8.000% due 3/1/08 284,250
50,000 B1* 9.500% due 11/1/08 51,500
290,000 B- Decrane Aircraft Holdings Inc., Sr. Sub. Notes,
12.000% due 9/30/98(d)(e) 281,300
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 19
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Aerospace -- 0.7% (continued)
$ 50,000 B+ Derlan Manufacturing, Sr. Notes, 10.000% due 1/15/07 $ 44,125
10,000 B+ Hawk Corp., Sr. Notes, 10.250% due 12/1/03 10,587
50,000 NR K&F Industries, Sr. Sub. Notes, 9.250% due 10/15/07 48,250
L3 Communications Corp., Sr. Sub. Notes:
45,000 B 10.375% due 5/1/07 48,150
80,000 B 8.500% due 5/15/08 79,800
- ---------------------------------------------------------------------------------------------------
1,115,487
- ---------------------------------------------------------------------------------------------------
Agriculture -- 0.1%
25,574 NR Premium Standard Farms Inc., Sr. Secured Notes,
11.000% due 9/17/03 26,980
120,000 B- Purina Mills, Inc., Sr. Sub. Notes, 9.000% due 3/15/10 118,200
- ---------------------------------------------------------------------------------------------------
145,180
- ---------------------------------------------------------------------------------------------------
Airlines -- 0.5%
Canadian Airlines Corp., Sr. Notes:
150,000 B- 10.000% due 5/1/05 141,937
100,000 CCC- 12.250% due 8/1/06 80,000
280,000 BB- Cathay International Ltd., Sr. Notes,
13.000% due 4/15/08(d) 126,000
90,000 Ba2* Continential Airlines Inc., Company Guaranteed Notes,
8.125% due 4/1/08 93,037
90,000 B- GEO Specialty Chemicals Inc., Sr. Sub. Notes,
10.125% due 8/1/08(d) 86,962
Trans World Airlines Inc.:
70,000 NR Sr. Notes, 11.500% due 12/15/04(d) 68,687
230,000 NR Sr. Sub. Notes, 11.375% due 3/1/06 211,887
- ---------------------------------------------------------------------------------------------------
808,510
- ---------------------------------------------------------------------------------------------------
Automotive -- 1.0%
490,000 B- Accuride Corp., Sr. Sub. Notes,
9.250% due 2/1/08 460,600
75,000 B- Cambridge Industries Inc., Sr. Sub. Notes,
10.250% due 7/15/07 70,500
25,000 B Delco Remy International Inc., Sr. Sub. Notes,
10.625% due 8/1/06 24,875
300,000 BB+ Lear Corp., Sub. Notes, 9.500% due 7/15/06 325,500
330,000 NR MCII Holdings Inc., step bond to yield
12.109% due 11/15/02 301,950
60,000 NR Motors & Gears Inc., Sr. Notes, 10.750% due 11/15/06 59,250
300,000 NR Navistar International Inc., Sr. Sub. Notes,
8.000% due 2/1/08 294,000
60,000 B- Safety Components International Inc., Sr. Sub. Notes,
10.125% due 7/15/07 57,900
- ---------------------------------------------------------------------------------------------------
1,594,575
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
========================================================================================================
<S> <C> <C> <C>
Banking -- 0.3%
$ 340,000 Ba1* Fuji JGB Investment LLC, 9.870% due 6/30/08(d) $194,034
30,000 B+ Imperial Credit Industries Inc., Sr. Notes,
9.875% due 1/15/07 18,000
45,000 BB+ North Fork Capital Trust, 8.700% due 12/15/06 52,312
30,000 BB- Ocwen Capital Trust, 10.875% due 8/1/27 23,100
45,000 BB- Ocwen Federal Bank, Sub. Debentures,
12.000% due 6/15/05 42,975
30,000 BB Riggs Capital Trust, 8.625% due 12/31/26(d) 31,687
40,000 BB- Webster Capital Trust Inc., Bonds, 9.360% due 1/29/27(d) 46,000
- --------------------------------------------------------------------------------------------------------
408,108
- --------------------------------------------------------------------------------------------------------
Beverages -- 0.2%
325,000 B+ Canandaigua Brands, Inc., Sr. Sub. Notes,
8.750% due 12/15/03 327,437
- --------------------------------------------------------------------------------------------------------
Broadcasting -- 1.4%
85,000 NR Acme Television Financial, Sr. Discount Notes,
step bond to yield 10.875% due 9/30/04 64,706
110,000 B Affinity Group Holding Inc., Sr. Notes,
11.000% due 4/1/07 113,437
40,000 B2* Azteca Holdings S.A., Sr. Notes, 11.000% due 6/15/02 29,000
Capstar Broadcasting Corp.:
155,000 B- Sr. Discount Notes, step bond to yield
12.750% due 2/1/09 116,250
240,000 B2* Sr. Sub. Notes, 9.250% due 7/1/07 240,000
Chancellor Media Corp., Sr. Sub. Notes:
190,000 B 9.375% due 10/1/04 190,475
90,000 B 8.125% due 12/15/07 85,500
305,000 B Citadel Broadcasting Co., Sr. Sub. Notes,
10.250% due 7/1/07 320,250
225,000 B+ Garden State Newspapers, Inc., Sr. Sub. Notes,
8.750% due 10/1/09 210,937
60,000 BB- Globo Communicacoes Par, Sr. Notes,
10.625% due 12/5/08(d) 33,300
Jacor Communications Co.:
160,000 B Company Guaranteed, convertible, zero coupon
to yield 3.631% due 6/12/11 119,400
140,000 NR Sr. Sub. Notes, 8.750% due 6/15/07(d) 146,650
195,000 NR PHI Holdings Inc., Notes, 16.000% due 5/15/01 149,604
180,000 CCC+ Radio One Inc., Sr. Sub. Notes, 12.000% due 5/15/04 180,900
100,000 B- SFX Broadcasting, Inc., Sr. Sub. Notes,
10.750% due 5/15/06 108,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 21
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
========================================================================================================
<S> <C> <C> <C>
Broadcasting -- 1.4% (continued)
$ 40,000 B Sinclair Broadcast Group, Inc., Sr. Sub. Notes,
8.750% due 12/15/07 $ 38,400
60,000 B Spanish Broadcasting Systems Inc., Sr. Notes,
11.000% due 3/15/04 59,700
25,000 B+ TV Azteca SA, Guaranteed Sr. Notes, 10.500% due 2/15/07 18,125
- --------------------------------------------------------------------------------------------------------
2,224,884
- --------------------------------------------------------------------------------------------------------
Building/Construction -- 0.4%
120,000 B- Albecca Inc., Sr. Sub. Notes, 10.750% due 8/15/08(d) 113,850
50,000 B American Architectural Products Corp., Sr. Notes,
11.750% due 12/1/07 40,125
55,000 B Atrium Cos. Inc., Sr. Sub. Notes, 10.500% due 11/15/06 56,306
20,000 BB Building Materials Corp., Sr. Notes,
8.625% due 12/15/06 19,900
25,000 BB CIA Latino Americana, Guaranteed Sr. Notes,
11.625% due 6/1/04(d) 18,218
190,000 BB GS Superhighway, Sr. Notes, 9.875% due 8/15/04 76,475
110,000 B Morris Material Handling, Sr. Notes, 9.500% due 4/1/08 75,900
50,000 B Republic Group Inc., Sr. Sub. Notes, 9.500% due 7/15/08(d) 45,312
150,000 BBB Southdown Inc., Sr. Sub. Notes, 10.000% due 3/1/06 159,750
50,000 CCC+ Waxman Industries Inc., Sr. Secured Deferred Notes,
12.750% due 6/1/04 37,000
- --------------------------------------------------------------------------------------------------------
642,836
- --------------------------------------------------------------------------------------------------------
Casinos -- 1.3%
210,000 B+ Argosy Gaming Co., 1st Mortgage Notes,
13.250% due 6/1/04 222,600
55,000 B+ Autotote Corp., Sr. Notes, 10.875% due 8/1/04 56,100
60,000 B+ Casino America Inc., Sr. Notes, 12.500% due 8/1/03 64,800
275,000 B+ Coast Hotels Casinos Inc., 1st Mortgage Notes,
13.000% due 12/15/02 301,468
386,600 NR Colorado Gaming Entertainment Co., Sr. Notes,
12.000% due 6/1/03 - Payment in Kind(a) 418,011
75,000 NR Empress River Casino Financial Corp.,
Guaranteed Sr. Notes, 10.750% due 4/1/02 80,156
1,000 Caa* Great Bay Property Funding, 1st Mortgage Notes,
10.875% due 11/15/04 820
22,000 NR Louisiana Casino Cruises Inc., 1st Mortgage,
11.500% due 12/1/98 22,027
200,000 BB+ Mohegan Tribal Gaming, Sr. Secured Notes,
13.500% due 11/15/02 258,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Casinos -- 1.3% (continued)
$ 75,000 BB- Players International Inc., Sr. Notes,
10.875% due 4/15/05 $ 78,562
175,000 Caa* PRT Funding Corp., Sr. Notes, 11.625% due 4/15/04 122,062
185,000 B Trump Atlantic City Funding Inc., 1st Mortgage Notes,
11.250% due 5/1/06 160,950
230,000 B Trump Castle Inc., 10.250% due 4/30/03(d) 232,300
- ---------------------------------------------------------------------------------------------------
2,018,106
- ---------------------------------------------------------------------------------------------------
Chemicals -- 0.6%
125,000 BB- Acetex Corp., Sr. Guaranteed Notes, 9.750% due 10/1/03 118,125
100,000 B Huntsman Corp., Sr. Sub. Notes, 9.094% due 7/1/07(d) 93,000
200,000 B ISP Holdings Inc., Sr. Notes, 9.750% due 2/15/06 207,500
50,000 NR Koppers Industries Inc., Sr. Sub. Notes,
9.875% due 12/1/07 46,687
200,000 NR PCI Chemicals, Sr. Secured Notes, 9.250% due 10/15/07 180,000
Polymer Group Inc., Sr. Sub. Notes:
65,000 B 9.000% due 7/1/07 61,100
70,000 B 8.750% due 3/1/08 65,800
95,834 CC Polytama International Finance, Guaranteed Secured
Notes, 11.250% due 6/15/02 12,458
105,000 B+ Sterling Chemicals Holdings Inc., Sr. Secured
Discount Notes, 13.500% due 8/15/08 35,700
125,000 BB- Trikem SA, Bonds, 10.625% due 7/24/07(d) 69,375
- ---------------------------------------------------------------------------------------------------
889,745
- ---------------------------------------------------------------------------------------------------
Communications -- 0.4%
490,000 NR Cellnet Data Systems Inc., Sr. Discount Notes,
14.000% due 10/1/07 250,512
90,000 Caa* Conecel Holdings Ltd., 14.000% due 10/1/00(d) 90,000
260,000 NR Focal Communications Corp., Sr. Discount Notes,
step bond to yield 11.513% due 2/15/08 123,500
110,000 NR Orbital Imaging Corp., Notes, 11.625% due 3/1/05 92,950
- ---------------------------------------------------------------------------------------------------
556,962
- ---------------------------------------------------------------------------------------------------
Conglomerates -- 0.4%
320,000 B CEX Holdings Inc., Sr. Sub. Notes, 9.625% due 6/1/08(d) 302,400
45,000 BB Desc SA de C.V., Company Guaranteed,
8.750% due 10/15/07 35,100
Iron Mountain Inc., Sr. Sub Notes:
50,000 B- 10.125% due 10/1/06 52,125
125,000 B- 8.750% due 9/30/09 122,812
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 23
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
Conglomerates -- 0.4% (continued)
$ 30,000 BB Newport News Shipbuilding Inc., Sr. Notes,
8.625% due 12/1/06 $ 31,387
110,000 BB+ Westinghouse Electric Corp., Sr. Notes,
6.875% due 9/1/03 115,232
- -----------------------------------------------------------------------------------------------------
659,056
- -----------------------------------------------------------------------------------------------------
Consumer Products -- 0.5%
60,000 B- Chattem Inc., Sr. Sub. Notes, 8.875% due 4/1/08 57,600
120,000 BB+ Fred Meyer Inc., Notes, 7.450% due 3/1/08 126,000
French Fragrances Inc., Sr. Notes:
30,000 B+ Series B, 10.375% due 5/15/07(d) 31,050
40,000 B+ Series D, 10.375% due 5/15/07(d) 41,400
15,000 B- Hedstrom Holdings Inc., Sr. Discount Notes,
12.000% due 6/1/09 8,868
110,000 NR Interact Systems Inc., Sr. Discount Notes,
14.000% due 8/1/03 42,762
70,000 B Packaged Ice Inc., Sr. Sub. Discount Notes,
9.750% due 2/1/05 65,450
325,000 B- Revlon Consumer Products Corp., Sr. Sub. Notes,
8.625% due 2/1/08 287,625
80,000 B Selmer Co. Inc., Sr. Sub. Notes, 11.000% due 5/15/00 82,600
- -----------------------------------------------------------------------------------------------------
743,355
- -----------------------------------------------------------------------------------------------------
Consumer Services -- 0.1%
25,000 NR Amscan Holdings Inc., Sr. Sub. Notes,
9.875% due 12/15/07 20,531
200,000 B+ Coinmach Corp., Sr. Notes, 11.750% due 11/15/05 204,250
- -----------------------------------------------------------------------------------------------------
224,781
- -----------------------------------------------------------------------------------------------------
Containers -- 0.1%
170,000 B AEP Industries Inc., Sr. Sub. Notes,
9.875% due 11/15/07 159,375
- -----------------------------------------------------------------------------------------------------
Electric -- 0.1%
210,000 BB+ Cleveland Electric Illuminating Co., 1st Mortgage Bonds,
6.860% due 10/1/08(d) 206,850
- -----------------------------------------------------------------------------------------------------
Electronics -- 0.2%
60,000 B- Details Inc., Sr. Sub. Notes, 10.000% due 11/15/05 57,825
20,000 B Moog Inc., Sr. Sub. Notes, 10.000% due 5/1/06 20,050
60,000 B Motors & Gears Inc., Sr. Notes, 10.750% due 11/15/06 59,250
40,000 BB- Samsung Electronics Inc., Guaranteed Notes,
9.750% due 5/1/03(d) 34,950
190,000 B- Zilog Inc., Sr. Secured Notes, 9.500% due 3/1/05 129,200
- -----------------------------------------------------------------------------------------------------
301,275
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Energy -- 0.3%
$ 40,000 B- Coho Energy Inc., Sr. Sub. Notes, 8.875% due 10/15/07 $ 36,400
20,000 BB Ocean Energy, Sr. Notes, 8.375% due 7/1/08 19,200
Transamerican Energy Corp., Sr. Secured Notes:
500,000 NR 11.500% due 6/15/02 165,000
855,000 NR 13.000% due 6/15/02 282,150
- ---------------------------------------------------------------------------------------------------
502,750
- ---------------------------------------------------------------------------------------------------
Entertainment -- 2.1%
170,000 B AMC Entertainment Inc., Sr. Sub. Notes,
9.500% due 3/15/09 161,500
45,000 B- ATC Group Services Inc., Sr. Sub. Notes,
12.000% due 1/15/08 33,750
175,000 B+ Cinemark USA Inc., Sr. Sub. Notes,
9.625% due 8/1/08 176,750
325,000 B Fox Family Worldwide Inc., Sr. Notes,
9.250% due 11/1/07 301,375
190,000 B Fox Liberty Networks LLC Inc., Sr. Notes,
8.750% due 8/15/07 184,775
60,000 B+ Paragon Corporate Holdings Inc., Sr. Notes,
9.625% due 4/1/08 42,600
600,000 BBB Paramount Communications Inc., Sr. Debentures,
7.500% due 7/15/23 596,250
Premier Parks Inc.:
500,000 B Sr. Discount Notes, 10.000% due 4/1/08 305,000
250,000 B- Sr. Notes, 12.000% due 8/15/03 264,062
40,000 B- PX Escrow Corp., Sr. Discount Notes,
9.625% due 2/1/06(d) 22,200
150,000 B- SFX Entertainment Inc., Sr. Sub. Notes,
9.125% due 2/1/08 139,875
110,000 B- Silver Cinemas International Inc., Sr. Sub. Notes,
10.500% due 4/15/05 104,500
400,000 B- Six Flags Theme Parks Inc., Sr. Sub. Discount Notes,
12.250% due 6/15/05 438,000
123,000 CCC+ TCI Satellite Entertainment Inc., Sr. Sub. Notes,
10.875% due 2/15/07 73,953
115,000 BBB Time Warner Inc., Notes, 8.180% due 8/15/07 131,962
280,000 B- United Artists Theatre Co., Sr. Sub. Notes,
due 4/15/08 257,600
150,000 BB+ Viacom Inc., Sub. Debenture, 8.000% due 7/7/06 155,250
- ---------------------------------------------------------------------------------------------------
3,389,402
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 25
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================================
<S> <C> <C> <C>
Environment -- 0.1%
$ 130,000 BB- Allied Waste Industries Inc., Sr. Discount Notes,
step bond to yield 11.300% due 6/1/07 $ 97,500
65,000 BB- Allied Waste North America Inc., Sr. Sub. Notes,
10.250% due 12/1/06 70,850
- -------------------------------------------------------------------------------------------------------------------
168,350
- -------------------------------------------------------------------------------------------------------------------
Financial Services -- 0.6%
65,000 B Aames Financial Corp., Sr. Notes, 9.125% due 11/1/03 33,150
10,000 CCC+ APP International Financial Co., Guaranteed Notes,
11.750% due 10/1/05 7,300
200,000 B+ Chevy Chase Savings Bank, Sub. Debenture,
9.250% due 12/1/05 196,250
55,000 B+ Conti Financial Corp., Sr. Notes, 8.375% due 8/15/03 34,100
60,000 B+ Delta Financial Corp., Sr. Notes, 9.500% due 8/1/04 30,000
30,000 BB Dime Capital Trust I, 9.330% due 5/6/27 33,487
30,000 B+ Dollar Financial Corp., Sr. Notes, 10.875% due 11/15/06 28,200
65,000 B+ ESAT Holdings Ltd., Sr. Deferred Notes, step bond to yield
13.513% due 2/1/07 38,512
60,000 B+ Imperial Credit Capital Trust, 10.250% due 6/15/32 42,000
250,000 NR Nationwide Credit Inc., Sr. Notes, 10.250% due 1/15/08 231,875
25,000 BB- Ocwen Financial Corp., Notes, 11.875% due 10/1/03 22,250
30,000 B+ Pioneer Americas Acquisition Corp., Sr. Secured Notes,
9.250% due 6/15/07 22,500
60,000 BB Provident Capital Trust, Guaranteed Notes,
8.600% due 12/1/26 69,000
35,000 B- Resource America Inc., Sr. Notes, 12.000% due 8/1/04 28,000
45,000 NR Sovereign Capital Trust, Guaranteed Notes,
9.000% due 4/1/07 52,875
- -------------------------------------------------------------------------------------------------------------------
869,499
- -------------------------------------------------------------------------------------------------------------------
Foods -- 0.5%
Ameriserve Food Distribution Inc., Sr. Notes:
175,000 B+ 8.875% due 10/15/06 154,000
45,000 B- 10.125% due 7/15/07 36,956
Aurora Foods Inc., Sr. Sub. Notes:
20,000 B+ Series B, 9.875% due 2/15/07(d) 21,400
130,000 B+ Series D, 9.875% due 2/15/07(d) 139,100
90,000 B+ Fleming Cos. Inc., Sr. Sub. Notes, 10.500% due 12/1/04 86,400
250,000 B FRD Acquisition Co., Sr. Notes, 12.500% due 7/15/04 241,250
15,000 B- Nebco Evans Holding Co., Sr. Discount Notes,
step bond to yield 12.375% due 12/15/05 9,206
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Foods -- 0.5% (continued)
$ 170,000 B- Rab Enterprises Inc., Sr. Notes, 10.500% due 5/1/05(d) $ 158,312
15,000 NR Windy Hill Pet Food Co., Sr. Sub. Notes,
9.750% due 5/15/07 15,000
- ----------------------------------------------------------------------------------------------------
861,624
- ----------------------------------------------------------------------------------------------------
Gaming -- 0.1%
200,000 B- Fitzgeralds Gaming Corp., Sr. Secured Notes,
12.000% due 12/15/04 122,000
- ----------------------------------------------------------------------------------------------------
Gas & Oil Exploration -- 0.9%
125,000 B Abraxas Petroleum Corp., Sr. Notes,
11.500% due 11/1/04 96,406
Benton Oil & Gas Co., Sr. Notes:
100,000 B+ 11.625% due 5/1/03 83,000
15,000 B+ 9.375% due 11/1/07 10,500
Chesapeake Energy Corp., Sr. Notes:
210,000 B 9.625% due 5/1/05 179,550
50,000 B Company Guaranteed, 9.125% due 4/15/06 41,750
70,000 BB CMS Energy Corp., Sr. Notes, 8.125% due 5/15/02 74,375
80,000 B- Dailey International Inc., Sr. Notes, 9.500% due 2/15/08 38,400
20,000 CCC- Gothic Energy Corp., Sr. Discount Notes,
step bond to yield 14.799% due 5/1/06(d) 13,575
80,000 B- Michael Petroleum Corp., Sr. Notes, 11.500% due 4/1/05 66,800
105,000 B Northern Offshore ASA, Sr. Notes, 10.000% due 5/15/05(d) 70,875
30,000 BBB Perez Companc S.A., Notes, 9.000% due 1/30/04(d) 27,262
100,000 CCC- Petsec Energy Inc., Sr. Sub. Notes, 9.500% due 6/15/07 82,000
15,000 B+ Pogo Producing Co., Sr. Sub. Notes,
8.750% due 5/15/07 14,118
70,000 B- Ram Energy Inc., Sr. Notes, 11.500% due 2/15/08 49,700
250,000 CCC+ Seven Seas Petroleum Inc., Sr. Notes,
12.500% due 5/15/05 197,187
60,000 CCC Southwest Royalties Inc., Sr. Notes,
10.500% due 10/15/04 28,200
380,000 NR TransAmerican Energy, Sr. Notes, 11.500% due 6/15/02 144,400
128,094 CCC TransTexas Gas Corp., Sr. Sub. Notes,
13.750% due 12/31/01 108,879
80,000 NR XCL Ltd., Sr. Secured Discount Notes,
13.500% due 5/1/04(d) 83,200
- ----------------------------------------------------------------------------------------------------
1,410,177
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 27
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Health Care -- 2.4%
$ 80,000 B- Alaris Medical Systems Inc., Sr. Sub. Notes,
9.750% due 12/1/06 $ 77,800
100,000 B Dade International Inc., Sr. Sub. Notes,
11.125% due 5/1/06 107,250
125,000 B- Extendicare Health Services, Sr. Sub. Notes,
9.350% due 12/15/07 112,343
150,000 B+ Fresenius Medical Care Capital Trust,
7.875% due 2/1/08 138,750
50,000 B- Genesis Health Ventures, Inc., Sr. Sub. Notes,
9.250% due 10/1/06 44,062
150,000 B+ Global Health Sciences Inc., Sr. Notes,
11.000% due 5/1/08 140,250
300,000 BBB Graphic Controls Corp., Sr. Sub. Notes,
12.000% due 9/15/05 339,000
190,000 BBB Healthsouth Corp., Convertible Sub. Debenture,
3.250% due 4/1/03 155,325
150,000 BB ICN Pharmaceuticals Inc., Sr. Notes,
9.250% due 8/15/05 147,750
105,000 CCC- Imagyn Medical Technologies Inc., Sr. Sub. Notes,
12.500% due 4/1/04 23,100
300,000 B- Integrated Health Services, Inc., Sr. Sub. Notes,
9.500% due 9/15/07 276,000
55,000 B- Kinetic Concepts Inc., Sr. Sub. Notes,
9.625% due 11/1/07 54,862
100,000 B- Leiner Health Products Inc., Sr. Sub. Notes,
9.625% due 7/1/07 102,750
170,000 NR Magellan Health Services, Inc., Sr. Sub. Notes,
9.000% due 2/15/08(d) 144,925
Mariner Post-Acute Network Inc., Sr. Sub. Notes:
140,000 B- 9.500% due 11/1/07 130,200
310,000 B- Step bond to yield 9.843% due 11/1/07 174,762
110,000 B- Mediq Inc., Sr. Discount Debenture, step bond to yield
13.000% due 6/1/09(e) 60,500
160,000 B- Mediq Inc./Prn Life Support Services Inc.,
Sr. Sub. Notes, 11.000% due 6/1/08(d) 143,200
Medpartners Inc., Sr. Sub. Notes:
10,000 B 6.875% due 9/1/00 8,087
240,000 B 7.375% due 10/1/06 180,900
330,000 B- Multicare Cos. Inc., Sr. Sub. Notes, 9.000% due 8/1/07 284,625
120,000 B- Paracelsus Healthcare Corp., Sr. Sub. Notes,
10.000% due 8/15/06 107,400
100,000 BB- Quorum Health Group, Inc., Sr. Sub. Notes,
8.750% due 11/1/05 96,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
Health Care -- 2.4% (continued)
Sun Healthcare Group Inc., Sr. Sub. Notes:
$ 90,000 CCC+ 9.375% due 5/1/08(d) $ 67,050
195,000 CCC+ 9.500% due 7/1/07(d) 146,250
Tenet Healthcare Corp.:
45,000 BB- Sr. Notes, 8.000% due 1/15/05 46,125
245,000 BB- Sr. Sub. Notes, 8.625% due 1/15/07 250,818
150,000 BB- Sr. Sub. Notes, 8.125% due 1/15/08(d) 148,687
100,000 NR Wright Medical Technology Inc., Secured Notes,
11.750% due 7/1/00 97,750
- -----------------------------------------------------------------------------------------------------
3,806,521
- -----------------------------------------------------------------------------------------------------
Industrial Goods & Services -- 1.3%
150,000 B- Axia Inc., Sr. Sub. Notes, 10.750% due 7/15/08(d) 141,187
50,000 BB- Call-Net Enterprises Inc., Sr. Discount Notes,
step bond to yield 9.400% due 8/15/08 28,500
90,000 NR Eagle Geophysical Inc., Sr. Notes,
10.750% due 7/15/08(d) 77,737
140,000 B Flextronics International Ltd., Sr. Sub. Notes,
8.750% due 10/15/07 132,825
30,000 BB Greenpoint Capital Trust, 9.100% due 6/1/27 34,200
350,000 BB HMH Properties Inc., Sr. Notes, 7.875% due 8/1/08 339,500
50,000 B- Home Interiors & Gifts Inc., Sr. Sub. Notes,
10.125% due 6/1/08(d) 47,500
80,000 B Huntsman Packaging Corp., Sr. Sub. Notes,
9.125% due 10/1/07 77,600
50,000 B+ Hyperion Telecommunications, Inc., Sr. Secured Notes,
12.250% due 9/1/04 48,875
50,000 B- Integrated Device Technology Inc., Convertible Sub.
Notes, 5.500% due 6/1/02 37,312
50,000 B- Jackson Products Inc., Sr. Sub. Notes,
9.500% due 4/15/05(d) 47,687
100,000 NR MDC Holdings Inc., Sr. Notes, 11.125% due 12/15/03 106,375
200,000 B North Atlantic Trading Inc., Sr. Notes,
11.000% due 5/1/08 168,250
160,000 NR Northeast Optic Network Inc., Sr. Notes,
12.750% due 8/15/08 157,200
90,000 BB+ Owens - Illinois Inc., Sr. Notes, 8.100% due 5/15/07 94,725
145,000 B- Panaco Inc., Sr. Notes, 10.625% due 10/1/04 123,250
250,000 B- Panda Global Energy Co., Sr. Secured Notes,
12.500% due 4/15/04 149,375
65,000 B- Repap New Brunswick Inc., 1st Priority
Sr. Secured Notes, 9.000% due 6/1/04 60,612
45,000 B- Sealy Mattress Co., Sr. Sub. Notes,
9.875% due 12/15/07 41,175
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 29
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
Industrial Goods & Services -- 1.3% (continued)
$ 100,000 BB- Unisys Corp., Sr. Notes, 7.875% due 4/1/08 $ 100,250
90,000 B- United Defense Industries Inc., Sr. Sub. Notes,
8.750% due 11/15/07 90,000
- --------------------------------------------------------------------------------------------------------
2,104,135
- --------------------------------------------------------------------------------------------------------
Insurance -- 0.1%
30,000 B- Outsourcing Solutions Inc., Sr. Sub. Notes,
11.000% due 11/1/06 27,450
148,000 BBB Reliance Group Holdings Inc., Sr. Notes,
9.000% due 11/15/00 152,255
- --------------------------------------------------------------------------------------------------------
179,705
- --------------------------------------------------------------------------------------------------------
Lodging -- 0.3%
20,000 B Bluegreen Corp., Sr. Secured Notes,
10.500% due 4/1/08 17,600
100,000 B- Epic Resorts Inc., Sr. Secured Notes,
13.000% due 6/15/05 95,000
250,000 BB- Host Marriott Travel Plaza, Sr. Secured Notes,
9.500% due 5/15/05 257,500
60,000 CC Presley Co., Sr. Notes, 12.500% due 7/1/01 52,875
90,000 B+ Prime Hospitality Corp., Sr. Sub. Notes,
9.750% due 4/1/07 85,500
- --------------------------------------------------------------------------------------------------------
508,475
- --------------------------------------------------------------------------------------------------------
Manufacturing -- 0.1%
120,000 NR Decora Industries, Inc., Secured Notes,
11.500% due 5/1/05 105,600
35,000 B- HCC Industries, Inc., Sr. Sub. Notes,
10.750% due 5/15/07 32,987
20,000 B- Roller Bearing Co. Inc., Sr. Sub. Notes,
9.625% due 6/15/07 18,200
- --------------------------------------------------------------------------------------------------------
156,787
- --------------------------------------------------------------------------------------------------------
Media - Cable -- 2.3%
Adelphia Communications Corp., Sr. Notes:
100,000 B+ 10.250% due 7/15/00 103,250
7,493 B+ 9.500% due 2/15/04 - Payment in Kind 7,708
150,000 B Affinity Group, Inc., Sr. Sub. Notes,
11.500% due 10/15/03 155,250
130,000 B- Allbritton Communications Co., Sr. Sub. Notes,
8.875% due 2/1/08 123,662
150,000 B1* American Media Operation Inc., Sr. Sub. Notes,
11.625% due 11/15/04 153,750
40,000 B Central European Media Enterprises, Sr. Notes,
9.375% due 8/15/04 31,400
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Media - Cable -- 2.3% (continued)
$ 320,000 BB- Century Communications Corp., Sr. Notes,
9.500% due 3/1/05 $ 345,600
250,000 B Charter Communications Southeast Holdings,
Sr. Secured Discount Debenture,
14.000% due 3/15/01 210,625
250,000 BB+ Comcast Corp., Sr. Sub. Notes, 9.500% due 1/15/08 262,500
CSC Holdings Inc.:
120,000 BB+ Sr. Notes, 7.250% due 7/15/08 117,000
25,000 BB- Sr. Sub. Debenture, 9.875% due 2/15/13 27,062
100,000 BB Sr. Sub. Debenture, 10.500% due 5/15/16 115,750
150,000 BB- Sr. Sub. Debenture, 9.875% due 4/1/23 165,000
535,000 B- Diamond Cable Communications PLC,
Sr. Discount Notes, 10.750% due 2/15/07 356,443
190,000 B Fox Family World, Sr. Discount Notes, step bond to
yield 10.250% due 11/1/07 114,000
60,000 BB- Globo Comunicacoes, Notes, 10.500% due 12/20/06(d) 32,625
135,000 CCC+ Golden Sky Systems, Inc., Sr. Sub. Notes,
12.375% due 8/1/06(d) 136,012
500,000 BB International Cabletel Inc., Deferred Notes,
11.500% due 2/1/06 386,875
100,000 BB- Jones Intercable, Inc., Sr. Sub. Debenture,
10.500% due 3/1/08 107,000
140,000 B Marcus Cable Operating Co., Sr. Discount Notes,
13.500% due 8/1/04 136,150
NTL Inc.:
40,000 B- Sr. Discount Notes, step bond to yield
11.500% due 10/1/08 22,202
305,000 B- Sr. Notes, 10.000% due 2/15/07 284,412
130,000 B- Sr. Notes, 11.500% due 10/1/08(d) 134,225
50,000 B- Pegasus Media & Communications Inc., Notes,
12.500% due 7/1/05 54,500
110,000 B Supercanal Holdings S.A., Sr. Notes,
11.500% due 5/15/05 52,250
- ---------------------------------------------------------------------------------------------------
3,635,251
- ---------------------------------------------------------------------------------------------------
Metals -- 0.6%
25,000 B+ Acindar Industria Argentina de Aceros S.A., Notes,
11.250% 2/15/04 16,000
140,000 Ba3* Ameristeel Corp., Sr. Notes, 8.750% due 4/15/08 127,400
150,000 B- Anker Coal Group Inc., Sr. Notes,
9.750% due 10/1/07 66,000
60,000 B Continental Global Group Inc., Sr. Notes,
11.000% due 4/1/07 51,675
300,000 B- Granite Broadcasting Corp., Sr. Sub. Notes,
8.875% due 5/15/08 258,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 31
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Metals -- 0.6% (continued)
$ 150,000 B Lodestar Holdings Inc., Sr. Notes,
11.500% due 5/15/05(d) $ 144,750
100,000 B UCAR Global Enterprises Inc., Sr. Sub. Notes,
12.000% due 1/15/05 101,125
100,000 B Weirton Steel Corp., Sr. Notes, 11.375% due 7/1/04 87,000
80,000 B WHX Corp., Sr. Notes, 10.500% due 4/15/05 72,600
- ---------------------------------------------------------------------------------------------------
924,550
- ---------------------------------------------------------------------------------------------------
Miscellaneous -- 0.9%
20,000 BB- American Eco Corp., Sr. Notes, 9.625% due 5/15/08 15,200
90,000 NR Bestel SA, Units, step bond to yield 12.750% due 5/15/05(d) 50,400
85,000 B- Club Regina Resorts Inc., Sr. Notes, 13.000% due 12/1/04 51,000
30,000 BB Colonial Capital II, 8.920% due 1/15/27 34,350
480,000 NR Diva Systems Corp., Sr. Discount Notes, step
bond to yield 13.655% due 3/1/08(d)(e) 163,200
150,000 B+ Flag Ltd., Sr. Notes, 8.250% due 1/30/08 137,250
90,000 CCC+ Gothic Production Corp., Sr. Notes, 11.125% due 5/1/05(d) 58,500
350,000 B- Isle Capri Black Hawk LLC, 1st Mortgage Notes,
13.000% due 8/31/04 350,875
275,000 NR Knology Holdings, Inc., Sr. Discount Notes,
step bond to yield 12.492% due 10/15/07 126,843
Netia Holdings, Guaranteed Sr. Notes:
40,000 B 10.250% due 11/1/07 29,400
20,000 B Step bond to yield 11.533% due 11/1/07 9,400
200,000 BB- Showboat Marina, 1st Mortgage Notes,
13.500% due 3/15/03 232,250
135,000 NR Transamerican Refunding Corp., Sr. Sub. Notes,
16.000% due 6/30/03(d) 47,250
45,000 NR Transtel, Trust Certificates, 12.500% due 11/1/07(d) 25,931
130,000 BB- York Power Funding Ltd., 12.000% due 10/30/07(d) 128,700
- ---------------------------------------------------------------------------------------------------
1,460,549
- ---------------------------------------------------------------------------------------------------
Paper -- 0.9%
150,000 CCC+ APP Finance II Maturitius Ltd., Bonds,
12.000% due 12/15/04 63,000
350,000 CCC+ APP Global Finance Co., Guaranteed Notes,
3.500% due 4/30/03 201,250
15,000 CCC+ Florida Coast Paper LLC., 1st Mortgage Notes,
12.750% due 6/1/03 10,500
130,000 B- Impac Group Inc., Sr. Sub. Notes,
10.125% due 3/15/08(d) 126,100
250,000 CCC+ Indah Kiat Finance Mauritius Ltd., Sr. Notes,
10.000% due 7/1/07 133,750
130,000 CCC+ Pindo Deli Finance Mauritius Ltd., Sr. Notes,
10.750% due 10/1/07 58,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Paper -- 0.9% (continued)
$ 200,000 B- Repap New Brunswick, 2nd Priority Sr. Notes,
10.625% due 4/15/03 $ 132,000
Riverwood International Corp.:
200,000 B- Sr. Notes, 10.250% due 4/1/06 188,000
380,000 CCC+ Sr. Sub. Notes, 10.875% due 4/1/08 309,225
220,000 CCC+ Tjiwi Kimia Finance Mauritius Ltd., Sr. Notes,
10.000% due 8/1/04 105,600
- ---------------------------------------------------------------------------------------------------
1,327,925
- ---------------------------------------------------------------------------------------------------
Publishing -- 0.2%
75,000 BB- Hollinger International Publishing Inc., Sr. Notes,
9.250% due 3/15/07 78,187
200,000 B- Perry-Judd Inc., Sr. Sub. Notes, 10.625% due 12/15/07 202,000
30,000 B Von Hoffman Press Inc., Sr. Sub. Notes,
10.375% due 5/15/07(d) 31,050
25,000 BB- World Color Press Inc., Sr. Sub. Notes,
9.125% due 3/15/03 25,468
- ---------------------------------------------------------------------------------------------------
336,705
- ---------------------------------------------------------------------------------------------------
Railroads -- 0.1%
TFM SA de C.V.:
120,000 B+ Sr. Discount Debenture, 11.750% due 6/15/09 58,800
25,000 B+ Sr. Notes, 10.250% due 6/15/07 20,750
- ---------------------------------------------------------------------------------------------------
79,550
- ---------------------------------------------------------------------------------------------------
Retail -- 0.6%
230,000 B Amazon.com Inc., Sr. Discount Notes, step bond to
yield 10.000% due 5/1/08 131,387
50,000 NR Carter Holdings Inc., Sr. Sub. Notes,
12.000% due 10/1/08 51,562
90,000 B- Eye Care Centers of America Inc., Sr. Sub. Notes,
9.125% due 5/1/08(d) 77,625
150,000 B Mothers Work, Inc., Sr. Notes, 12.625% due 8/1/05 157,125
40,000 B+ NBTY Inc., Sr. Sub. Notes, 8.625% due 9/15/07(d) 39,300
105,000 NR Sassco Fashions Ltd., Sr. Notes, 12.750% due 3/31/04 105,525
45,000 BB- Specialty Retailers Inc., Sr. Notes, 8.500% due 7/15/05 42,075
United Stationers Supply:
30,000 B 8.375% due 4/15/08 28,800
67,000 B Sr. Sub. Notes, 12.750% due 5/1/05(d) 73,783
210,000 NR U.S. Office Product Co., Sr. Sub. Notes,
9.750% due 6/15/08(d) 163,800
90,000 NR Zale Corp., Sr. Notes, 8.500% due 10/1/07 83,587
- ---------------------------------------------------------------------------------------------------
954,569
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 33
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
======================================================================================================
<S> <C> <C> <C>
Shipping -- 0.1%
125,000 B Johnstown America Industries Inc., Sr. Sub Notes,
11.750% due 8/15/05 129,062
180,000 NR Pegasus Shipping, 14.500% due 6/20/08(d)(e) 83,700
- ------------------------------------------------------------------------------------------------------
212,762
- ------------------------------------------------------------------------------------------------------
Supermarkets -- 0.2%
350,000 BB+ Southland Corp., 2nd Priority, Sr. Sub. Notes,
4.500% due 6/15/04 271,687
80,000 B Stater Brothers Holdings Inc., Sr. Sub. Notes,
9.000% due 7/1/04 70,500
- ------------------------------------------------------------------------------------------------------
342,187
- ------------------------------------------------------------------------------------------------------
Technology -- 0.3%
70,000 B DII Group Inc., Sr. Sub. Notes, 8.500% due 9/15/07 67,025
Fairchild Semiconductor Corp.:
228,574 B Payment in Kind, 11.740% due 3/14/08 202,288
260,000 B Sr. Sub. Notes, 10.125% due 3/15/07 236,600
20,000 NR Wavetek Corp., Sr. Sub. Notes, 10.125% due 6/15/07(d) 19,850
- ------------------------------------------------------------------------------------------------------
525,763
- ------------------------------------------------------------------------------------------------------
Telecommunications -- 7.0%
410,000 NR Allegiance Telecom Inc., Sr. Discount Notes,
step bond to yield 12.216% due 2/15/08 168,100
160,000 NR AMSC Acquisition Co. Inc., Sr. Notes,
12.250% due 4/1/08 81,600
110,000 B3* Barak I.T.C. Sr. Discount Notes, step bond to yield
12.500% due 6/15/04 48,400
250,000 B3* Benedek Communications Corp., Sr. Discount Notes,
step bond to yield 13.379% due 5/15/06 180,000
90,000 NR Birch Telecom Inc., Sr. Notes,
14.000% due 6/15/08(d)(e) 79,200
90,000 NR CapRock Communications Corp., Sr. Notes,
12.000% due 7/15/08(d) 80,775
400 NR CBS Radio, Inc., Payment-in-kind, 11.325% due 1/15/09 462
Celcaribe SA:
250,000 NR Sr. Notes, 13.500% due 3/15/04 256,250
3,000 NR Step bond to yield 11.841% due 3/15/04(d)(e) 60,000
23,000 B+ Celestica International Inc., Sr. Sub. Notes,
10.500% due 12/31/06 24,610
Centennial Cellular Corp., Sr. Notes:
100,000 Ba3* 8.875% due 11/1/01 100,625
200,000 Ba3* 10.125% due 5/15/05 237,250
415,000 B Colt Telecom Group PLC, Sr. Discount Notes,
12.000% due 12/15/06 317,475
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
Telecommunications -- 7.0% (continued)
$ 190,000 BB+ Comcast Cellular Holdings, Sr. Notes,
9.500% due 5/1/07 $ 196,650
35,000 NR Concentric Networks Inc., 12.750% due 12/15/07 32,112
30,000 B3* Consorcio Ecuatoriano DE, Notes,14.000% due 5/1/02 15,000
120,000 NR Covad Communications Group, Inc., Sr. Discount
Notes, step bond to yield 14.556% due 3/15/08 54,000
275,000 NR Dobson Communication Corp., Sr. Notes,
11.750% due 4/15/07 264,000
130,000 NR Dobson Wireline Co., Sr. Notes, 12.250% due 6/15/08(d) 119,600
570,000 NR DTI Holdings Inc., Sr. Discount Notes, step bond to
yield 12.171% due 2/15/08 199,500
60,000 NR E.Spire Communications Inc., Sr. Notes,
13.750% due 7/15/07 64,875
290,000 NR Econophone Inc., Sr. Discount Notes, step bond to
yield 11.071% due 5/15/08(d) 162,037
60,000 B- Esprit Telecom Group PLC, Sr. Notes,
11.500% due 12/15/07 54,000
400,000 NR FirstWorld Communication Inc., Sr. Notes,
step bond to yield 13.693% due 4/15/08(d) 128,000
625,000 NR Global Crossing Holdings Ltd., Sr. Notes,
9.625% due 5/15/08(d) 612,500
15,000 B- Gray Communications Systems Inc., Sr. Sub. Notes,
10.625% due 10/1/06 15,000
350,000 NR GST Network, Sr. Discount Notes, step bond to yield
10.500% due 5/1/08(d) 156,625
20,000 NR GST Technologies, Sr. Discount Notes, step bond to
yield 14.752% due 12/15/05 26,000
360,000 NR GST USA Inc., Sr. Discount Notes, step bond to yield
14.606% due 12/15/05 235,800
70,000 B Hermes Europe Railtel BV, Sr. Notes,
11.500% due 8/15/07 71,400
80,000 B+ Hyperion Telecommunications Inc., Sr. Discount Notes,
step bond to yield 13.467% due 4/15/03(d) 52,400
ICG Holdings Inc., Sr. Discount Notes:
160,000 NR Step bond to yield 13.174% due 9/15/05 123,200
200,000 NR Step bond to yield 12.500% due 5/1/06 152,000
ICG Services Inc., Sr. Discount Notes:
480,000 NR Step bond to yield 9.692% due 9/15/05 221,400
420,000 NR Step bond to yield 9.919% due 5/1/08 201,600
70,000 B+ IDT Corp., Sr. Notes, 8.750% due 2/15/06 61,775
Intermedia Communications Inc., Sr. Notes:
235,000 B 8.875% due 11/1/07 229,125
155,000 B 8.500% due 1/15/08 147,250
120,000 B 8.600% due 6/1/08 114,600
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 35
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Telecommunications -- 7.0% (continued)
$ 240,000 B IPC Information Systems Inc., Sr. Discount Notes,
10.875% due 5/1/08 $170,400
140,000 CCC+ IXC Communications, Inc., Sr. Sub. Notes,
9.000% due 4/15/08 136,850
260,000 NR KMC Telecom Holdings Inc., Sr. Discount Notes,
step bond to yield 12.514% due 2/15/08 124,800
160,000 NR Long Distance International Inc., Sr. Discount Notes,
12.250% due 4/15/08(d)(e) 132,800
350,000 CCC+ McCaw International Ltd., Sr. Discount Notes,
13.000% due 4/15/07 166,250
50,000 NR Metronet Communications Corp., Sr. Discount Notes,
step bond to yield 10.750% due 11/1/07 29,125
270,000 NR Microcell Telecommunications Inc., Sr. Discount Notes,
step bond to yield 12.199% due 6/1/06 177,187
575,000 B- Millicom International Cellular S.A., Sr. Sub. Discount
Notes, step bond to yield 12.422% due 6/1/06 299,000
100,000 B- Mobile Telecom Technology Corp., Sr. Notes,
13.500% due 12/15/02 108,500
Nextel Communications Inc.:
55,000 CCC+ Sr. Discount Notes, step bond to yield
12.125% due 1/15/04 51,975
675,000 CCC+ Sr. Discount Notes, step bond to yield
12.982% due 8/15/04 632,812
110,000 CCC+ Sr. Discount Notes, step bond to yield
10.650% due 9/15/07 63,800
160,000 CCC+ Sr. Discount Notes, step bond to yield
9.750% due 10/31/07 87,200
120,000 CCC+ Sr. Discount Notes, step bond to yield
11.132% due 2/15/08 65,400
260,000 CCC+ Sr. Notes, 12.000% due 11/1/08(d) 270,400
510,000 CCC+ Nextel International Inc., step bond to yield
12.125% due 4/15/08 174,037
40,000 NR Paging Network Inc., Sr. Notes, 13.500% due 6/6/05 16,000
80,000 B Price Communications Wireless Inc., Sr. Secured Notes,
9.125% due 12/15/06(d) 77,800
280,000 B- Primus Telecom Group, Inc., Sr. Notes,
9.875% due 5/15/08 224,000
60,000 BB+ Protection One Alarm, Sr. Discount Notes,
13.625% due 6/30/05 65,400
PSINet Inc., Sr. Notes:
80,000 B- 10.000% due 2/15/05 78,400
70,000 B- 11.500% due 11/1/08 72,100
125,000 BB+ Qwest Communications International Inc., Sr. Discount Notes,
step bond to yield 9.470% due 10/15/07 94,687
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
Telecommunications -- 7.0% (continued)
$ 220,000 NR RCN Corp., Sr. Discount Notes, step bond to yield
11.125% due 10/15/07 $ 114,400
270,000 NR Rhythms Netconnections Inc., Sr. Notes,
13.500% due 5/15/08(d)(e) 122,175
RSL Communications Ltd.:
100,000 B- Sr. Discount Notes, step bond to yield
10.125% due 3/1/08 46,000
70,000 B- Sr. Notes, 9.125% due 3/1/08 56,000
70,000 B- Satelites Mexicanos SA, Sr. Notes,
10.125% due 11/1/04 45,850
Sprint Spectrum Finance Corp., Sr. Notes:
125,000 Baa* 11.000% due 8/15/06 142,812
100,000 Baa* Step bond to yield 9.492% due 8/15/06 87,500
25,000 CCC+ Sygnet Wireless Inc., Sr. Notes, 11.500% due 10/1/06 28,625
110,000 CCC+ TCI Satellite Entertainment Inc., Sr. Discount Notes,
step bond to yield 12.141% due 2/15/07 38,637
200,000 NR Telecomm Techniques, Sr. Sub. Notes,
9.750% due 5/15/08(d) 166,000
80,000 NR Telehub Communications Corp., Sr. Discount Notes,
step bond to yield 13.882% due 7/31/05(d)(e) 42,800
50,000 CCC+ Telesystem International Wireless Inc., Sr. Discount
Notes, step bond to yield 10.500% due 11/1/07 16,000
40,000 B+ Telewest PLC, Sr. Notes, 11.250% due 11/1/08 42,000
200,000 CCC Teligent Inc., Sr. Notes, 11.500% due 12/1/07 166,000
270,000 B- Time Warner Telecom LLC Inc., Sr. Notes,
9.750% due 7/15/08 270,675
160,000 B United International Holdings Inc., Sr. Discount Notes,
10.750% due 2/15/08 75,200
80,000 NR US Xchange LLC, Sr. Notes, 15.000% due 7/1/08(d) 80,400
100,000 NR Versatel Telecom, Sr. Notes, 13.250% due 5/15/08(d) 94,500
ViaSystems Group, Inc., Sr. Sub. Notes:
30,000 B- 9.750% due 6/1/07(d) 26,550
140,000 B- Series B, 9.750% due 6/1/07(d) 123,900
400,000 Caa* Viatel Inc., Sr. Discount Notes, step bond to yield
10.879% due 4/15/08 180,000
Winstar Communications Inc.:
300,000 CCC+ Sr. Discount Notes, step bond to yield
12.327% due 10/15/05(d) 264,375
130,000 CCC+ Sr. Sub. Discount Notes, 15,000% due 10/15/05(d) 123,500
60,000 CCC+ Winstar Equipment Corp., Guaranteed Notes,
12.500% due 3/15/04 55,950
- -----------------------------------------------------------------------------------------------------
11,073,968
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 37
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Telephone -- 1.3%
$ 160,000 Caa* 21st Century Telecom Group, Sr. Discount Notes,
step bond to yield 12.246% due 2/15/08 $ 66,200
335,000 B BTI Telecom Corp., Sr. Notes, 10.500% due 9/15/07 276,375
225,000 B- Diamond Cable Communications PLC,
Sr. Discount Notes, 11.750% due 12/15/05 171,281
500,000 NR E.Spire Communications, Sr. Discount Notes,
13.000% due 11/1/05 370,625
70,000 NR Facilicom International Inc., Sr. Notes,
10.500% due 1/15/08 53,987
90,000 B- Iridum LLC/Capital Corp., Sr. Notes,
14.000% due 7/15/05 75,600
340,000 B Metronet Communications Corp., Sr. Discount Notes,
10.750% due 11/1/07 190,400
80,000 BB- Niagara Mohawk Power Corp., Sr. Notes,
7.375% due 7/1/03 82,800
50,000 NR OnePoint Communications Corp., Sr. Notes,
14.500% due 6/1/08(d) 22,500
170,000 NR Startec Global Communications Inc., Sr. Notes,
12.000% due 5/15/08(d) 144,500
500,000 BBB Worldcom Inc., Sr. Notes, 7.750% due 4/1/27 576,250
- ----------------------------------------------------------------------------------------------------
2,030,518
- ----------------------------------------------------------------------------------------------------
Textiles -- 0.4%
210,000 B Galey & Lord Inc., Sr. Sub. Notes, 9.125% due 3/1/08 185,850
30,000 NR Glenoit Corp., Sr. Sub. Notes, 11.000% due 4/15/07 28,537
340,000 BB- Guess Inc., Sr. Sub. Notes, 9.500% due 8/15/03 334,050
15,000 B- William Carter Co., Sr. Sub. Notes,
10.375% due 12/1/06 15,543
- ----------------------------------------------------------------------------------------------------
563,980
- ----------------------------------------------------------------------------------------------------
Transportation -- 0.3%
40,000 B+ Coach USA Inc., Sr. Sub. Notes, 9.375% due 7/1/07 39,450
100,000 BB- Eletson Holdings Inc., Notes, 9.250% due 11/15/03 97,875
40,000 NR International Shipholding Corp., Sr. Notes,
7.750% due 10/15/07 37,850
250,000 B+ Kitty Hawk Inc., Sr. Secured Notes,
9.950% due 11/15/04 240,000
60,000 B+ MC Shipping, Inc., Sr. Notes, 11.250% due 3/1/08 58,575
- ----------------------------------------------------------------------------------------------------
473,750
- ----------------------------------------------------------------------------------------------------
Utilities - Electric -- 1.4%
85,000 BB- AES China Generating Co., Notes,
10.125% due 12/15/06 43,350
125,000 BB+ Calenergy Co. Inc., Sr. Notes, 9.825% due 6/30/03 135,937
160,000 BB- Calpine Corp., Sr. Notes, 7.875% due 4/1/08 157,200
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
38 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(c) SECURITY VALUE
======================================================================================================
<S> <C> <C> <C>
Utilities - Electric -- 1.4% (continued)
$ 105,000 B Costilla Energy Inc., Sr. Sub. Notes,
10.250% due 10/1/06 $ 89,250
350,000 NR Long Island Lighting Co., 9.000% due 11/1/22 416,500
Midland Funding, Sr. Secured Lease Obligations:
440,000 B Series A, 11.750% due 7/23/05 506,000
75,000 B Series B, 13.250% due 7/23/06 90,936
178,146 B Series C-91, 10.330% due 7/23/02 189,280
410,000 BB- Niagara Mohawk Power Corp., Sr. Notes,
7.750% due 10/1/08 429,987
Northeast Utilities, Notes:
106,667 B+ 8.830% due 3/1/05 109,466
17,831 B+ 8.580% due 12/1/06 18,522
- ------------------------------------------------------------------------------------------------------
2,186,428
- ------------------------------------------------------------------------------------------------------
TOTAL CORPORATE DEBENTURES
(Cost -- $61,089,625) 54,266,607
======================================================================================================
<CAPTION>
SHARES SECURITY VALUE
======================================================================================================
<S> <C> <C>
COMMON STOCK -- 0.0%
Agriculture -- 0.0%
2,203 PSF Holding LLC(f) 38,588
- ------------------------------------------------------------------------------------------------------
Consumer Products -- 0.0%
910 Hedstrom Holdings Inc. 909
44 Mothers Work Inc.(f) 368
- ------------------------------------------------------------------------------------------------------
1,277
- ------------------------------------------------------------------------------------------------------
Electric -- 0.0%
79 El Paso Electric Co., Payment-in-kind 8,225
- ------------------------------------------------------------------------------------------------------
Foods -- 0.0%
25 Amerking Inc.(f) 1,000
- ------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $87,559) 49,090
======================================================================================================
PREFERRED STOCK -- 2.1%
Banking -- 0.2%
5,400 California Fed Perferred Cap Corp. 138,375
3,500 Chevy Chase Perferred Capital Corp. 175,875
- ------------------------------------------------------------------------------------------------------
314,250
- ------------------------------------------------------------------------------------------------------
Broadcasting -- 0.5%
507 Capstar Broadcasting Partners Sr. Preferred(f) 59,826
800 Chancellor Media 61,100
10 Paxson Communications 144a(d) 100,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 39
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
======================================================================================================
<S> <C> <C>
Broadcasting -- 0.5%
22 Paxson Communications, 13.25% Payment-in-kind $ 202,400
671 SFX Broadcasting Inc., Payment-in-kind 78,842
219 Spanish Broadcasting Systems, Inc. 215,715
5 Spanish Broadcasting Systems Inc., Payment-in-kind(d) 4,925
201 Viatel, Inc. Payment-in-kind 12,076
- ------------------------------------------------------------------------------------------------------
734,884
- ------------------------------------------------------------------------------------------------------
Communications -- 0.0%
72 Echostar Communications Corp., Payment-in-kind 77,238
- ------------------------------------------------------------------------------------------------------
Electric -- 0.0%
1,801 Public Service Co. 45,925
- ------------------------------------------------------------------------------------------------------
Foods -- 0.1%
1,247 AmeriKing Inc., Sr. Preferred Exchangeable
Payment-in-kind 31,175
1,493 Nebco Evans Holdings Co. 123,919
- ------------------------------------------------------------------------------------------------------
155,094
- ------------------------------------------------------------------------------------------------------
Gas & Oil Exploration -- 0.0%
635 Chesapeake Energy Inc., Payment-in-kind(d) 12,700
- ------------------------------------------------------------------------------------------------------
Health Care -- 0.1%
800 Fresensius Medical Care 80,800
- ------------------------------------------------------------------------------------------------------
Media - Cable -- 0.4%
2,612 Citadel Broadcasting Inc. 312,824
44 CSC Holdings Inc., Payment-in-kind 4,840
2,524 CSC Holdings Inc., Payment-in-kind 276,378
- ------------------------------------------------------------------------------------------------------
594,042
- ------------------------------------------------------------------------------------------------------
Miscellaneous -- 0.0%
19 Anvil Holdings Inc. Sr. Preferred, Payment-in-kind 475
- ------------------------------------------------------------------------------------------------------
Publishing -- 0.0%
750 Von Hoffman Inc.(d) 23,250
- ------------------------------------------------------------------------------------------------------
Telecommunications -- 0.8%
72 Concentric Network Payment-in-kind 54,000
141 Dobson Communications, Payment-in-kind 129,720
245 Intermedia Communications Inc., Payment-in-kind 252,602
157 IXC Communications Inc. Payment-in-kind 178,695
560 Nextel Communications, Series E 442,400
960 Nextel Communications, Payment-in-kind 101,760
2,346 Nextlink Communications Inc., Payment-in-kind 130,203
- ------------------------------------------------------------------------------------------------------
1,289,380
- ------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $3,465,512) 3,328,038
======================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
40 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
======================================================================================================
<S> <C> <C>
WARRANTS(f) -- 0.1%
Broadcasting -- 0.0%
320 Paxson Communications Corp., Expire 6/30/03 $ 3
75 Spanish Broadcasting Systems Inc., Expire 6/30/99 15,375
- ------------------------------------------------------------------------------------------------------
15,378
- ------------------------------------------------------------------------------------------------------
Casinos -- 0.0%
75 Louisiana Casino Cruises Inc., Expire 12/1/98 0
- ------------------------------------------------------------------------------------------------------
Chemicals -- 0.0%
40 Sterling Chemicals Holdings Inc., Expire 8/15/08 720
- ------------------------------------------------------------------------------------------------------
Media - Cable -- 0.0%
330 UIH Australia Pacific Inc., Expire 5/15/06 1,650
300 Wireless One Inc., Expire 10/15/03 75
- ------------------------------------------------------------------------------------------------------
1,725
- ------------------------------------------------------------------------------------------------------
Miscellaneous -- 0.0%
85 Club Regina Resorts Inc., Expire 12/1/04 85
2,850 DTI Holdings Inc., Expire 3/1/08 142
100 Epic Resorts, Expire 6/15/05 1
125 McCaw International Ltd., Expire 4/15/07 62
110 Orbital Imaging Corp., Expire 3/1/05 5,280
221 President Riverboat Inc., Expire 9/30/99 22
- ------------------------------------------------------------------------------------------------------
5,592
- ------------------------------------------------------------------------------------------------------
Telecommunications -- 0.1%
330 Allegiance Telecom Inc., Expire 2/3/08 3,960
160 American Mobile Satellite Inc., Expire 4/1/08(c) 441
510 Cellnet Data System, Expire 10/1/07 19,380
65 Colt Telecom Group PLC, Expire 12/31/06 12,350
35 Concentric Networks Inc., Expire 12/15/07 3,577
120 Covad Communications Group, Expire 3/15/08 1,200
65 ESAT Inc., Expire 2/1/07 2,275
40 Globalstar Telecommunications, Expire 2/15/04 3,600
395 Hyperion Communications Inc., Expire 4/1/01(d) 21,130
495 Intelcom Group Inc., Expire 9/15/05(d) 13,365
110 Interact Systems Inc., Expire 8/1/03(d) 1
125 Intermedia Communications Inc., Expire 6/1/00 6,862
45 International Wireless Inc., Expire 8/15/01 0
250 KMC Telecom Holdings Inc., Expire 1/31/08(d) 4,000
215 Knology Holdings, Inc., Expire 10/15/27 430
110 Loral Orion Inc., Expire 1/31/07 1,265
35 MGC Communications Inc., Expire 10/1/04 1,530
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 41
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
======================================================================================================
<S> <C> <C>
Telecommunications -- 0.1% (continued)
40 Paging Network Brasi Inc., Expire 6/6/05(d) $ 0
100 Versatel Telecom Inc., Expire 5/15/08(d) 1,000
- ------------------------------------------------------------------------------------------------------
96,366
- ------------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $88,165) 119,781
======================================================================================================
TOTAL HIGH YIELD SECTOR
(Cost -- $64,730,861) 57,763,516
======================================================================================================
<CAPTION>
FACE
AMOUNT+ SECURITY VALUE
========================================================================================================
<S> <C> <C>
FOREIGN BONDS -- 18.4%
Brazil -- 1.2%
3,375,000 Brazil Discount ZL, 6.125% due 4/15/24 1,999,201
- --------------------------------------------------------------------------------------------------------
Bulgaria -- 1.3%
1,130,000 Bulgaria Disc., 6.688% due 7/28/24 793,825
2,455,000 Bulgaria Floating Rate Bond, 2.250% due 7/28/12 1,356,387
- --------------------------------------------------------------------------------------------------------
2,150,212
- --------------------------------------------------------------------------------------------------------
France -- 2.7%
17,900,000 French BTAN, 4.500% due 7/12/03 3,330,488
4,580,000 French OAT, 5.500% due 4/25/07 900,175
Ivory Coast:
800,000 Floating Rate Bond, 2.000% due 3/31/18(d) 34,551
800,000 PDI, 2.000% due 3/31/18 28,792
- --------------------------------------------------------------------------------------------------------
4,294,006
- --------------------------------------------------------------------------------------------------------
Italy -- 1.6%
2,975,000,000 BTPS, 10.500% due 9/1/05 2,477,153
- --------------------------------------------------------------------------------------------------------
Mexico -- 2.2%
Mexico Par B:
42,000 6.250% due 12/31/19 31,578
4,670,000 6.250% due 12/31/19 3,511,256
- --------------------------------------------------------------------------------------------------------
3,542,834
- --------------------------------------------------------------------------------------------------------
Panama -- 0.3%
605,000 Panama IRB, 3.750% due 7/17/14 442,784
- --------------------------------------------------------------------------------------------------------
Peru -- 0.6%
1,670,000 Peru PDI, 4.000% due 3/7/17 960,250
- --------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
42 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
PUTNAM DIVERSIFIED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY VALUE
=======================================================================================================
<S> <C> <C>
Sweden -- 3.2%
Sweden Government:
17,200,000 6.000% due 2/9/05 $ 2,376,966
17,400,000 6.750% due 5/5/14 2,657,021
- -------------------------------------------------------------------------------------------------------
5,033,987
- -------------------------------------------------------------------------------------------------------
United Kingdom -- 4.6%
United Kingdom Treasury:
3,160,000 8.000% due 12/7/00 5,566,726
705,000 8.000% due 6/7/21 1,649,982
- -------------------------------------------------------------------------------------------------------
7,216,708
- -------------------------------------------------------------------------------------------------------
Venezuela -- 0.6%
195,000 Venezuela, 13.625% due 8/15/18 140,400
1,160,000 Venezuela Par A, 6.750% due 3/31/20 778,650
- -------------------------------------------------------------------------------------------------------
919,050
- -------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost -- $29,207,142) 29,036,185
=======================================================================================================
SHORT TERM SECURITIES -- 6.3%
$ 10,000,000 FHLMC Discount Note, 5.350% due 11/16/98
(Cost -- $9,977,466) 9,977,466
=======================================================================================================
REPURCHASE AGREEMENT -- 3.9%
6,094,000 CS First Boston Corp., 5.370% due 11/2/98;
Proceeds at maturity -- $6,096,727;
(Fully collateralized by U.S. Treasury Notes,
4.055% due 10/14/99; Market value -- $6,187,320)
(Cost -- $6,094,000) 6,094,000
=======================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $163,715,190) $157,837,919
=======================================================================================================
</TABLE>
(a) Security is segregated for forward exchange contracts and/or for securities
traded on a "to-be-announced" basis or when issued basis, and/or options,
futures and extended settlements.
(b) Security is traded on a "to-be-announced" basis (see Note 9).
(c) All ratings are by Standard & Poor's Ratings Services ("Standard &
Poor's"), except that those identified by an asterisk (*) are rated by
Moody's Investors Service Inc. ("Moody's").
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, generally to qualified institutional buyers.
(e) Security has been issued with attached warrants.
(f) Non-income producing security.
+ Represents local currency.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 44 for definitions of ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 43
<PAGE>
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "CC" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have 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
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in
higher rated categories.
BB, B, -- Bonds rated "BB", "B", "CCC", and "CC" are regarded, on balance, as
CCC, predominantly speculative with respect to capacity to pay interest
and CC and repay principal in accordance with the terms of the obligation.
"BB" represents the lowest degree of speculation and "CC" the
highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Ca", where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds 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.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or present elements of danger may exist with respect to
principal or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
44 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Assets and Liabilities October 31, 1998
================================================================================
<TABLE>
<CAPTION>
Putnam
Smith Barney Diversified
High Income Income
Portfolio Portfolio
===================================================================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $174,185,490
and $163,715,190, respectively) $ 160,439,988 $ 157,837,919
Cash 255 --
Foreign currency, at value (Cost -- $0 and $44,251) -- 46,780
Dividends and interest receivable 3,293,857 2,682,910
Receivable for securities sold 2,030,536 2,747,459
Receivable for Fund shares sold 36,976 77,897
Receivable for closed forward foreign currency contracts -- 136,948
Receivable for open forward foreign currency
contracts (Note 5) -- 1,001,813
Receivable from broker -- 10,875
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 165,801,612 164,542,601
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 4,966,702 6,242,931
Payable for open forward foreign currency
contracts (Note 5) 263,372 1,159,451
Management fee payable 234,321 95,096
Payable for closed forward foreign currency contracts -- 71,955
Payable to bank -- 5,480
Payable for Fund shares purchased 24,988 --
Accrued expenses 53,601 73,073
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 5,542,984 7,647,986
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 160,258,628 $ 156,894,615
===================================================================================================================================
NET ASSETS:
Par value of capital shares $ 134 $ 134
Capital paid in excess of par value 163,543,153 156,108,744
Undistributed net investment income 13,909,654 9,261,510
Accumulated net realized loss from security transactions,
options, futures contracts and foreign currencies (3,188,389) (2,323,139)
Net unrealized depreciation of investments,
futures contracts and foreign currencies (14,005,924) (6,152,634)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 160,258,628 $ 156,894,615
===================================================================================================================================
Shares Outstanding 13,392,387 13,412,724
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value $11.97 $11.70
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 45
<PAGE>
================================================================================
Statements of Operations For the Year Ended October 31, 1998
================================================================================
<TABLE>
<CAPTION>
Putnam
Smith Barney Diversified
High Income Income
Portfolio Portfolio
===================================================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 14,638,441 $ 11,733,194
Dividends 360,610 424,137
Less: Foreign withholding tax -- (28,601)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 14,999,051 12,128,730
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 915,654 1,084,982
Shareholder communications 38,452 29,917
Audit and legal 25,374 22,936
Pricing service fees 12,626 44,878
Custody 10,474 59,834
Shareholder and system servicing fees 6,849 6,982
Directors' fees 6,212 7,680
Registration fees 5,339 2,992
Other 7,470 4,565
- -----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,028,450 1,264,766
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 13,970,601 10,863,964
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS, FUTURES CONTRACTS
AND FOREIGN CURRENCIES (NOTES 3, 4, 5 AND 7)
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (3,275,470) (1,951,270)
Options purchased -- 29,825
Futures contracts -- (65,264)
Foreign currency transactions 27,072 (1,993,453)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized Loss (3,248,398) (3,980,162)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments, Futures Contracts and Foreign Currencies:
Beginning of year 3,717,845 2,616,438
End of year (14,005,924) (6,152,634)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (17,723,769) (8,769,072)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Loss on Investments (20,972,167) (12,749,234)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (7,001,566) $ (1,885,270)
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
46 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Years Ended October 31,
Smith Barney High Income Portfolio 1998 1997
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 13,970,601 $ 8,737,397
Net realized gain (loss) (3,248,398) 1,991,107
(Increase) decrease in net unrealized
depreciation (17,723,769) 3,028,895
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (7,001,566) 13,757,399
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (8,703,060) (3,902,709)
Net realized gains (2,002,944) (325,225)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (10,706,004) (4,227,934)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 49,965,742 46,549,788
Net asset value of shares issued
for reinvestment of dividends 10,706,004 4,227,935
Cost of shares reacquired (6,431,646) (2,536,014)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 54,240,100 48,241,709
- --------------------------------------------------------------------------------
Increase in Net Assets 36,532,530 57,771,174
NET ASSETS:
Beginning of year 123,726,098 65,954,924
- --------------------------------------------------------------------------------
End of year* $160,258,628 $123,726,098
================================================================================
* Includes undistributed net investment income of: $13,909,654 $8,703,403
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 47
<PAGE>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
<TABLE>
<CAPTION>
Years Ended October 31,
Putnam Diversified Income Portfolio 1998 1997
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,863,964 $ 7,040,767
Net realized loss (3,980,162) (507,432)
(Increase) decrease in net unrealized
depreciation (8,769,072) 1,679,994
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (1,885,270) 8,213,329
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,006,574) (4,024,282)
Net realized gains (1,644,355) (649,717)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (6,650,929) (4,673,999)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 41,078,403 34,247,136
Net asset value of shares issued
for reinvestment of dividends 6,650,929 4,673,999
Cost of shares reacquired (3,899,578) (1,935,399)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 43,829,754 36,985,736
- --------------------------------------------------------------------------------
Increase in Net Assets 35,293,555 40,525,066
NET ASSETS:
Beginning of year 121,601,060 81,075,994
- --------------------------------------------------------------------------------
End of year* $156,894,615 $121,601,060
================================================================================
* Includes undistributed net investment income of: $9,261,510 $5,343,943
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
48 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The Smith Barney High Income and Putnam Diversified Income Portfolios
("Portfolio(s)") are separate investment portfolios of the Travelers Series Fund
Inc. ("Fund"). The Fund, a Maryland corporation, is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company and consists of these Portfolios and eleven other
separate investment portfolios: AIM Capital Appreciation, Alliance Growth, Van
Kampen American Capital Enterprise, Smith Barney Large Cap Value (formerly Smith
Barney Income and Growth), Smith Barney International Equity, Smith Barney
Pacific Basin, TBC Managed Income, GT Global Strategic Income, MFS Total Return,
Smith Barney Money Market and Smith Barney Large Capitalization Growth
Portfolios. Shares of the Fund are offered only to insurance company separate
accounts which fund certain variable annuity and variable life insurance
contracts. The financial statements and financial highlights for the other
portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities for which no sales price was reported and U.S. government agencies
and obligations are valued at the mean between the bid and ask prices; (c)
securities for which market quotations are not available will be valued in good
faith at fair value by or under the direction of the Board of Directors; (d)
securities maturing within 60 days are valued at cost plus accreted discount, or
minus amortized premium, which approximates value; (e) dividend income is
recorded on the ex-dividend date; foreign dividends are recorded on the
ex-dividend date or as soon as practical after the Portfolio determines the
existence of a dividend declaration after exercising reasonable due diligence;
(f) interest income, adjusted for accretion of original issue discount, is
recorded on an accrual basis; (g) gains or losses on the sale of securities are
calculated by using the specific identification method; (h) dividends and
distributions to shareholders are recorded on the ex-dividend date; (i) the
accounting records of the Portfolios are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars based on the rate of exchange of such currencies against U.S. dollars on
the date of valuation. Purchases and sales of securities, and income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income or expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (j) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At October 31, 1998, reclassifications
were made to the Portfolios' capital accounts to reflect permanent
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 49
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
book/tax differences and income and gains available for distribution under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change; (k) the Portfolios intend to comply with the
requirements of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
and (l) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
In addition, Putnam Diversified Income and Smith Barney High Income Portfolios
may enter into foreign currency exchange contracts in order to hedge against
foreign currency risk. These contracts are marked-to-market daily, by
recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled or closed.
2. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as the investment manager of the Smith Barney High Income
Portfolio ("SBHI"). SBHI pays MMC a management fee calculated at an annual rate
of 0.60% of the average daily net assets of the Portfolio. In addition,
Travelers Investment Adviser, Inc. ("TIA"), an affiliate of MMC, acts as the
investment manager of the Putnam Diversified Income Portfolio ("PDIP"). PDIP
pays TIA a management fee calculated at an annual rate of 0.75% of the average
daily net assets of the Portfolio. These fees are calculated daily and paid
monthly.
TIA has entered into a sub-advisory agreement with Putnam Investment Management,
Inc. ("PIM"). Pursuant to the sub-advisory agreement, PIM is responsible for the
day-to-day portfolio operations and investment decisions for PDIP and is
compensated for such service at the annual rate of 0.35% of the average daily
net assets of PDIP. This fee is calculated daily and paid monthly.
TIA has entered into a Sub-Administrative Services Agreement with MMC. TIA pays
MMC, as sub-administrator, a fee calculated at an annual rate of 0.10% of the
average daily net assets of PDIP.
All officers and one Director of the Fund are employees of SSB.
- --------------------------------------------------------------------------------
50 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
3. Investments
During the year ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
SBHI PDIP
================================================================================
Purchases $171,111,455 $305,634,814
- --------------------------------------------------------------------------------
Sales 114,604,241 263,279,379
================================================================================
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
SBHI PDIP
===============================================================================
Gross unrealized appreciation $1,660,364 $3,279,395
Gross unrealized depreciation (15,405,866) (9,156,666)
- -------------------------------------------------------------------------------
Net unrealized depreciation $(13,745,502) $(5,877,271)
===============================================================================
4. Option Contracts
Premiums paid when put or call options are purchased by the Portfolios,
represent investments, which are marked-to-market daily and are included in the
schedules of investments. When a purchased option expires, the Portfolios will
realize a loss in the amount of the premium paid. When the Portfolios enter into
closing sales transaction, the Portfolios will realize a gain or loss depending
on whether the proceeds from the closing sales transaction are greater or lesser
than the premium paid for the option. When the Portfolios exercise a put option,
they will realize a gain or loss from the sale of the underlying security and
the proceeds from such sale will be decreased by the premium originally paid.
When the Portfolios exercise a call option, the cost of the security which the
Portfolios purchase upon exercise will be increased by the premium originally
paid.
At October 31, 1998, there were no open purchased call options.
When the Portfolios write a covered call or put option, an amount equal to the
premium received by the Portfolios is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Portfolios
realize a gain. When the Portfolios enter into a closing purchase transaction,
the Portfolios realize a gain or loss depending upon whether the cost of the
closing transaction is greater or less than the premium originally received
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a written call option
is exercised, the cost of the security sold will be decreased by the premium
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 51
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Portfolios purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolios enter into options for hedging purposes. The risk in
writing a covered call option is that the Portfolios give up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolios are
exposed to the risk of loss if the market price of the underlying security
declines.
The following covered call option transactions occurred in PDIP during the year
ended October 31, 1998:
Number of
Contracts Premiums
================================================================================
Options written, outstanding at October 31, 1997 1,010 $ 12,575
Options written during the year ended October 31, 1998 6,766 37,953
Options cancelled in closing purchase transactions (7,776) (50,528)
- --------------------------------------------------------------------------------
Options written, outstanding at October 31, 1998 0 $ 0
================================================================================
There were no open covered call option written contracts as of October 31, 1998.
5. Foreign Currency Exchange Contracts
At October 31, 1998, the Portfolios had open foreign currency exchange contracts
as described below. The Portfolios record realized gains or losses at the time
the forward contract is offset by entry into a closing transaction or settlement
of the contract. The Portfolios bear the market risk that arises from changes in
foreign currency exchange rates. The unrealized loss on the contracts is
reflected in the accompanying financial statements as follows:
- --------------------------------------------------------------------------------
52 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Smith Barney High Income Portfolio
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
======================================================================================
<S> <C> <C> <C> <C> <C>
To Sell:
British Pound 224,725 $375,650 2/25/99 $(11,595)
European Currency Unit 946,576 1,126,042 11/30/98 (69,445)
German Mark 1,642,688 993,489 12/3/98 (50,131)
German Mark 672,917 407,373 12/23/98 (29,876)
German Mark 2,398,440 1,455,541 1/28/99 (102,325)
- --------------------------------------------------------------------------------------
Net Unrealized Loss on Open Forward
Foreign Currency Contracts $(263,372)
======================================================================================
</TABLE>
Putnam Diversified Income Portfolio
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
===================================================================================================
<S> <C> <C> <C> <C>
To Buy:
Australian Dollar 23,519 $ 14,647 12/16/98 $ 937
Danish Krone 4,101,553 652,121 12/16/98 35,346
German Mark 826,350 500,089 12/16/98 20,489
German Mark 5,672,500 3,432,872 12/16/98 138,737
German Mark 2,850,450 1,725,030 12/16/98 72,595
German Mark 6,709,900 4,060,684 12/16/98 3,422
Italian Lira 2,699,235,852 1,647,634 11/2/98 297
Italian Lira 1,411,254,966 861,441 11/2/98 838
Japanese Yen 143,014,165 1,236,021 12/16/98 156,588
Japanese Yen 381,769,000 3,299,496 12/16/98 420,111
Spanish Peseta 155,004,080 1,100,214 12/16/98 52,273
- ---------------------------------------------------------------------------------------------------
901,633
- ---------------------------------------------------------------------------------------------------
To Sell:
British Pound (2,558,400) (4,274,120) 12/16/98 7,874
British Pound (1,882,400) (3,144,779) 12/16/98 47,583
French Franc (658,000) (118,686) 12/16/98 (5,841)
French Franc (22,043,800) (3,976,135) 12/16/98 (195,686)
German Mark (8,299,960) (5,022,953) 12/16/98 (211,382)
German Mark (537,512) (325,290) 12/16/98 (13,146)
German Mark (3,533,150) (2,138,185) 12/16/98 (86,652)
German Mark (921,850) (557,883) 12/16/98 (23,481)
German Mark (2,856,785) (1,728,863) 12/16/98 (69,871)
Italian Lira (890,575,591) (543,669) 12/16/98 (138)
Japanese Yen (98,733,885) (853,322) 12/16/98 (108,161)
Japanese Yen (23,951,400) (207,004) 12/16/98 (26,918)
Japanese Yen (8,903,800) (76,952) 12/16/98 (9,805)
Japanese Yen (167,737,128) (1,449,693) 12/16/98 (186,707)
Japanese Yen (111,586,497) (964,403) 12/16/98 (122,215)
Japanese Yen (88,365,850) (763,715) 12/16/98 (99,240)
Netherland Guilder (10,100) (5,423) 12/16/98 (208)
Swedish Krona (27,704,068) (3,549,940) 12/16/98 44,723
- ---------------------------------------------------------------------------------------------------
(1,059,271)
- ---------------------------------------------------------------------------------------------------
Total Unrealized Loss on Forward
Foreign Currency Contracts $ (157,638)
===================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 53
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
6. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
7. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolios record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. The Portfolios enter
into such contracts to hedge a portion of their portfolios. The Portfolios bear
the market risk that arises from changes in the value of the financial
instruments and securities indices (futures contracts).
At October 31, 1998, the PDIP had the following open futures contracts:
<TABLE>
<CAPTION>
Net
# of Basis Market Unrealized
Contracts to Sell Contracts Expiration Value Value Loss
======================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. Treasury 10-Year Note 12 12/98 $(1,541,326) $(1,546,875) $(5,549)
======================================================================================================
</TABLE>
8. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may vary between 2% and 5%
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in segregated accounts. The Portfolios maintain
exposure for the risk of any losses in the investment of amounts received as
collateral.
At October 31, 1998, the Portfolios had no securities on loan.
- --------------------------------------------------------------------------------
54 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
9. Securities Traded on a When-Issued or To-Be-Announced Basis
PDIP may trade securities on a when-issued basis or on a to-be-announced ("TBA")
basis.
In a when-issued transaction the securities are purchased or sold by the
Portfolio with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous price and yield to the Portfolio
at the time of entering into the transaction. Purchasing such securities
involves the risk of loss if the value of the securities declines prior to
settlement.
In a TBA transaction, the Portfolio commits to purchasing or selling securities
for which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date. Securities purchased on a TBA
basis are not settled until they are delivered to the Portfolio, normally 15 to
45 days later. These transactions are subject to market fluctuations and their
current value is determined in the same manner as for other portfolio
securities.
At October 31, 1998, PDIP held two TBA securities with a cost of $2,005,944.
10. Capital Loss Carryforwards
At October 31, 1998, the Smith Barney High Income Portfolio and the Putnam
Diversified Income Portfolio had, for Federal income tax purposes, approximately
$3,001,000 and $2,321,000, respectively, of capital loss carryforwards available
to offset future realized gains before expiration in 2006. To the extent that
these carryforward losses are used to offset gains, it is probable that the
gains so offset will not be distributed.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 55
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
11. Capital Shares
At October 31, 1998, the Fund had six billion shares of $0.00001 par value
capital stock authorized. Each share of a Portfolio represents an equal
proportionate interest in that Portfolio with each share of the same Portfolio
and has an equal entitlement to any dividends and distributions made by the
Portfolio.
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1998 October 31, 1997
====================================================================================
<S> <C> <C>
Smith Barney High Income Portfolio
Shares sold 3,735,587 3,725,306
Shares issued on reinvestment 816,629 358,299
Shares redeemed (497,339) (202,326)
- ------------------------------------------------------------------------------------
Net Increase 4,054,877 3,881,279
====================================================================================
Putnam Diversified Income Portfolio
Shares sold 3,309,769 2,882,116
Shares issued on reinvestment 543,375 403,976
Shares redeemed (321,876) (165,387)
- ------------------------------------------------------------------------------------
Net Increase 3,531,268 3,120,705
====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
56 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
For a share of each capital stock outstanding throughout each year ended October
31:
<TABLE>
<CAPTION>
Smith Barney High Income Portfolio 1998(1) 1997 1996 1995 1994(2)
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $13.25 $12.09 $11.26 $10.07 $10.00
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 1.21 0.88 1.14 0.93 0.29
Net realized and unrealized
gain (loss) (1.58) 1.00 0.19 0.48 (0.22)
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.37) 1.88 1.33 1.41 0.07
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.66) (0.50) (0.22) --
Net realized gains (0.17) (0.06) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.91) (0.72) (0.50) (0.22) --
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.97 $13.25 $12.09 $11.26 $10.07
- -----------------------------------------------------------------------------------------------------------------
Total Return (3.38)% 16.24% 12.17% 14.30% 0.70%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $160,259 $123,726 $65,955 $20,450 $3,395
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.67% 0.70% 0.84% 0.70% 0.69%+
Net investment income 9.12 9.36 9.79 9.54 7.55+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 82% 89% 104% 57% 15%
=================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the Manager
reimbursed the Portfolio for $17,664 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not reimbursed,
the per share effect on net investment income and the expense ratios would
have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement
------------------------ ----------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C>
$0.04 $0.07 1.07% 2.60%+
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 57
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Putnam Diversified Income Portfolio 1998 1997 1996(1) 199 1994(2)
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $12.31 $11.99 $11.46 $10.18 $10.00
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.57 0.67 0.78 0.79 0.23
Net realized and unrealized
gain (loss) (0.62) 0.30 0.27 0.58 (0.05)
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.05) 0.97 1.05 1.37 0.18
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.42) (0.56) (0.39) (0.09) --
Net realized gains (0.14) (0.09) (0.13) -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.65) (0.52) (0.09) --
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.70 $12.31 $11.99 $11.46 $10.18
- -----------------------------------------------------------------------------------------------------------------
Total Return (0.65)% 8.44% 9.43% 13.55% 1.80%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $156,895 $121,601 $81,076 $31,514 $6,763
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.87% 0.88% 0.96% 0.97% 0.98%+
Net investment income 7.48 6.99 7.57 7.53 6.14+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 191% 253% 255% 276% 20%
=================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager waived all or part of its fees for the year ended October 31,
1995 and the period ended October 31, 1994. In addition, the Manager
reimbursed the Portfolio for $19,028 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not reimbursed,
the per share effect on net investment income and the expense ratios would
have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement
---------------------- -----------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C>
$0.04 $0.07 1.31% 2.92%+
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
58 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Smith Barney High Income Portfolio and
Putnam Diversified Income Portfolio of Travelers Series Fund Inc. as of October
31, 1998, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and financial highlights for each of the years in the four-year
period then ended and for the period from June 16, 1994 (commencement of
operations)to October 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney High Income Portfolio and Putnam Diversified Income Portfolio of
Travelers Series Fund Inc. as of October 31, 1998, and the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period then ended and financial highlights for each of
the years in the four-year period then ended and for the period from June 16,
1994 to October 31, 1994, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 18, 1998
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 59
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Travelers Series Fund Inc. hereby designates for
the fiscal year ended October 31, 1998:
o Long-term capital gain distributions paid:
o SBHI $573,345
o PDIP $424,171
- --------------------------------------------------------------------------------
60 1998 Annual Report to Shareholders
<PAGE>
SalomonSmithBarney
---------------------------
A member of citigroup[LOGO]
Directors Investment Managers
Victor K. Atkins Mutual Management Corp.
A.E. Cohen Travelers Investment Adviser, Inc.
Robert A. Frankel
Rainer Greeven Custodian
Susan M. Heilbron PNC Bank, N.A.
Heath B. McLendon, Chairman
Officers Annuity Administration
Heath B. McLendon Travelers Annuity Investor Services
President and Chief Executive Officer 5 State House Square
1 Tower Square
Hartford, CT 06183
Lewis E. Daidone
Senior Vice President and Treasurer
John C. Bianchi This report is submitted for the general
Vice President information of the shareholders of
Travelers Series Fund Inc. -- Smith
Thomas M. Reynolds Barney High Income and Putnam
Controller Diversified Income Portfolios. It is not
authorized for distribution to
Christina T. Sydor prospective investors unless accompanied
Secretary or preceded by a current Prospectus for
the Portfolios, which contains
information concerning the Portfolios'
investment policies and expenses as well
as other pertinent information.
Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc.
Travelers Series Fund Inc.
388 Greenwich Street, MF-2
New York, New York 10013
IN0254 12/98
<PAGE>
[GRAPHIC]
Travelers Series Fund Inc.
Smith Barney Large Cap
Value Portfolio
Alliance Growth Portfolio
Van Kampen American
Capital Enterprise Portfolio
- -------------
ANNUAL REPORT
- -------------
October 31, 1998
[LOGO]Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Travelers Series
Fund Inc.
[PHOTO]
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the annual report of the Travelers Series Fund Inc. -
Smith Barney Large Cap Value Portfolio, Alliance Growth Portfolio and Van Kampen
American Capital Enterprise Portfolio for the year ended October 31, 1998. In
this report, we summarize the period's prevailing economic and market conditions
and outline each Portfolio's investment strategy. A detailed summary of
performance and current holdings for each Portfolio can be found in the
appropriate sections that follow.
Portfolio Highlights
Smith Barney Large Cap Value Portfolio
For the year ended October 31, 1998, the Smith Barney Large Cap Value Portfolio
had a total return of 9.65% compared to the total return of 10.41% for its
Lipper Inc. ("Lipper") growth fund peer group average over the same period.
(Lipper is a major fund-tracking organization.)
Most major U.S. markets ended September modestly higher, as the notion of a less
restrictive global monetary policy to stem the international financial crisis
appeared to gain currency. Investors were encouraged by a noticeable shift in
the Federal Reserve Board's ("Fed") view of the economy from a focus on the
risks of domestic inflation toward a greater balance between inflation and a
global turmoil-induced economic recession. The lift in stock prices was
challenged by volatility associated with several events including a steady
string of corporate profit warnings, significant reductions in corporate
earnings estimates, the near collapse of a major hedge fund and lingering
concerns regarding the implications of a slowdown in global economic growth for
corporate earnings and economic growth in 1999.
Although investors were forewarned of massive losses related to emerging market
trading inventories by several money center banks in August, the degree of
damage caused by unusually high levels of market volatility and the rapid
widening of spreads between different types of bonds was further evidenced
during September by the near failure of a large hedge fund.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 1
<PAGE>
The unfavorable prospects for a rebound in the growth of the Asian economies
also remained a concern. A year after the inception of the Asian crisis,
economic data related to the countries that initially faltered showed precious
little signs of stabilization. These countries continue to struggle, in part,
because of the inability of Japanese leaders to break a political stalemate that
continues to prevent the implementation of adequate fiscal policies to bolster
its economy and restructure its financial system. Additionally, political
uncertainty and a potential impeachment proceeding in the U.S. have unsettled
investors further.
The stock markets snapped back vigorously during October responding to a rare
inter-meeting rate cut by the Fed, Congressional passage of additional IMF
funding and the appearance of progress related to issues of investor concern
regarding the economic prospects associated with Brazil and Japan. The ability
of these countries to address their structural problems is perceived to be among
the linchpins preventing an exacerbation of a possible global slowdown.
Therefore, attempts among Japanese leaders to deal with its banking industry
problems and the announcement of a fiscal austerity plan in Brazil, helped to
improve investor psychology.
The Fund's investment team believes several international events that have
occurred recently constituted steps in the proper direction (i.e., several
global rate cuts, increased resolve among G-7 nations, Japanese banking
proposal, Brazilian austerity plan, etc.) and these antidotes to long-festering
structural problems should ultimately be positive for the global economy.
However, they may likely not stave off the intermediate-term reality of economic
recessions within the associated regions. Clearly, global leaders are more
disposed toward aggressively attempting to constrain the impact of the current
turmoil, yet the prospect of a Brazilian recession remains a concern.
Two rate cuts by the Fed within the span of three weeks combined with mediocre
yet, generally in-line reported earnings, gave rise to a potent `relief rally'
that lifted the S&P 500 Index by 8%. (The Fed reduced the federal-funds rate for
the third time in seven weeks on November 17, 1998.)
Although further rate reductions may inhibit the equity market from breaching
recent lows, the yawning gap between analyst's 1999 projections of corporate
earnings growth relative to economists' estimates implies an unusually high
degree of optimism continues to exist. Going forward, the Fund's investment team
anticipates negative earnings revisions and continues to emphasize the
importance of disciplined stock selection with an emphasis on high-quality
companies of a defensive nature with relatively cheaper valuations, largely
domestic revenues and high earnings visibility. Moreover, the Fund's investment
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
team has identified select opportunities among the regional banking, life
insurance, pharmaceutical and electric utility industries during the reporting
period.
Alliance Growth Portfolio
For the year ended October 31, 1998, the Alliance Growth Portfolio generated a
total return of 12.92%, in comparison to the total return of 11.35% for its
Lipper growth fund peer group average. (Lipper is a major fund-tracking
organization.)
In the view of the Portfolio Managers, the performance of the U.S. market during
the reporting period has been predicated on reactions to world events and does
not necessarily reflect basic market fundamentals. During the six months ended
October 31, 1998, the U.S. market experienced a 20% decline. The Portfolio
Managers believe that this decline may be classified as something of a financial
panic and not necessarily the start of a bear market. During the summer, the
stock market had been declining on fears that Asian weakness would drag down the
western economies as well. When Russia defaulted on its foreign debt there was a
large and sudden expansion of risk premiums. The vulnerability of speculative
investors such as hedge funds to these movements proved to be alarmingly great.
When it became known that many large hedge funds had lost most of their equity
capital and that banks and brokers had extended shockingly large amounts of
credit to these funds, the stock market dropped sharply. Scare stories of an
imminent credit crunch sent financial stocks sharply lower.
To some, these events signaled the death of optimism about the ability of the
United States and Europe to continue to prosper while Asia struggles with
economic disarray. A more positive view would be that there is an element of
financial panic in this situation, and that these events do not necessarily
presage recession or worse for the United States. The stock market is an
acknowledged forecaster of recessions. Unfortunately, the stock market forecasts
more recessions than actually occur. In other words, market declines are not
necessarily followed by recession.
The portfolio managers at Alliance see significant differences between this
crisis and other troubled markets of the past. Unlike declines in the 1970s and
1980s it is their belief that this one is taking place in a much more positive
environment than those which occurred in a climate of war, inflation and high
interest rates. The managers are therefore hopeful that the damage will be more
easily contained. At worst they expect a mild recession. With the market down
15% to 20%, the managers were buying unreasonably depressed stocks rather than
not participating in the market.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 3
<PAGE>
Van Kampen American Capital Enterprise Portfolio
For the year ended October 31, 1998, the Van Kampen American Capital Enterprise
Portfolio ("Portfolio") generated a total return of 8.97%, which compares
unfavorably to the total return of 11.35% for its Lipper growth fund peer group
average. (Lipper is a major fund-tracking organization.)
The Van Kampen American Capital Enterprise Portfolio is managed with a
consistent philosophy: to own companies with positive future fundamentals at
attractive current prices. Although this philosophy may sound simplistic, the
portfolio managers believe that the best total return potential has usually been
achieved by a primary focus on disciplined stock selection. In selecting stocks,
the portfolio managers generally look for at least one of the following
fundamental characteristics:
o Consistent earnings growth
o Accelerating earnings growth
o Better-than-expected fundamentals
o An underlying change in a company, industry, or regulatory
environment
As long as the original criteria for purchasing a particular stock hold true and
its value remains relatively attractive, the stock usually stays in the Van
Kampen American Capital Enterprise Portfolio. Because of the stock market's
extreme volatility since mid-July, the portfolio managers continue to monitor
companies very closely, looking for signs of deteriorating fundamentals.
The Portfolio's performance was shaped by two very different sets of conditions
during the reporting period. During the first nine months of the period, the
Portfolio performed well, thanks to steady domestic economic growth and low
inflation. Beginning in mid-July, however, economic difficulties in Asia and,
later, in Russia and Latin America drove stock markets around the world sharply
downward. Although the market recovered partially in September and October, the
Portfolio nevertheless lost some ground during the period under review.
In response to recent market volatility and slowing international economic
conditions, the managers sought to limit the Portfolio's exposure to
economically-sensitive industries. The managers also tended to focus on
industries with a domestic orientation, because the managers believed these
companies would be less affected by economic turmoil abroad. Consequently, the
Portfolio had a higher-than-average weighting in the retail and health care
sectors.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
Through June, the retail sector performed well and benefited the Portfolio's
performance. After June, however, investors became increasingly concerned that a
recession may be on the horizon. As a result, retail companies-especially
apparel producers-hurt the Portfolio's performance in the reporting period's
final months. The managers continue to be optimistic about their holdings in the
retail sector because they have become more selective in their investment
criteria and especially leery of companies with questionable fundamentals. The
managers believe that growth prospects for retail companies over the next six
months are more uncertain than they were at this time last year. For the most
part, however, the managers believe the uncertainty is already reflected in
current stock prices.
The Portfolio's managers reduced their weighting in technology companies because
the managers are concerned about an increase in competitive pressures. They are
also concerned that earnings reductions among U.S. companies may prompt them to
reduce capital spending, undermining future profitability of technology firms.
Computer software companies performed well and continued to occupy a significant
portion of the Portfolio's technology holdings. The managers are monitoring the
"Year 2000" problem, which may encourage businesses and individuals to purchase
new computer hardware and software now rather than next year. This could provide
a short-term benefit to the computer industry but have negative implications for
the companies' earnings in 1999.
Despite low inflation, the U.S. stock market continues to be affected by
uncertainty about the full impact of international economic difficulties on U.S.
companies. As domestic firms report their third-quarter 1998 earnings, however,
it is becoming clear that U.S. companies were not hurt as much as analysts
feared. The portfolio managers believe that recent economic difficulties could
persist through the first half of 1999, setting the stage for an eventual
recovery next year.
The managers will not significantly change their stock-selection discipline in
response to weaker market conditions, although they will continue to scrutinize
companies to identify those firms with fundamentals that meet the managers'
investment criteria. Over the long term, they expect that investors will still
seek companies with strong fundamentals, consistent track records, promising
growth prospects, and attractive valuations.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 5
<PAGE>
In closing, thank you for investing in the Smith Barney Large Cap Value,
Alliance Growth and Van Kampen American Capital Enterprise Portfolios. We look
forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 18, 1998
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Large Cap Value Portfolio
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns+
================================================================================
10/31/98 $17.90 $18.94 $0.21 $0.53 9.65%
- --------------------------------------------------------------------------------
10/31/97 14.84 17.90 0.18 0.17 23.38
- --------------------------------------------------------------------------------
10/31/96 12.12 14.84 0.17 0.05 24.55
- --------------------------------------------------------------------------------
10/31/95 10.14 12.12 0.06 0.00 20.21
- --------------------------------------------------------------------------------
6/16/94*-10/31/94 10.00 10.14 0.00 0.00 1.40++
================================================================================
Total $0.62 $0.75
================================================================================
- --------------------------------------------------------------------------------
Alliance Growth Portfolio
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns+
================================================================================
10/31/98 $20.82 $22.14 $0.04 $1.44 12.92%
- --------------------------------------------------------------------------------
10/31/97 16.30 20.82 0.02 0.62 32.59
- --------------------------------------------------------------------------------
10/31/96 13.28 16.30 0.09 0.32 26.55
- --------------------------------------------------------------------------------
10/31/95 10.65 13.28 0.02 0.10 26.18
- --------------------------------------------------------------------------------
6/16/94*-10/31/94 10.00 10.65 0.00 0.00 6.50++
================================================================================
Total $0.17 $2.48
================================================================================
- --------------------------------------------------------------------------------
Van Kampen American Capital Enterprise Portfolio
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns+
================================================================================
10/31/98 $19.89 $20.56 $0.05 $1.17 8.97%
- --------------------------------------------------------------------------------
10/31/97 15.37 19.89 0.05 0.00 29.81
- --------------------------------------------------------------------------------
10/31/96 12.89 15.37 0.04 0.40 23.35
- --------------------------------------------------------------------------------
10/31/95 10.38 12.89 0.02 0.03 24.74
- --------------------------------------------------------------------------------
6/16/94*-10/31/94 10.00 10.38 0.00 0.00 3.80++
================================================================================
Total $0.16 $1.60
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
Smith Barney Alliance Van Kampen
Large Cap Growth American Capital
Value Portfolio Portfolio Enterprise Portfolio
================================================================================
Year Ended 10/31/98 9.65% 12.92% 8.97%
- --------------------------------------------------------------------------------
6/16/94* through 10/31/98 17.87 23.80 20.46
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns+
- --------------------------------------------------------------------------------
Smith Barney Alliance Van Kampen
Large Cap Growth American Capital
Value Portfolio Portfolio Enterprise Portfolio
================================================================================
6/16/94* through 10/31/98 105.39% 154.63% 125.92%
================================================================================
* Commencement of operations.
+ Assumes the reinvestment of all dividend and capital gain distributions,
if any, at net asset value.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Shares of the
Smith Barney Large Cap Value Portfolio vs. S&P 500 Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[LINE CHART APPEARS HERE]
Smith Barney Large Cap Value Portfolio S&P 500 Index
6/16/94 10,000 10,000
10/94 10,140 10,324
4/95 10,982 11,404
10/95 12,189 13,053
4/96 13,943 14,684
10/96 15,181 16,018
4/97 16,911 18,374
10/97 18,731 21,159
4/98 22,049 25,920
10/31/98 20,539 25,817
+ Hypothetical illustration of $10,000 invested in shares of the Smith
Barney Large Cap Value Portfolio (formerly known as Smith Barney Income
and Growth Portfolio) on June 16, 1994 (commencement of operations),
assuming reinvestment of dividends and capital gains, if any, at net asset
value through October 31, 1998. The Standard & Poor's 500 Index ("S&P 500
Index") is an index of widely held common stocks listed on the New York
and American Stock Exchanges and the over-the-counter markets. Figures for
the S&P 500 Index include reinvestment of dividends. The index is
unmanaged and is not subject to the same management and trading expenses
of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Shares of the
Alliance Growth Portfolio vs. S&P 500 Index
and Russell 1000 Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[LINE CHART APPEARS HERE]
Alliance
Growth Portfolio S&P 500 Index Russell 1000 Index
6/16/94 10,000 10,000 10,000
10/94 10,650 10,324 10,191
4/95 11,475 11,404 11,050
10/95 13,428 13,053 12,612
4/96 15,557 14,684 14,327
10/96 17,007 16,018 15,501
4/97 17,491 18,374 17,529
10/97 22,549 21,159 20,236
4/98 26,805 25,920 24,485
10/31/98 25,463 25,817 24,039
+ Hypothetical illustration of $10,000 invested in shares of the Alliance
Growth Portfolio on June 16, 1994 (commencement of operations), assuming
reinvestment of dividends and capital gains, if any, at net asset value
through October 31, 1998. The Standard & Poor's 500 Index ("S&P 500
Index") is an index of widely held common stocks listed on the New York
and American Stock Exchanges and the over-the-counter markets. Figures for
the S&P 500 Index include reinvestment of dividends. The Russell 1000
Index is comprised of 1,000 of the largest capitalized U.S. domiciled
companies whose common stock is traded on either the New York, American or
NASDAQ stock exchanges. The indexes are unmanaged and are not subject to
the same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Shares of the Van Kampen
American Capital Enterprise Portfolio vs.
S&P 500 Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[LINE CHART APPEARS HERE]
Van Kampen American
Capital Enterprise Portfolio S&P 500 Index
6/16/94 10,000 10,000
10/94 10,380 10,324
4/95 11,160 11,404
10/95 12,948 13,053
4/96 14,933 14,684
10/96 15,972 16,018
4/97 17,283 18,374
10/97 20,733 21,159
4/98 24,736 25,920
10/31/98 22,593 25,817
+ Hypothetical illustration of $10,000 invested in shares of the Van Kampen
American Capital Enterprise Portfolio on June 16, 1994 (commencement of
operations), assuming reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 1998. The Standard & Poor's 500
Index ("S&P 500 Index") is an index of widely held common stocks listed on
the New York and American Stock Exchanges and the over-the-counter
markets. Figures for the S&P 500 Index include reinvestment of dividends.
The index is unmanaged and is not subject to the same management and
trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 99.6%
Aerospace/Defense -- 4.5%
90,000 Lockheed Martin Corp. $ 10,023,750
100,000 United Technologies Corp. 9,525,000
- --------------------------------------------------------------------------------
19,548,750
- --------------------------------------------------------------------------------
Aluminum -- 1.7%
125,000 Reynolds Metals Co. 7,492,188
- --------------------------------------------------------------------------------
Automobiles -- 2.5%
120,000 Ford Motor Co. 6,510,000
70,000 General Motors Corp. 4,414,375
- --------------------------------------------------------------------------------
10,924,375
- --------------------------------------------------------------------------------
Banks - Major Regional -- 3.0%
225,000 First Union Corp. 13,050,000
- --------------------------------------------------------------------------------
Banks - Money Center -- 3.7%
156,580 BankAmerica Corp. 8,993,564
125,000 Chase Manhattan Corp. 7,101,562
- --------------------------------------------------------------------------------
16,095,126
- --------------------------------------------------------------------------------
Chemicals -- 2.1%
110,000 E.I. du Pont de Nemours & Co. 6,325,000
71,000 Imperial Chemical Industries PLC 2,573,750
- --------------------------------------------------------------------------------
8,898,750
- --------------------------------------------------------------------------------
Conglomerates -- 1.6%
80,000 General Electric Co. 7,000,000
- --------------------------------------------------------------------------------
Electric Utilities -- 5.5%
100,000 Bec Energy 3,968,750
175,000 Duke Energy Corp. 11,320,313
225,000 Unicom Corp. 8,479,688
- --------------------------------------------------------------------------------
23,768,751
- --------------------------------------------------------------------------------
Electrical Equipment -- 4.7%
150,000 Emerson Electric Co. 9,900,000
130,000 Honeywell, Inc. 10,383,750
- --------------------------------------------------------------------------------
20,283,750
- --------------------------------------------------------------------------------
Financial -- 1.2%
90,000 Marsh & McLennan Cos., Inc. 4,995,000
- --------------------------------------------------------------------------------
Foods -- 7.0%
150,000 Conagra Corp. 4,565,625
100,000 Kellogg Co. 3,300,000
150,000 Quaker Oats Corp. 8,859,375
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Foods -- 7.0% (continued)
100,000 Sara Lee Corp. $ 5,968,750
100,000 Unilver NV, NY Shares 7,525,000
- --------------------------------------------------------------------------------
30,218,750
- --------------------------------------------------------------------------------
Hardware & Tools -- 1.0%
150,000 Stanley Works, Inc. 4,500,000
- --------------------------------------------------------------------------------
Health Care - Drugs -- 11.7%
200,000 Abbott Laboratories, Inc. 9,387,500
275,000 American Home Products Corp. 13,406,250
100,000 Bristol-Myers Squibb Co. 11,056,250
80,000 Eli Lilly & Co. 6,475,000
75,000 Merck & Co., Inc. 10,143,750
- --------------------------------------------------------------------------------
50,468,750
- --------------------------------------------------------------------------------
Household Furniture & Appliance -- 4.6%
375,000 Masco Corp. 10,570,312
180,000 Whirlpool Corp. 9,225,000
- --------------------------------------------------------------------------------
19,795,312
- --------------------------------------------------------------------------------
Insurance - Life -- 3.9%
130,000 American General Corp. 8,905,000
110,000 Cigna Corp. 8,023,125
- --------------------------------------------------------------------------------
16,928,125
- --------------------------------------------------------------------------------
Insurance - Property -- 1.9%
61,290 Exel Limited 4,684,854
100,000 St. Paul Cos., Inc. 3,312,500
- --------------------------------------------------------------------------------
7,997,354
- --------------------------------------------------------------------------------
Insurance - Multiline -- 1.9%
150,000 Hartford Financial Services Group, Inc. 7,968,750
- --------------------------------------------------------------------------------
Medical Products/Services -- 1.7%
120,000 Baxter International, Inc. 7,192,500
- --------------------------------------------------------------------------------
Natural Gas -- 6.8%
200,000 El Paso Natural Gas Co. 7,087,500
250,134 Enron Corp. 13,194,568
330,000 The Williams Cos., Inc. 9,054,375
- --------------------------------------------------------------------------------
29,336,443
- --------------------------------------------------------------------------------
Office Equipment & Supply -- 1.9%
150,000 Pitney Bowes, Inc. 8,259,375
- --------------------------------------------------------------------------------
Oil & Gas Drilling & Equipment -- 1.4%
234,000 Conoco Inc.* 5,820,750
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Oil & Gas Refining & Marketing -- 0.8%
75,000 Ashland, Inc. $ 3,609,375
- --------------------------------------------------------------------------------
Oil - International -- 5.4%
80,000 Chevron Corp. 6,520,000
130,000 Exxon Corp. 9,262,500
100,000 Mobil Corp. 7,568,750
- --------------------------------------------------------------------------------
23,351,250
- --------------------------------------------------------------------------------
Oil Well Equipment & Service -- 1.1%
130,000 Halliburton Co. 4,671,875
- --------------------------------------------------------------------------------
Paper & Forest Products -- 0.8%
75,000 International Paper Co. 3,482,813
- --------------------------------------------------------------------------------
Photograph/Imaging -- 1.7%
75,000 Xerox Corp. 7,265,625
- --------------------------------------------------------------------------------
Publishing - Newspaper -- 1.6%
150,000 Dow Jones & Co., Inc. 6,871,875
- --------------------------------------------------------------------------------
Retail - Apparel -- 2.0%
330,000 The Limited, Inc. 8,456,250
- --------------------------------------------------------------------------------
Retail - General Merchandise -- 1.3%
125,000 Sears, Roebuck & Co. 5,617,187
- --------------------------------------------------------------------------------
Savings & Loan -- 2.0%
225,000 Washington Mutual, Inc. 8,423,438
- --------------------------------------------------------------------------------
Telephone -- 8.6%
150,000 AT&T Corp. 9,337,500
100,000 BellSouth Corp. 7,981,250
170,000 GTE Corp. 9,976,875
130,000 Sprint Corp. 9,977,500
- --------------------------------------------------------------------------------
37,273,125
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $382,072,713) 429,565,612
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 0.4%
$1,920,000 Morgan Stanley, 5.380% due 11/2/98;
Proceeds at maturity -- $1,920,861;
(Fully collateralized by U.S. Treasury Bills,
due 10/14/99; Market value -- $1,967,926)
(Cost -- $1,920,000) $ 1,920,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $383,992,713**) $ 431,485,612
================================================================================
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
ALLIANCE GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 98.2%
Airlines -- 2.2%
163,000 Continental Airlines, Inc., Class B Shares* $ 6,458,875
66,900 Delta Airlines, Inc. 7,062,131
103,000 KLM Royal Dutch Air 3,109,312
- --------------------------------------------------------------------------------
16,630,318
- --------------------------------------------------------------------------------
Banks -- 5.9%
328,800 Bank of Tokyo-Mitsubishi 3,205,800
257,400 BankAmerica Corp. 14,784,412
302,208 Chase Manhattan Corp. 17,169,192
146,000 First Union Corp. 8,468,000
73,500 GreenPoint Financial Corp. 2,411,719
- --------------------------------------------------------------------------------
46,039,123
- --------------------------------------------------------------------------------
Broadcasting -- 1.8%
447,800 CBS Corp 12,510,412
27,675 Tele-Communications Inc.* 1,165,809
- --------------------------------------------------------------------------------
13,676,221
- --------------------------------------------------------------------------------
Computer Services -- 10.4%
377,600 Ceridian Corp. 21,664,800
39,000 EMC Corp.* 2,510,625
171,000 First Data Corp. 4,531,500
1,700 Ingram Micro, Inc.* 77,350
128,000 International Business Machines Corp. 19,000,000
397,300 Networks Associates, Inc. 16,885,250
451,375 Sterling Commerce Inc.* 15,910,969
- --------------------------------------------------------------------------------
80,580,494
- --------------------------------------------------------------------------------
Diversified Operations -- 1.9%
349,000 Republic Industries, Inc.* 5,605,812
144,398 Tyco International Ltd. 8,943,651
- --------------------------------------------------------------------------------
14,549,463
- --------------------------------------------------------------------------------
Drugs -- 4.5%
142,000 Bristol Myers Squibb & Co. 15,699,875
104,400 Merck & Co., Inc. 14,120,100
50,000 Schering-Plough Corp. 5,143,750
- --------------------------------------------------------------------------------
34,963,725
- --------------------------------------------------------------------------------
Electronics -- 12.5%
463,425 Cisco Systems Inc.* 29,195,775
75,000 Philips Electronics NV 4,115,625
514,900 Sanmina Corp. 21,110,900
280,600 SCI Systems, Inc.* 11,083,700
184,900 Solectron Corp.* 10,585,525
114,000 Tandy Corp. 5,650,125
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
ALLIANCE GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Electronics -- 12.5% (continued)
238,000 Texas Instruments, Inc. $ 15,217,125
- --------------------------------------------------------------------------------
96,958,775
- --------------------------------------------------------------------------------
Financial Services -- 8.9%
55,600 American Express Co. 4,913,650
84,000 Associates First Capital Corp. 5,922,000
30,900 Household International Inc. 1,129,781
834,862 MBNA Corp. 19,045,289
27,200 Morgan Stanley Dean Witter & Co. 1,761,200
340,400 Newcourt Credit Group Inc. 11,190,650
24,000 Providian Corp. 1,905,000
1,240,450 Telecom-TCI Ventures, Class A Shares 23,103,381
- --------------------------------------------------------------------------------
68,970,951
- --------------------------------------------------------------------------------
Health Care -- 0.8%
154,000 Columbia/HCA Healthcare 3,234,000
51,600 Medtronic Inc. 3,354,000
- --------------------------------------------------------------------------------
6,588,000
- --------------------------------------------------------------------------------
Insurance -- 4.7%
43,000 Acceptance Insurance Cos., Inc.* 843,875
120,900 American Bankers Insurance Group, Inc. 5,402,720
268,012 American International Group, Inc. 22,848,023
85,200 The PMI Group Inc. 4,297,275
121,600 20th Century Industries 2,986,800
- --------------------------------------------------------------------------------
36,378,693
- --------------------------------------------------------------------------------
Leisure -- 0.6%
58,000 Carnival Corp., Class A Shares 1,877,750
85,000 Mirage Resorts, Inc. 1,439,687
55,000 Royal Caribbean Cruises Ltd. 1,533,125
- --------------------------------------------------------------------------------
4,850,562
- --------------------------------------------------------------------------------
Manufacturing -- 3.2%
256,300 Mannesmann AG 24,822,195
- --------------------------------------------------------------------------------
Miscellaneous -- 6.9%
120,900 Boston Scientific Corp.* 6,581,494
924,250 Cendant Corp. 10,571,109
28,000 Coca-Cola Enterprises Inc. 1,009,750
175,700 Electric Lightwave Inc., Class A Shares* 1,383,637
188,000 Engelhard Corp. 3,948,000
171,200 Global Telesystems Group, Inc.* 6,858,700
624,200 Loral Space & Communications* 11,820,788
166,400 The News Corp. Ltd., ADR 4,544,800
61,800 Pacific Gateway Exchange, Inc.* 1,784,475
42,105 Reuters Group PLC 2,552,676
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
ALLIANCE GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Miscellaneous -- 6.9% (continued)
35,641 Starwood Hotels & Resorts, Inc. $ 1,009,091
88,900 Union Pacific Resources Corp. 1,155,700
- --------------------------------------------------------------------------------
53,220,220
- --------------------------------------------------------------------------------
Oil Related -- 4.3%
38,000 Apache Corp. 1,075,875
143,400 BJ Services Co.* 2,930,738
1,768,500 Gulf Canada Resources Ltd.* 6,631,875
415,000 Halliburton Co. 14,914,063
31,000 Nabors Industries, Inc.* 573,500
241,000 Noble Drilling Corp.* 4,142,188
84,000 Transocean Offshore, Inc. 3,102,750
- --------------------------------------------------------------------------------
33,370,989
- --------------------------------------------------------------------------------
Real Estate -- 3.5%
145,900 Arden Realty Group, Inc. 3,155,088
140,000 Entertainment Properties Trust 2,327,500
34,400 Equity Office Properties Trust 825,600
270,300 Humphrey Hospitality Trust, Inc. 2,601,638
93,000 JP Realty, Inc. 1,947,188
250,000 Koger Equity Inc. 4,218,750
131,900 Macerich Co. 3,635,494
138,000 New Plan Excel Realty Trust 3,139,500
138,000 Spieker Properties, Inc. 4,761,000
20,000 Sun Communities Inc. 668,750
- --------------------------------------------------------------------------------
27,280,508
- --------------------------------------------------------------------------------
Retail -- 3.4%
27,000 Dayton-Hudson Corp. 1,144,145
309,700 The Home Depot, Inc. 13,471,950
313,850 The Limited Inc. 8,042,406
149,000 Office Depot, Inc.* 3,725,000
- --------------------------------------------------------------------------------
26,383,501
- --------------------------------------------------------------------------------
Technology -- 3.9%
512,700 Pairgain Technologies, Inc.* 4,213,753
987,400 Sterling Software Inc.* 25,857,538
- --------------------------------------------------------------------------------
30,071,291
- --------------------------------------------------------------------------------
Telecommunications -- 7.1%
171,000 ADC Telecommunications, Inc.* 3,933,000
127,800 Colt Telecommunications Group PLC ADR* 6,565,725
15,300 Globalstar Telecommunications Inc. 227,587
300,180 Liberty Media Group, Class A shares 11,425,601
555,700 Nextel Communications Inc.* 10,072,063
153,000 Telecomuncacoes Brasileiras SA ADR* 11,618,438
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
ALLIANCE GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Telecommunications -- 7.1% (continued)
185,100 Viacom, Inc., Non Voting Class B Shares* $ 11,082,863
- --------------------------------------------------------------------------------
54,925,277
- --------------------------------------------------------------------------------
Tobacco -- 3.7%
113,800 Loews Corp. 10,690,088
352,400 Philip Morris Cos., Inc. 18,016,450
- --------------------------------------------------------------------------------
28,706,538
- --------------------------------------------------------------------------------
Utility - Telephone -- 8.0%
1,036,950 MCI Worldcom Inc.* 57,291,488
139,000 Millicom International Cellular SA* 4,639,125
- --------------------------------------------------------------------------------
61,930,613
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $637,397,295) 760,897,457
================================================================================
PREFERRED STOCK -- 0.9%
Drugs -- 0.1%
24,000 Gensia, Inc., Exchangeable $3.75+ 576,107
- --------------------------------------------------------------------------------
Miscellaneous -- 0.1%
60,000 Automatic Common Exchange Security Trust 6.50% 993,750
- --------------------------------------------------------------------------------
Publishing -- 0.7%
225,000 Reader's Digest Association, Inc. 5,175,000
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $7,564,013) 6,744,857
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
CONVERTIBLE BONDS -- 0.8%
Computers -- 0.8%
$7,950,000 Global Telesystems Group, 5.75% due 7/1/10
(Cost -- $5,604,291) 6,499,125
================================================================================
SHORT-TERM SECURITIES -- 0.1%
1,000,000 Student Loan Market Association
Discount Note, 5.42% due 11/2/98
(Cost -- $999,699) 999,699
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $651,565,298**) $775,141,138
================================================================================
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of
1933.
This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 98.3%
Advertising -- 1.3%
65,000 Omnicom Group Inc. $ 3,213,437
- --------------------------------------------------------------------------------
Aircraft & Aerospace -- 1.3%
32,500 United Technologies Corp. 3,095,625
- --------------------------------------------------------------------------------
Airlines -- 0.7%
25,200 AMR Corp.* 1,688,400
- --------------------------------------------------------------------------------
Automotive -- 0.7%
31,800 Ford Motor Co. 1,725,150
- --------------------------------------------------------------------------------
Banking -- 5.8%
45,687 BankAmerica Corp. 2,624,147
52,600 Chase Manhattan Corp. 2,988,337
37,000 Fifth Third Bancorp 2,451,250
62,000 Fleet Financial Group, Inc. 2,476,125
65,000 Norwest Corp.* 2,417,187
18,000 Star Banc Corp. 1,361,250
- --------------------------------------------------------------------------------
14,318,296
- --------------------------------------------------------------------------------
Broadcast Media and Cable Television -- 4.5%
97,600 CBS, Inc. 2,726,700
82,300 Chancellor Media Corp.* 3,158,262
15,636 Clear Channel Communications, Inc.* 712,415
28,800 Jacor Communications Inc.* 1,584,000
30,600 Time Warner Inc. 2,840,062
- --------------------------------------------------------------------------------
11,021,439
- --------------------------------------------------------------------------------
Commercial Services -- 0.9%
91,805 Cendant Corp.* 1,050,020
44,900 Metamor Worldwide, Inc.* 1,153,369
- --------------------------------------------------------------------------------
2,203,389
- --------------------------------------------------------------------------------
Distribution/Wholesale -- 1.4%
51,300 Brightpoint Inc. * 628,425
47,000 SYSCO Corp. 1,266,062
33,000 US Foodservice* 1,567,500
- --------------------------------------------------------------------------------
3,461,987
- --------------------------------------------------------------------------------
Electrical - Integrated -- 1.2%
32,000 Peco Energy Co. 1,238,000
46,000 Unicom Corp. 1,733,625
- --------------------------------------------------------------------------------
2,971,625
- --------------------------------------------------------------------------------
Energy - Oil & Gas Companies -- 1.5%
56,000 Halliburton Co. 2,012,500
17,600 Valero Energy Corp. 440,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Energy - Oil & Gas Companies -- 1.5% (continued)
39,500 YPF Sociedad Anonima ADR $ 1,143,031
- --------------------------------------------------------------------------------
3,595,531
- --------------------------------------------------------------------------------
Financial Services -- 2.8%
24,669 Associates First Capital Corp. 1,739,163
40,800 Fannie Mae 2,889,150
58,600 Washington Mutual Inc. 2,193,837
- --------------------------------------------------------------------------------
6,822,150
- --------------------------------------------------------------------------------
Food - Baking -- 0.6%
46,200 Earthgrains Co. 1,386,000
- --------------------------------------------------------------------------------
Health Care - Hospital/Medical Services -- 5.3%
38,600 HCR Manor Care, Inc.* 1,254,500
77,852 Health Management Association, Inc.* 1,386,739
117,900 Healthsouth Corp.* 1,429,537
67,600 Lincare Holdings, Inc.* 2,699,775
52,200 Tenet Healthcare Corp. 1,458,338
72,414 Total Renal Care Holdings, Inc.* 1,774,143
37,100 Universal Health Services Inc., Class B Shares* 1,903,694
15,200 Wellpoint Health Networks Inc.* 1,119,100
- --------------------------------------------------------------------------------
13,025,826
- --------------------------------------------------------------------------------
Health Care - Products -- 13.0%
35,400 Abbott Laboratories 1,661,587
24,600 American Home Products Corp. 1,199,250
29,000 Amgen Inc.* 2,278,313
24,500 Baxter International Inc. 1,468,469
39,800 Becton Dickinson & Co. 1,676,575
54,200 Bristol-Myers Squibb Co. 5,992,487
26,600 Guidant Corp. 2,034,900
29,600 McKesson Corp. 2,279,200
50,500 Mylan Laboratories Inc. 1,739,094
10,500 Pfizer, Inc. 1,126,781
50,500 Schering-Plough Corp. 5,195,187
24,000 Warner-Lambert Co. 1,881,000
60,000 Watson Pharmaceuticals, Inc.* 3,337,500
- --------------------------------------------------------------------------------
31,870,343
- --------------------------------------------------------------------------------
Human Resources -- 0.5%
72,625 Modis Professional Services, Inc.* 1,280,016
- --------------------------------------------------------------------------------
Insurance -- 4.7%
42,200 Allstate Corp. 1,817,237
31,200 AMBAC Inc. 1,815,450
18,000 American General Corp. 1,233,000
37,800 CMAC Investment Corp. 1,582,875
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Insurance -- 4.7% (continued)
74,200 Conseco, Inc. $ 2,573,812
15,700 MGIC Investment Corp. 612,300
45,400 Torchmark Corp. 1,986,250
- --------------------------------------------------------------------------------
11,620,924
- --------------------------------------------------------------------------------
Manufacturing -- 3.2%
31,400 Dana Corp. 1,312,912
35,100 Textron, Inc. 2,610,562
61,600 Tyco International Ltd. 3,815,350
- --------------------------------------------------------------------------------
7,738,824
- --------------------------------------------------------------------------------
Newspapers -- 1.5%
29,400 Gannett Inc. 1,819,125
33,300 Tribune Co. 1,918,913
- --------------------------------------------------------------------------------
3,738,038
- --------------------------------------------------------------------------------
Pipelines -- 1.8%
75,500 El Paso Natural Gas Co. 2,675,531
32,100 Enron Corp. 1,693,275
- --------------------------------------------------------------------------------
4,368,806
- --------------------------------------------------------------------------------
Retail - Consumer Electronics -- 1.0%
29,300 Maytag Corp. 1,448,519
22,000 Tandy Corp. 1,090,375
- --------------------------------------------------------------------------------
2,538,894
- --------------------------------------------------------------------------------
Retail - Department/Discount -- 6.7%
35,200 Costco Cos., Inc.* 1,997,600
75,300 Dayton Hudson Corp. 3,190,838
88,300 Family Dollar Stores, Inc. 1,600,438
58,500 Lowe's Cos., Inc. 1,970,719
60,500 Ross Stores, Inc. 1,966,250
156,900 TJX Co. 2,971,294
40,000 Wal-Mart Stores, Inc. 2,760,000
- --------------------------------------------------------------------------------
16,457,139
- --------------------------------------------------------------------------------
Retail - Food/Drugs -- 4.8%
31,600 CVS Corp. 1,443,725
61,900 Koger, Inc. 3,435,450
29,700 Rite Aid Corp. 1,178,719
119,995 Safeway, Inc.* 5,737,261
- --------------------------------------------------------------------------------
11,795,155
- --------------------------------------------------------------------------------
Retail - Packaged Goods -- 2.1%
25,900 Colgate-Palmolive Co. 2,288,913
61,200 Dial Corp. 1,686,825
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Retail - Packaged Goods -- 2.1% (continued)
19,000 H.J. Heinz Co. $ 1,104,375
- --------------------------------------------------------------------------------
5,080,113
- --------------------------------------------------------------------------------
Retail - Restaurants -- 2.0%
104,200 Brinker International Inc.* 2,520,338
57,000 Tricon Global Restaurants, Inc.* 2,479,500
- --------------------------------------------------------------------------------
4,999,838
- --------------------------------------------------------------------------------
Technology - Computers & Office Equipment -- 5.8%
36,000 Compaq Computer Corp. 1,138,500
15,000 Dell Computer Corp.* 984,375
85,100 EMC Corp.* 5,478,313
25,600 International Business Machines Corp. 3,800,000
24,000 Lexmark International Group, Inc.* 1,678,500
21,000 Sun Microsystems Inc.* 1,223,250
- --------------------------------------------------------------------------------
14,302,938
- --------------------------------------------------------------------------------
Technology - Computer Services -- 1.9%
18,000 America Online, Inc. 2,287,125
43,400 Computer Sciences Corp 2,289,350
- --------------------------------------------------------------------------------
4,576,475
- --------------------------------------------------------------------------------
Technology - Computer Software -- 7.0%
84,500 BMC Software, Inc.* 4,061,282
25,300 Check Point Software Technologies Ltd.* 575,575
25,450 Citrix Systems Inc.* 1,803,769
54,400 Compuware Corp.* 2,947,800
21,900 Microsoft Corp.* 2,318,663
59,100 Networks Associates, Inc.* 2,511,750
44,000 Oracle Corp.* 1,300,750
66,600 Sterling Software Inc.* 1,744,088
- --------------------------------------------------------------------------------
17,263,677
- --------------------------------------------------------------------------------
Technology - Networking Products -- 1.5%
38,700 Ascend Communications, Inc.* 1,867,275
52,000 3Com Corp.* 1,875,250
- --------------------------------------------------------------------------------
3,742,525
- --------------------------------------------------------------------------------
Technology - Telecommunications Equipment -- 2.1%
34,500 Cisco Systems Inc.* 2,173,500
22,700 Comverse Technology, Inc.* 1,044,200
20,300 Nokia Corp., ADR 1,889,169
- --------------------------------------------------------------------------------
5,106,869
- --------------------------------------------------------------------------------
Textiles -- 0.5%
74,000 Shaw Industries, Inc. 1,285,750
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
SHARES SECURITY VALUE
================================================================================
Tobacco -- 3.3%
159,200 Philip Morris Cos. $ 8,139,100
- --------------------------------------------------------------------------------
Utilities - Telephone -- 3.8%
44,600 Ameritech Corp. 2,405,613
45,200 Bell Atlantic Corp. 2,401,250
54,500 SBC Communications Inc. 2,524,031
35,500 U.S. West Communications Inc. 2,036,813
- --------------------------------------------------------------------------------
9,367,707
- --------------------------------------------------------------------------------
Waste Disposal -- 3.1%
53,000 Republic Services, Inc.* 1,159,375
140,600 Waste Management, Inc. 6,344,575
- --------------------------------------------------------------------------------
7,503,950
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $191,294,202) 241,305,936
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
SHORT-TERM INVESTMENTS -- 1.7%
U.S. Treasury Bills:
$1,850,000 3.87% due 1/21/99 1,831,371
1,500,000 4.00% due 1/21/99 1,484,895
800,000 4.25% due 1/21/99 791,943
150,000 4.30% due 1/21/99 148,490
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $4,260,812) 4,256,699
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $195,555,014**) $245,562,635
================================================================================
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Van Kampen
Smith Barney American
Large Cap Alliance Capital
Value Growth Enterprise
Portfolio Portfolio Portfolio
==================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value
(Cost -- $383,992,713, $651,565,298
and $195,555,014, respectively) $431,485,612 $775,141,138 $245,562,635
Cash 97 899,894 164,125
Receivable for securities sold 1,764,362 1,242,564 4,822,438
Dividends and interest receivable 461,987 744,951 188,045
Receivable from Fund shares sold 138,558 -- 41,289
- --------------------------------------------------------------------------------------------------
Total Assets 433,850,616 778,028,547 250,778,532
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 9,673,649 2,577,252 1,377,609
Payable for Fund shares purchased 322,200 12,817 --
Management fees payable 230,577 437,631 313,414
Accrued expenses 53,941 58,210 36,930
- --------------------------------------------------------------------------------------------------
Total Liabilities 10,280,367 3,085,910 1,727,953
- --------------------------------------------------------------------------------------------------
Total Net Assets $423,570,249 $774,942,637 $249,050,579
==================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 224 $ 350 $ 121
Capital paid in excess of par value 357,232,796 591,430,713 194,057,062
Undistributed net investment income 6,006,162 5,844,057 845,636
Accumulated net realized gain
on security transactions 12,838,168 54,091,677 4,140,139
Net unrealized appreciation
of investments 47,492,899 123,575,840 50,007,621
- --------------------------------------------------------------------------------------------------
Total Net Assets $423,570,249 $774,942,637 $249,050,579
==================================================================================================
Shares Outstanding 22,367,328 34,997,005 12,115,076
- --------------------------------------------------------------------------------------------------
Net Asset Value $ 18.94 $ 22.14 $ 20.56
- --------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Van Kampen
Smith Barney American
Large Cap Alliance Capital
Value Growth Enterprise
Portfolio Portfolio Portfolio
=====================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 7,924,626 $ 8,029,224 $ 2,056,119
Interest 754,422 1,872,341 568,099
Less: Foreign withholding tax (54,958) (77,072) (11,403)
- -----------------------------------------------------------------------------------------------------
Total Investment Income 8,624,090 9,824,493 2,612,815
- -----------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 2,461,022 5,537,281 1,677,943
Shareholder communications 50,948 88,737 26,987
Audit and legal 27,928 23,336 14,960
Custody 15,703 35,857 19,520
Registration fees 14,226 -- --
Directors' fees 13,462 22,949 10,191
Shareholder and system servicing fees 8,034 7,979 9,586
Other 4,093 4,774 3,989
- -----------------------------------------------------------------------------------------------------
Total Expenses 2,595,416 5,720,913 1,763,176
- -----------------------------------------------------------------------------------------------------
Net Investment Income 6,028,674 4,103,580 849,639
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 130,136,926 268,114,847 152,826,949
Cost of securities sold 117,312,632 212,235,959 147,955,763
- -----------------------------------------------------------------------------------------------------
Net Realized Gain 12,824,294 55,878,888 4,871,186
- -----------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of year 40,791,822 112,515,767 38,536,804
End of year 47,492,899 123,575,840 50,007,621
- -----------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 6,701,077 11,060,073 11,470,817
- -----------------------------------------------------------------------------------------------------
Net Gain on Investments 19,525,371 66,938,961 16,342,003
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 25,554,045 $ 71,042,541 $ 17,191,642
=====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Smith Barney Large Cap Value Portfolio 1998 1997
===================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,028,674 $ 4,343,100
Net realized gain 12,824,294 10,733,184
Increase in net unrealized appreciation 6,701,077 24,630,552
- -----------------------------------------------------------------------------------
Increase in Net Assets From Operations 25,554,045 39,706,836
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,308,078) (1,809,911)
Net realized gains (10,768,673) (1,779,060)
- -----------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (15,076,751) (3,588,971)
- -----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 120,636,096 112,644,265
Net asset value of shares issued
for reinvestment of dividends 15,076,751 3,588,971
Cost of shares reacquired (9,952,696) (3,730,616)
- -----------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 125,760,151 112,502,620
- -----------------------------------------------------------------------------------
Increase in Net Assets 136,237,445 148,620,485
NET ASSETS:
Beginning of year 287,332,804 138,712,319
- -----------------------------------------------------------------------------------
End of year* $ 423,570,249 $ 287,332,804
===================================================================================
* Includes undistributed net investment income of: $ 6,006,162 $ 4,340,906
===================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Alliance Growth Portfolio 1998 1997
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,103,580 $ 1,309,831
Net realized gain 55,878,888 45,285,163
Increase in net unrealized appreciation 11,060,073 69,278,096
- -------------------------------------------------------------------------------------
Increase in Net Assets From Operations 71,042,541 115,873,090
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,174,337) (322,517)
Net realized gains (45,386,333) (12,082,073)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (46,560,670) (12,404,590)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 176,224,362 139,218,982
Net asset value of shares issued
for reinvestment of dividends 46,560,670 12,404,591
Cost of shares reacquired (16,850,281) (5,161,944)
- -------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 205,934,751 146,461,629
- -------------------------------------------------------------------------------------
Increase in Net Assets 230,416,622 249,930,129
NET ASSETS:
Beginning of year 544,526,015 294,595,886
- -------------------------------------------------------------------------------------
End of year* $ 774,942,637 $ 544,526,015
=====================================================================================
* Includes undistributed net investment income of: $ 5,844,057 $ 1,310,038
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Van Kampen American Capital Enterprise Portfolio 1998 1997
======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 849,639 $ 615,283
Net realized gain 4,871,186 13,001,084
Increase in net unrealized appreciation 11,470,817 23,155,657
- --------------------------------------------------------------------------------------
Increase in Net Assets From Operations 17,191,642 36,772,024
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (569,909) (361,911)
Net realized gains (13,326,876) --
- --------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (13,896,785) (361,911)
- --------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 46,202,993 58,656,790
Net asset value of shares issued
for reinvestment of dividends 13,896,785 361,911
Cost of shares reacquired (10,927,001) (2,536,998)
- --------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 49,172,777 56,481,703
- --------------------------------------------------------------------------------------
Increase in Net Assets 52,467,634 92,891,816
NET ASSETS:
Beginning of year 196,582,945 103,691,129
- --------------------------------------------------------------------------------------
End of year* $ 249,050,579 $ 196,582,945
======================================================================================
* Includes undistributed net investment income of: $ 845,636 $ 565,906
======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Large Cap Value Portfolio (formerly known as Smith Barney
Income and Growth Portfolio), Alliance Growth Portfolio and Van Kampen American
Capital Enterprise Portfolio ("Portfolio(s)") are separate investment portfolios
of the Travelers Series Fund Inc. ("Fund"). The Fund, a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company and consists of these Portfolios and ten
other separate investment portfolios: AIM Capital Appreciation, Smith Barney
International Equity, Smith Barney Pacific Basin, TBC Managed Income, Putnam
Diversified Income, GT Global Strategic Income, Smith Barney High Income, MFS
Total Return, Smith Barney Money Market and Smith Barney Large Capitalization
Growth Portfolios. Shares of the Fund are offered only to insurance company
separate accounts which fund certain variable annuity and variable life
insurance contracts. The financial statements and financial highlights for the
other portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities for which no sales price was reported and U.S. government agencies
and obligations are valued at the mean between bid and ask prices; (c)
securities for which market quotations are not available will be valued in good
faith at fair value by or under the direction of the Board of Directors; (d)
securities maturing within 60 days are valued at cost plus accreted discount,
or minus amortized premium, which approximates value; (e) dividend income is
recorded on the ex-dividend date; foreign dividends are recorded on the
ex-dividend date or as soon as practical after the Portfolios determine the
existence of a dividend declaration after exercising reasonable due diligence;
(f) interest income is recorded on an accrual basis; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) gains or
losses on the sale of securities are calculated by using the specific
identification method; (i) the account ing records of the Portfolios are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, and income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income or expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank; (j) the character of income and
gains to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
principles, (k) the Portfolios intend to comply with the requirements of the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; and (l) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as the investment manager of the Smith Barney Large Cap
Value Portfolio ("SBLCV"). In addition, SBLCV pays MMC a management fee
calculated at an annual rate of 0.65% of the average daily net assets of the
Portfolio. Travelers Investment Adviser, Inc. ("TIA"), an affiliate of MMC, acts
as the investment manager of the Alliance Growth ("AGP") and the Van Kampen
American Capital Enterprise ("VKACEP") Portfolios. AGP and VKACEP pay TIA a
management fee calculated at an annual rate of 0.80% and 0.70%, respectively, of
the average daily net assets of each Portfolio. These fees are calculated daily
and paid monthly.
TIA has entered into sub-advisory agreements with Alliance Capital Management
L.P. ("Alliance Capital") and Van Kampen American Capital Asset Management, Inc.
("VKAC"). Pursuant to each sub-advisory agreement, Alliance Capital and VKAC are
responsible for the day-to-day portfolio operations and investment decisions and
are compensated by TIA for such services at an annual rate of 0.375% and 0.325%
of the average daily net assets of AGP and VKACEP, respectively. These fees are
calculated daily and paid monthly.
TIA has entered into a sub-administrative services agreement with MMC. TIA pays
MMC, as sub-administrator, a fee calculated at an annual rate of 0.10% of the
average daily net assets of AGP and VKACEP.
Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, acts as the
primary broker for its portfolio agency transactions.
For the year ended October 31, 1998, SSB received brokerage commissions of
$232,727.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
All officers and one director of the Fund are employees of SSB.
3. Investments
During the year ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were:
Van Kampen
Smith Barney American
Large Cap Alliance Capital
Value Growth Enterprise
================================================================================
Purchases $268,120,119 $497,156,232 $190,627,933
- --------------------------------------------------------------------------------
Sales 130,136,926 268,114,847 152,826,949
================================================================================
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Van Kampen
Smith Barney American
Large Cap Alliance Capital
Value Growth Enterprise
================================================================================
Gross unrealized appreciation $63,522,315 $179,933,944 $56,545,736
Gross unrealized depreciation (16,029,416) (56,358,104) (6,538,115)
- --------------------------------------------------------------------------------
Net unrealized appreciation $47,492,899 $123,575,840 $50,007,621
================================================================================
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
of the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolios' basis in the contract.
Only AGP and VKACEP may enter into such contracts to hedge a portion of their
portfolios. The Portfolios bear the market risk that arises from changes in the
value of the financial instruments and securities indices (futures contracts).
At October 31, 1998, AGP and VKACEP had no open futures contracts.
6. Options Contracts
AGP and VKACEP may purchase put or call options. Premiums paid when put or call
options are purchased represent investments, which are marked-to-market daily
and are included in the schedule of investments. When a purchased option
expires, a loss will be realized in the amount of the premium paid. When a
closing sales transaction is entered into, a gain or loss will be realized
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When a put option is exercised, a
gain or loss will be realized from the sale of the underlying security and the
proceeds from such sale decreased by the premium originally paid. When a call
option is exercised, the cost of the security purchased upon exercise will be
increased by the premium originally paid.
At October 31, 1998, AGP and VKACEP had no open purchased put or call option
contracts.
When AGP and VKACEP write a covered call or put option, an amount equal to the
premium received is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, a gain equal to the
amount of the premium received is realized. When a closing purchase transaction
is entered into, a gain or loss is realized depending upon whether the cost of
the closing transaction is greater or less than the premium originally received,
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a written call option
is exercised, the cost of the security sold will be decreased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security purchased upon
exercise. When written index options are exercised, settlement is made in cash.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolios enter into options for hedging purposes. The risk in
writing a covered call option is that the Portfolios give up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolios are
exposed to the risk of a loss if the market price of the underlying security
declines.
During the year ended October 31, 1998, AGP and VKACEP did not write any
options.
7. Lending of Portfolio Securities
SBLCV and AGP have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin depending on the type of
securities loaned. The custodian establishes and maintains the collateral in
segregated accounts. The Portfolios maintain exposure for the risk of any losses
in the investment of amounts received as collateral.
At October 31, 1998, there were no securities on loan.
8. Capital Shares
At October 31, 1998, the Fund had six billion shares authorized with a par value
of $0.00001 per share. Each share of a Portfolio represents an equal
proportionate interest in that Portfolio with each other share of the same
Portfolio and has an equal entitlement to any dividends and distributions made
by the Portfolio.
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each Portfolio were as follows:
Year Ended Year Ended
October 31, 1998 October 31, 1997
================================================================================
Smith Barney Large Cap Value
Shares sold 6,115,029 6,685,160
Shares issued on reinvestment 741,966 235,342
Shares redeemed (539,460) (219,187)
- --------------------------------------------------------------------------------
Net Increase 6,317,535 6,701,315
================================================================================
Alliance Growth
Shares sold 7,720,017 7,641,028
Shares issued on reinvestment 1,945,703 734,869
Shares redeemed (822,127) (294,993)
- --------------------------------------------------------------------------------
Net Increase 8,843,593 8,080,904
================================================================================
Van Kampen American Capital Enterprise
Shares sold 2,160,649 3,263,315
Shares issued on reinvestment 616,265 22,619
Shares redeemed (545,496) (146,973)
- --------------------------------------------------------------------------------
Net Increase 2,231,418 3,138,961
================================================================================
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 35
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Smith Barney Large Cap
Value Portfolio 1998(1) 1997 1996 1995 1994(2)
================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 17.90 $ 14.84 $ 12.12 $ 10.14 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.31 0.25 0.32 0.28 0.11
Net realized and unrealized gain 1.47 3.16 2.62 1.76 0.03
- ----------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.78 3.41 2.94 2.04 0.14
- ----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.21) (0.18) (0.17) (0.06) --
Net realized gains (0.53) (0.17) (0.05) -- --
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.35) (0.22) (0.06) --
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 18.94 $ 17.90 $ 14.84 $ 12.12 $ 10.14
- ----------------------------------------------------------------------------------------------------------------
Total Return 9.65% 23.38% 24.55% 20.21% 1.40%++
- ----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 423,570 $ 287,333 $ 138,712 $ 39,364 $ 6,377
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.68% 0.69% 0.73% 0.73% 0.73%+
Net investment income 1.59 2.01 2.35 2.70 2.82+
- ----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 36% 46% 32% 38% 2%
================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the manager
has reimbursed the Portfolio for $13,120 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not
reimbursed, the per share decreases in net investment income and the
ratios of expenses to average net assets would have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -----------------
1995 $0.02 0.94%
1994 0.05 2.08+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Alliance Growth Portfolio 1998 1997 1996 1995 1994(1)
==================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 20.82 $ 16.30 $ 13.28 $ 10.65 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.11 0.05 0.04 0.14 0.06
Net realized and unrealized gain 2.69 5.11 3.39 2.61 0.59
- ------------------------------------------------------------------------------------------------------------------
Total Income From Operations 2.80 5.16 3.43 2.75 0.65
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.04) (0.02) (0.09) (0.02) --
Net realized gains (1.44) (0.62) (0.32) (0.10) --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (1.48) (0.64) (0.41) (0.12) --
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 22.14 $ 20.82 $ 16.30 $ 13.28 $ 10.65
- ------------------------------------------------------------------------------------------------------------------
Total Return 12.92% 32.59% 26.55% 26.18% 6.50%++
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 774,942 $ 544,526 $ 294,596 $ 111,573 $ 17,086
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.82% 0.82% 0.87% 0.90% 0.88%+
Net investment income 0.59 0.32 0.39 1.24 1.47+
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 40% 66% 88% 78% 37%
==================================================================================================================
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the manager
has reimbursed the Portfolio for $3,500 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not
reimbursed, the per share decreases in net investment income and the
ratios of expenses to average net assets would have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -----------------
1995 $0.01 0.97%
1994 0.03 1.76+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 37
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Van Kampen American
Capital Enterprise Portfolio 1998 1997 1996 1995 1994(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 19.89 $ 15.37 $ 12.89 $ 10.38 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.06 0.06 0.05 0.03 0.03
Net realized and
unrealized gain 1.83 4.51 2.87 2.53 0.35
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.89 4.57 2.92 2.56 0.38
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.05) (0.05) (0.04) (0.02) --
Net realized gains (1.17) -- (0.40) (0.03) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (1.22) (0.05) (0.44) (0.05) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 20.56 $ 19.89 $ 15.37 $ 12.89 $ 10.38
- ------------------------------------------------------------------------------------------------------------
Total Return 8.97% 29.81% 23.35% 24.74% 3.80%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 249,051 $ 196,583 $ 103,691 $ 32,447 $ 5,734
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.73% 0.74% 0.83% 0.88% 0.84%+
Net investment income 0.35 0.41 0.53 0.65 0.79+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 68% 75% 112% 180% 55%
============================================================================================================
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the manager
has reimbursed the Portfolio for $19,007 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not
reimbursed, the per share decreases in net investment income and the
ratios of expenses to average net assets would have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursement
------------------------ -----------------
1995 $0.06 1.26%
1994 0.07 2.66+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
38 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of the Smith Barney Large Cap Value Portfolio,
Alliance Growth Portfolio and Van Kampen American Capital Enterprise Portfolio
of Travelers Series Fund Inc. as of October 31, 1998, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the four-year period then ended and for the
period from June 16, 1994 (commencement of operations) to October 31, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. As to securities
purchased or sold but not received or delivered, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Large Cap Value Portfolio, Alliance Growth Portfolio and Van Kampen
American Capital Enterprise Portfolio of Travelers Series Fund Inc. as of
October 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year period then
ended, and financial highlights for each of the years in the four-year period
then ended and for the period from June 16, 1994 to October 31, 1994, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 18, 1998
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 39
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Travelers Series Fund Inc. hereby designates for
the fiscal year ended October 31, 1998:
-- Long-term capital gain distributions paid:
Large Cap Value Portfolio $ 8,285,569
Alliance Growth Portfolio 33,279,625
Van Kampen American Capital
Enterprise Portfolio 10,253,896
-- Percentages of ordinary income distributions designated as qualifying
for the dividends received deduction available to corporate
shareholders:
Large Cap Value Portfolio 71.42%
Alliance Growth Portfolio 16.93
Van Kampen American Capital
Enterprise Portfolio 100.00
- --------------------------------------------------------------------------------
40 1998 Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
--------------------
A member of citigroup [LOGO]
Directors
Victor K. Atkins
A.E. Cohen
Robert A. Frankel
Rainer Greeven
Susan M. Heilbron
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and
Treasurer
James B. Conheady
Vice President
Bruce D. Sargent
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Managers
Mutual Management Corp.
Travelers Investment Adviser, Inc.
Custodian
PNC Bank, N.A.
Annuity Administration
Travelers Annuity Investor Services
5 State House Square
1 Tower Square
Hartford, CT 06183
This report is submitted for the general information of the shareholders of
Travelers Series Fund Inc. - Smith Barney Large Cap Value Portfolio, Alliance
Growth Portfolio and Van Kampen American Capital Enterprise Portfolio. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Fund, which contains information
concerning the Fund's investment policies and expenses as well as other
pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Travelers Series Fund Inc.
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
IN0251 12/98
<PAGE>
================================================================================
[GRAPHIC]
Travelers Series Fund Inc.
AIM Capital
Appreciation Portfolio
Smith Barney Large
Capitalization Growth
Portfolio
--------------------------
ANNUAL REPORT
--------------------------
October 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
================================================================================
<PAGE>
Travelers Series
Fund Inc.
[PHOTO]
HEATH B.
MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the annual report for the Travelers Series Fund Inc.
- - AIM Capital Appreciation Portfolio and the Smith Barney Large Capitalization
Growth Portfolio for the year ended October 31, 1998. In this report, we
summarize the period's prevailing economic and market conditions and outline our
portfolio strategy. A detailed summary of performance and current holdings can
be found in the appropriate sections that follow.
Portfolio Highlights
AIM Capital Appreciation Portfolio
Portfolio performance fluctuated considerably during the very volatile fiscal
year. Markets vacillated between optimism that Asia's woes would be contained
and worry that they would become a major drag on the U.S. and other economies.
The AIM Capital Appreciation Portfolio ("Portfolio") was hard hit during a major
stock sell-off during August. While it rallied strongly during October, it was
unable to recoup its losses completely by the close of the fiscal year. The
Portfolio's total return for the fiscal year was a negative 2.79%, versus a
negative 2.91% total return for the Lipper Mid-Cap Fund Index over the same
period.
As the fiscal year opened, concern about Asia's financial difficulties was
widespread. The small- and mid-sized company stocks in which the Portfolio
invests were especially hard hit as uneasy investors sought the relative safety
of blue-chip stocks. Markets rallied in the spring as investors seemed to shrug
off Asian worries.
The latter half of the fiscal year was even more volatile. A rally took many
stock indexes to all-time highs by mid-July, but mid-cap stocks did not really
participate. For example, the Standard & Poor's ("S&P") 400 Mid-Cap Stock Index
was higher in mid-April than it was on July 17, 1998, when large-cap indexes
such as the S&P 500 peaked.
In August, the markets were affected by the seemingly intractable Asian
downturn, a default on Russian government debt, the collapse of some highly
leveraged hedge funds and recognition that domestic corporate profits were
slipping after several years of robust growth.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 1
<PAGE>
Late in the fiscal year, amid evidence of a possible worldwide credit crunch,
the Federal Reserve Board ("Fed") shifted its focus from fighting inflation to
providing liquidity and supporting markets. In two steps, on September 29, 1998
and again on October 15, 1998, it lowered the short-term target federal-funds
rate from 5.50% to 5.00%, and equity markets rallied in response*. Since the
Fed's second interest rate easing, the S&P 500 was up 4.93%. In the short run at
least, the Fed appeared to have assured investors that the central bank would
intervene to forestall a recession.
During the reporting period, the portfolio managers continued their disciplined,
earnings-driven stock selection process, looking at the underlying fundamentals
of individual companies, not the overall market.
The composition of the Portfolio changed considerably during its fiscal year.
Holdings in energy sector stocks, which faltered with the steep decline in oil
and other commodity prices, were significantly reduced. Holdings in
semiconductors were also down. Semiconductor makers and equipment manufacturers
had a tough year as the Asian financial crisis drove down demand for computers
and components in Southeast Asia. The Portfolio remains heavily invested in
technology, especially the computer software and services industry. The computer
glitch that requires reprogramming older computers and software to recognize the
year 2000 continues to provide investment opportunities.
The retailing industry is another area of investment focus. In addition, the
Portfolio includes a large number of health care stocks, especially in the
medical products and pharmaceutical industries. The Portfolio's managers trimmed
their exposure to less promising industries such as HMOs and hospital management
companies. Because U.S. drug manufacturers and distributors are not heavily
dependent on Asian and Latin American markets, they may be relatively immune to
foreign turmoil and provide a safe haven in the months ahead. The Portfolio's
managers expect their strong earnings growth to continue.
The Portfolio's managers are optimistic that the U.S. will avoid a recession in
1999. They think that the U.S. economy will likely experience annual gross
domestic product growth in the 1.50% to 2.00% range, so inflation and low
interest rates should continue to be low. In their opinion, the challenge will
be corporate earnings. With global markets in or near recession and the U.S.
economy expanding more slowly, companies will be sorely tested to keep earnings
advancing. Clearly, there are added risks until the situations in Asia and Latin
America stabilize.
- ----------
* The Fed reduced the federal-funds rate for the third time in seven weeks on
November 17, 1998, after this letter was written.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
For the quarter ended September 30, 1998, reported earnings growth for companies
in the mid-cap portion of the stock market was well over 20%. Moreover,
valuations of the stocks in the mid-cap sector are significantly lower than in
the large-cap sector. The Portfolio's managers believe these stocks also offer
some refuge from Asia's woes because they tend to have less international
exposure. The Portfolio's managers expect that these advantages should
ultimately translate into strong market performance for mid-cap stocks.
Smith Barney Large Capitalization Growth Portfolio
The Smith Barney Large Capitalization Growth Portfolio ("Portfolio"), which
began on May 1, 1998, seeks long-term growth of capital by normally investing
65% of its assets in the equity securities of companies with market
capitalizations of $5 billion or more. From May 1, 1998 through October 31,
1998, the Portfolio had a negative total return of 1.00%.
The Portfolio's manager emphasizes a core of large-capitalization growth stocks
that share a number of characteristics. Chief among them are solid financials
such as consistent and sustainable earnings growth, free cash flow and
competitive returns on equity. The second key characteristic centers on the
product or service of a company. The Portfolio's manager is most interested in
companies delivering world-class products or services in the global marketplace.
He also looks for dominant companies within growth industries where he perceives
the barriers to entry to be extremely high. Lastly, the third characteristic he
looks for is a great management team. Strong management is just as important as
a company's financial condition or its products or services. He looks for these
characteristics to identify companies that represent outstanding long-term
investment opportunities.
The third quarter of 1998 was one of the most volatile in memory. In July, many
strategists, economists and market commentators expected the Fed to raise
interest rates. Ironically, the third quarter of 1998 ended with those same
people complaining the Fed action to reduce rates at that time was not enough.
Large-cap growth stocks rebounded sharply in the last few weeks of October as
the financial panic that gripped the stock markets abated. With the U.S. economy
growing at a moderate pace, inflation quiet and interest rates down, the
backdrop remains favorable for large-cap growth stocks.
The recent worldwide turmoil has highlighted why the Portfolio's manager
continues to focus on strong balance sheets and quality management teams. A
number of companies in the Fund's portfolio have opportunistically used their
balance sheet strength to buy assets inexpensively in Asia and Latin America,
and have already begun to focus on how their companies will be positioned when
these regions of the world recover.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 3
<PAGE>
In closing, thank you for investing in the Travelers Series Fund Inc. - AIM
Capital Appreciation Portfolio and Smith Barney Large Capitalization Growth
Portfolio. We look forward to continuing to help you to pursue your financial
goals in the years to come.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 13, 1998
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
================================================================================
AIM Capital Appreciation Portfolio
================================================================================
================================================================================
Historical Performance
================================================================================
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
================================================================================
10/31/98 $12.68 $12.31 $0.02 $0.00 (2.79)%
- --------------------------------------------------------------------------------
10/31/97 10.76 12.68 0.01 0.00 17.96
- --------------------------------------------------------------------------------
10/31/96 10.00 10.76 0.01 0.00 7.71
- --------------------------------------------------------------------------------
10/10/95* - 10/31/95 10.00 10.00 0.00 0.00 0.00++
================================================================================
Total $0.04 $0.00
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
================================================================================
Average Annual Total Returns+
================================================================================
================================================================================
Year Ended 10/31/98 (2.79)%
- --------------------------------------------------------------------------------
10/10/95* through 10/31/98 7.14
================================================================================
================================================================================
Cumulative Total Return+
================================================================================
================================================================================
10/10/95* through 10/31/98 23.51%
================================================================================
+ Assumes the reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 5
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
AIM Capital Appreciation Portfolio vs. Lipper Midcap Index+
- --------------------------------------------------------------------------------
October 1995 -- October 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
AIM Capital
Appreciation Lipper Midcap
Porfolio Index
------------ -------------
<S> <C> <C>
10/10/95 $10,000 $10,000
4/96 $10,711 $11,727
10/96 $10,771 $11,739
4/97 $10,582 $11,530
10/97 $12,706 $14,180
4/98 $14,019 $16,201
10/31/98 $12,351 $13,768
</TABLE>
+ Hypothetical illustration of $10,000 invested in shares of the AIM Capital
Appreciation Portfolio on October 10, 1995 (commencement of operations),
assuming reinvestment of dividends and capital gains at net asset value
through October 31, 1998. The Lipper Midcap Index is an index of widely
held common stocks listed on the New York and American Stock Exchanges and
over-the-counter markets. Figures for the Lipper Midcap Index include
reinvestment of dividends. The index is unmanaged and is not subject to the
same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Smith Barney Large Capitalization Growth Portfolio
================================================================================
================================================================================
Historical Performance
================================================================================
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Return+
================================================================================
5/1/98* - 10/31/98 $10.00 $9.90 $0.00 $0.00 (1.00)%++
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
================================================================================
Average Annual Total Return+
================================================================================
================================================================================
5/1/98* through 10/31/98 (1.00)%++
================================================================================
+ Assumes the reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 7
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Shares of the
Smith Barney Large Capitalization Growth Portfolio
vs. Standard & Poor's 500 Index+
- --------------------------------------------------------------------------------
May 1998 -- October 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Smith Barney Large
Capitalization Growth Portfolio Standard & Poor's 500 Index
------------------------------- ---------------------------
<S> <C> <C>
5/1/98 $10,000 $10,000
5/98 $ 9,610 $ 9,828
6/98 $10,240 $10,227
7/98 $10,360 $10,119
8/98 $ 8,570 $ 8,656
9/98 $ 8,940 $ 9,211
10/31/98 $ 9,900 $ 9,959
</TABLE>
+ Hypothetical illustration of $10,000 invested in shares of the Smith Barney
Large Capitalization Growth Portfolio on May 1, 1998 (commencement of
operations), assuming reinvestment of dividends and capital gains at net
asset value through October 31, 1998. The Standard & Poor's 500 Index ("S&P
500") is an index composed of widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange and over-the-counter market.
Figures for the index include reinvestment of dividends. The index is
unmanaged and is not subject to the same management and trading expenses of
a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
COMMON STOCK -- 89.3%
Advertising -- 2.0%
8,000 Interpublic Group of Cos., Inc. $ 468,000
8,000 Lamar Advertising Co., Class A Shares+ 249,750
2,633 Nielsen Media Research 37,356
38,600 Omnicom Group Inc. 1,908,288
22,800 Outdoor Systems, Inc.+ 503,025
21,500 Snyder Communications, Inc.+ 767,281
12,300 Valassis Communications, Inc.+ 490,463
- --------------------------------------------------------------------------------
4,424,163
- --------------------------------------------------------------------------------
Aerospace & Defense -- 0.5%
15,500 AAR Corp. 358,437
8,200 BE Aerospace Inc.+ 176,300
6,900 Gulfstream Aerospace Corp.+ 305,325
7,500 Sundstrand Corp. 352,031
- --------------------------------------------------------------------------------
1,192,093
- --------------------------------------------------------------------------------
Airlines -- 0.1%
13,500 Southwest Airlines Co. 286,031
- --------------------------------------------------------------------------------
Banking -- 3.8%
15,900 AmSouth Bancorp. 636,994
42,900 Dime Bancorp, Inc. 1,021,556
24,200 Golden State Bancorp Inc.+ 464,338
16,600 GreenPoint Financial Corp. 544,687
21,000 Hibernia Corp. 350,438
30,000 MBNA Corp. 684,375
10,700 Mercantile Bankshares Corp. 349,088
43,450 North Fork Bancorp. 863,569
11,600 Northern Trust Corp. 855,500
27,400 Star Banc Corp. 2,072,125
16,600 TCF Financial Corp. 391,137
8,100 Zions Bancorp. 429,806
- --------------------------------------------------------------------------------
8,663,613
- --------------------------------------------------------------------------------
Building - Residential -- 0.1%
10,100 Kaufman & Broad Home Corp. 288,481
- --------------------------------------------------------------------------------
Broadcasting -- 0.8%
23,000 CanWest Global Communications Corp., Non-Voting Shares 268,812
3,490 Chancellor Media Corp., Class A Shares+ 133,929
8,500 Cox Communications, Inc.+ 466,437
9,400 Heftel Broadcasting Corp.+ 386,575
18,000 Tele-Com Liberty Media Group Co., Class A Shares 685,125
- --------------------------------------------------------------------------------
1,940,878
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 9
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Commercial Services -- 5.3%
24,100 Billing Concepts Corp. $ 340,412
22,500 Ceridian Corp.+ 1,290,938
8,000 Ciber, Inc. 157,000
14,000 Cintas Corp. 749,000
66,900 Comdisco, Inc. 1,032,769
12,500 Computer Sciences Corp. 659,375
67,200 Concord EFS, Inc.+ 1,915,200
13,800 CSG Systems International Inc. 752,100
13,000 Equity Corp. International+ 322,563
18,500 Keane Inc. 615,125
16,900 National Data Corp. 572,488
31,725 Paychex, Inc. 1,578,319
52,400 Service Corp. International 1,866,750
- --------------------------------------------------------------------------------
11,852,039
- --------------------------------------------------------------------------------
Communications - Equipment and Software -- 2.4%
60,000 3Com Corp. 2,163,750
60,200 Ascend Communications, Inc.+ 2,904,650
22,400 Gartner Group, Inc., Class A Shares+ 445,200
- --------------------------------------------------------------------------------
5,513,600
- --------------------------------------------------------------------------------
Computer Software -- 11.4%
14,200 Affiliated Computer Services, Class A Shares+ 525,400
28,200 America Online, Inc. 3,583,162
16,200 Aspect Development, Inc.+ 511,819
70,200 BMC Software, Inc. 3,373,988
21,550 Cadence Design Systems, Inc.+ 460,631
21,850 CDW Computer Centers, Inc.+ 1,637,384
8,025 Cisco Systems, Inc.+ 505,575
25,450 Citrix Systems, Inc.+ 1,803,769
43,800 Compuware Corp.+ 2,373,413
14,000 DST Systems, Inc.+ 700,000
8,900 Electronics Arts Inc.+ 366,012
10,600 IDX Systems Corp.+ 449,175
10,000 Intuit Inc.+ 505,000
18,000 J.D. Edwards & Co. 589,500
35,000 Learning Company Inc. 903,437
4,800 Microsoft Corp.+ 508,200
17,000 Network Associates, Inc.+ 722,500
45,000 Parametric Technology Corp.+ 748,125
24,185 Sterling Commerce, Inc.+ 852,521
14,600 Sterling Software, Inc.+ 382,337
30,600 SunGard Data Systems Inc.+ 1,032,750
24,300 Synopsys Inc.+ 1,099,575
17,650 Wind River Systems, Inc. 773,291
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Computer Software -- 11.4% (continued)
9,000 Yahoo! Inc. $ 1,177,594
- --------------------------------------------------------------------------------
25,585,158
- --------------------------------------------------------------------------------
Computers -- 2.6%
12,000 Apple Computer, Inc. 445,500
42,400 Dell Computer Corp.+ 2,782,500
25,500 Gateway 2000, Inc.+ 1,423,218
21,000 Seagate Technology, Inc. 553,875
15,000 VERITAS Software Corp. 751,875
- --------------------------------------------------------------------------------
5,956,968
- --------------------------------------------------------------------------------
Consumer/Commercial Services -- 0.8%
12,190 Nova Corp. 351,986
12,500 Robert Half International Inc. 501,562
39,300 Stewart Enterprises Inc., Class A Shares 906,356
- --------------------------------------------------------------------------------
1,759,904
- --------------------------------------------------------------------------------
Consumer Non-Durables -- 0.4%
7,700 Action Performance Cos., Inc. 230,038
6,500 Clorox Co. 710,125
- --------------------------------------------------------------------------------
940,163
- --------------------------------------------------------------------------------
Distribution -- 0.7%
15,500 Ingram Micro Inc., Class A Shares+ 705,250
20,300 Tech Data Corp.+ 799,313
- --------------------------------------------------------------------------------
1,504,563
- --------------------------------------------------------------------------------
Diversified -- 0.3%
21,000 Viad Corp. 576,188
- --------------------------------------------------------------------------------
Electronics -- 1.6%
18,600 Arrow Electronics, Inc.+ 405,712
26,000 Solectron Corp.+ 1,488,500
30,800 Symbol Technologies, Inc. 1,378,300
7,900 Teradyne, Inc.+ 256,750
- --------------------------------------------------------------------------------
3,529,262
- --------------------------------------------------------------------------------
Electronics - Semiconductors and Components -- 3.3%
23,000 Altera Corp.+ 957,375
15,000 Linear Technology Corp. 894,375
34,400 Maxim Integrated Products Inc.+ 1,227,650
43,550 Microchip Technology Inc.+ 1,178,572
30,500 Micron Technology, Inc. 1,159,000
18,100 PMC-Sierra, Inc.+ 812,238
16,000 SCI Systems, Inc. 632,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 11
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Electronics - Semiconductors and Components -- 3.3% (continued)
11,200 Xilinx, Inc.+ $ 500,150
- --------------------------------------------------------------------------------
7,361,360
- --------------------------------------------------------------------------------
Entertainment and Leisure Time -- 0.4%
13,700 Host Marriott Corp.+ 198,650
23,000 International Game Technology Inc. 518,938
7,300 Speedway Motorsports, Inc.+ 153,300
- --------------------------------------------------------------------------------
870,888
- --------------------------------------------------------------------------------
Financial Services -- 3.7%
12,300 A.G. Edwards, Inc. 425,119
13,200 Capital One Financial Corp. 1,343,100
35,000 Charles Schwab Corp. 1,677,813
10,000 Countrywide Credit Industries, Inc. 431,875
31,000 Equifax Inc. 1,199,312
16,300 Finova Group, Inc. 794,625
6,000 Lehman Brothers Holding Inc. 227,625
16,300 Newcourt Credit Group Inc. 535,863
18,850 SLM Holding Corp. 755,178
28,800 T. Rowe Price Associates, Inc. 1,024,200
- --------------------------------------------------------------------------------
8,414,710
- --------------------------------------------------------------------------------
Hospital Management -- 0.7%
7,500 Orthodontic Centers of America, Inc.+ 142,031
26,200 Universal Health Services Inc., Class B Shares+ 1,344,387
- --------------------------------------------------------------------------------
1,486,418
- --------------------------------------------------------------------------------
Hospital Related -- 0.1%
12,200 Curative Health Services, Inc.+ 332,450
- --------------------------------------------------------------------------------
Insurance -- 2.4%
16,000 AFLAC Inc. 610,000
7,000 ChoicePoint Inc.+ 330,750
4,500 HCC Insurance Holdings, Inc. 80,719
16,100 MGIC Investment Corp. 627,900
25,800 Provident Co., Inc. 749,812
23,100 Providian Corp. 1,833,562
25,500 ReliaStar Financial Corp. 1,117,219
- --------------------------------------------------------------------------------
5,349,962
- --------------------------------------------------------------------------------
Manufacturing -- 5.9%
34,900 American Power Conversion Corp.+ 1,481,069
9,000 Blyth Industries, Inc.+ 248,625
47,500 Clayton Homes, Inc. 733,281
17,000 Corning Inc. 617,312
7,650 Crane Co. 220,416
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Manufacturing -- 5.9% (continued)
21,000 Danaher Corp. $ 838,688
49,600 EMC Corp.+ 3,193,000
38,500 Harley-Davidson, Inc. 1,491,875
10,700 Hillenbrand Industries, Inc. 633,306
14,600 HON INDUSTRIES Inc. 309,338
30,000 Leggett & Platt, Inc. 701,250
15,700 Lexmark International Group, Inc., Class A Shares 1,098,019
13,000 Maytag Corp. 642,688
5,300 Pentair, Inc. 199,412
17,000 Russell Corp. 417,562
28,500 Shaw Industries, Inc. 495,187
- --------------------------------------------------------------------------------
13,321,028
- --------------------------------------------------------------------------------
Medical Devices -- 0.2%
16,000 Arterial Vascular Engineering, Inc.+ 492,000
- --------------------------------------------------------------------------------
Medical Distribution -- 1.9%
27,270 Cardinal Health, Inc. 2,578,719
22,100 McKesson Corp. 1,701,700
- --------------------------------------------------------------------------------
4,280,419
- --------------------------------------------------------------------------------
Medical Equipment and Information Systems -- 1.7%
42,400 Biomet, Inc. 1,438,950
19,500 Guidant Corp. 1,491,750
16,784 HBO & Co. 440,580
7,900 IMS Health Inc. 525,350
- --------------------------------------------------------------------------------
3,896,630
- --------------------------------------------------------------------------------
Medical Products and Supplies -- 5.6%
45,000 Allegiance Corp. 1,673,438
17,000 Bausch & Lomb Inc. 708,687
72,000 Becton, Dickinson & Co. 3,033,000
15,000 Bergen Brunswig Corp., Class A Shares 732,187
12,700 Boston Scientific Corp. 691,356
18,924 Henry Schein, Inc. 732,122
41,450 Jones Pharma Inc. 1,339,353
4,000 Medicis Pharmaceutical, Class A Shares 200,500
55,400 Omnicare Inc. 1,914,763
7,000 Safeskin Corp. 154,875
8,300 Sofamor Danek Group, Inc.+ 843,487
22,400 Sybron International Corp.+ 554,400
- --------------------------------------------------------------------------------
12,578,168
- --------------------------------------------------------------------------------
Medical Services -- 2.7%
28,750 Covance Inc.+ 801,406
10,500 Express Scripts Inc., Class A Shares+ 1,025,719
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 13
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Medical Services -- 2.7% (continued)
12,050 HCR Manor Care, Inc. $ 391,625
77,637 Health Management Associates Inc., Class A Shares+ 1,382,909
49,000 HEALTHSOUTH Corp.+ 594,125
17,600 Lincare Holdings Inc.+ 702,900
2,300 Pacificare Health Systems, Class B Shares 181,125
25,966 Total Renal Care Holdings, Inc.+ 636,167
11,600 Trigon Healthcare Inc. 435,000
- --------------------------------------------------------------------------------
6,150,976
- --------------------------------------------------------------------------------
Miscellaneous -- 1.8%
16,000 Apollo Group Inc., Class A Shares 514,000
24,000 Corrections Corp of America 462,000
43,800 Fiserv Inc.+ 2,036,700
5,500 G&K Services Inc., Class A Shares 251,625
16,000 Helen Of Troy Ltd.+ 238,000
15,500 Rubbermaid Inc. 514,406
- --------------------------------------------------------------------------------
4,016,731
- --------------------------------------------------------------------------------
Multimedia -- 0.4%
9,000 McGraw-Hill Cos. Inc. 809,438
- --------------------------------------------------------------------------------
Office Equipment, Products and Supplies -- 1.8%
7,400 Avery Dennison Corp. 306,638
20,800 Herman Miller, Inc. 458,900
39,500 Office Depot Inc.+ 987,500
71,025 Staples Inc.+ 2,317,191
- --------------------------------------------------------------------------------
4,070,229
- --------------------------------------------------------------------------------
Oil and Gas -- 2.5%
26,500 Apache Corp. 750,281
34,000 Baker Hughes Inc. 750,125
25,600 BJ Services Co. 523,200
4,200 Coflexip Stena Offshore Sponsored ADR 202,125
25,800 Cooper Cameron Corp.+ 896,550
18,000 Diamond Offshore Drilling 552,375
22,000 El Paso Natural Gas Co. 779,625
41,500 Global Industries Ltd.+ 399,438
35,000 Rowan Cos., Inc.+ 509,687
22,800 Santa Fe Energy Resources Inc.+ 185,250
- --------------------------------------------------------------------------------
5,548,656
- --------------------------------------------------------------------------------
Oil & Gas Drilling -- 1.1%
12,000 Core Laboratories N.V.+ 270,750
18,000 KN Energy, Inc. 894,375
18,000 Stolt Comex Seaway, S.A. 229,500
9,000 Stolt Comex Seaway, S.A. ADR, Class A Shares 92,812
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Oil & Gas Drilling -- 1.1% (continued)
9,000 Transocean Offshore Inc. $ 332,438
56,900 Varco International, Inc.+ 615,231
- --------------------------------------------------------------------------------
2,435,106
- --------------------------------------------------------------------------------
Pharmaceuticals -- 3.5%
4,700 Alpharma Inc., Class A Shares 130,131
20,500 ALZA Corp.+ 981,438
17,300 Biogen, Inc.+ 1,202,350
26,100 Elan Corp. PLC ADR+ 1,828,631
12,000 Forest Laboratories, Inc.+ 501,750
44,300 Mylan Laboratories Inc. 1,525,581
17,200 Quintiles Transnational Corp.+ 778,300
15,700 Watson Pharmaceuticals, Inc.+ 873,312
- --------------------------------------------------------------------------------
7,821,493
- --------------------------------------------------------------------------------
Restaurants -- 1.3%
35,000 Brinker International, Inc.+ 846,563
20,000 Outback Steakhouse, Inc.+ 692,500
18,400 Starbucks Corp.+ 798,100
13,000 Tricon Global Restaurants, Inc. 565,500
- --------------------------------------------------------------------------------
2,902,663
- --------------------------------------------------------------------------------
Retail -- 9.1%
12,900 Abercrombie & Fitch Co., Inc., Class A Shares 511,969
48,600 Bed Bath & Beyond Inc.+ 1,339,537
8,000 Best Buy Co., Inc.+ 384,000
6,300 Central Garden & Pet Co.+ 124,425
16,500 Consolidated Stores Corp. 271,219
14,200 Dayton Hudson Corp. 601,725
17,306 Dollar General Corp. 413,181
31,975 Dollar Tree Stores, Inc.+ 1,233,036
34,500 Family Dollar Stores, Inc. 625,312
29,700 Fred Meyer, Inc. 1,583,381
15,150 The Gap, Inc. 910,894
7,200 The Home Depot, Inc. 313,200
19,700 Jones Apparel Group, Inc.+ 339,825
19,700 Kohl's Corp.+ 941,906
38,100 The Kroger Co.+ 2,114,550
32,200 Lowe's Cos., Inc. 1,084,738
29,475 The Mens Warehouse Inc.+ 714,769
16,300 Michaels Stores, Inc.+ 326,000
17,600 Nautica Enterprises, Inc.+ 364,100
32,100 Rexall Sundown, Inc.+ 575,794
38,550 Rite Aid Corp. 1,529,953
9,200 Ross Stores, Inc. 299,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 15
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Retail -- 9.1% (continued)
21,800 Safeway Inc.+ $ 1,042,313
13,400 Saks Holdings, Inc. 304,850
21,500 Tandy Corp. 1,065,594
41,200 The TJX Cos., Inc. 780,225
4,500 Tommy Hilfiger Corp.+ 208,969
16,400 Williams-Sonoma, Inc.+ 446,900
- --------------------------------------------------------------------------------
20,451,365
- --------------------------------------------------------------------------------
Telecommunications -- 2.3%
26,200 Century Telephone Enterprises, Inc. 1,488,487
16,200 Cincinnati Bell Inc. 420,188
14,800 Clear Channel Communications, Inc.+ 674,325
23,200 Comcast Corp., Class A Shares 1,145,500
19,000 Global Telesystems Group, Inc. 761,187
21,500 Univision Communications Inc., Class A Shares 634,250
- --------------------------------------------------------------------------------
5,123,937
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 2.0%
13,200 Comverse Technology, Inc.+ 607,200
8,500 ECI Telecommunications Ltd. 281,562
35,000 General Instrument Corp.+ 899,062
24,700 Nokia Corp. ADR 2,298,644
7,800 Tellabs Inc.+ 429,000
- --------------------------------------------------------------------------------
4,515,468
- --------------------------------------------------------------------------------
Transportation - Miscellaneous -- 0.3%
20,500 Kansas City Southern Industries, Inc. 791,813
- --------------------------------------------------------------------------------
Utilities -- 0.3%
16,400 AES Corp. 671,375
- --------------------------------------------------------------------------------
Waste Management -- 1.5%
42,740 Allied Waste Industries Inc. 924,252
20,000 Republic Services Inc., Class A Shares 437,500
44,477 Waste Management Inc. 2,007,025
- --------------------------------------------------------------------------------
3,368,777
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $167,290,267) 201,075,164
================================================================================
WARRANTS -- 0.0%
19,200 Golden State Bancorp Inc., Expire 1/1/01+
(Cost -- $108,157) 93,600
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
AIM CAPITAL APPRECIATION PORTFOLIO
FACE
AMOUNT SECURITY VALUE
================================================================================
CONVERTIBLE BOND -- 0.2%
$ 150,000 EMC Corp., 3.250% due 3/15/02
(Cost -- $203,143) $ 435,750
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $167,601,567) 201,604,514
================================================================================
SHORT-TERM INVESTMENTS -- 10.5%
15,000,000 Federal Home Loan Bank Discount Note,
5.400% due 11/2/98 14,995,500
8,755,000 State Street Bank Trust Co. Euro Time Deposit,
5.625% due 11/2/98 8,755,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $23,750,500) 23,750,500
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $191,352,067*) $225,355,014
================================================================================
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 17
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
COMMON STOCK -- 87.3%
Capital Goods -- 2.6%
6,715 General Electric Co. $ 587,562
- --------------------------------------------------------------------------------
Computer Software -- 8.5%
7,685 America Online, Inc. 976,475
4,485 Microsoft Corp. 474,849
20,130 Netscape Communications Corp.+ 431,537
- --------------------------------------------------------------------------------
1,882,861
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 5.8%
13,085 The Home Depot, Inc. 569,197
3,420 McDonald's Corp. 228,712
18,300 The Walt Disney Co. 492,956
- --------------------------------------------------------------------------------
1,290,865
- --------------------------------------------------------------------------------
Consumer Staples -- 16.1%
15,190 Avon Products, Inc. 602,853
14,825 The Coca-Cola Co. 1,002,541
14,735 Gillette Co. 662,154
6,315 PepsiCo, Inc. 213,131
5,675 The Procter & Gamble Co. 504,366
7,265 Wm. Wrigley Jr. Co. 588,011
- --------------------------------------------------------------------------------
3,573,056
- --------------------------------------------------------------------------------
Energy -- 0.9%
3,845 Schlumberger Ltd. 201,863
- --------------------------------------------------------------------------------
Financial Services -- 20.1%
3,522 American International Group Inc. 300,251
1,920 BankAmerica Corp. 110,280
7,595 Fannie Mae 537,821
2,890 General Re Corp 634,897
23,040 Household International, Inc. 842,400
8,600 Merrill Lynch & Co., Inc. 509,550
8,965 Morgan Stanley Dean Witter & Co. 580,484
2,600 Wells Fargo Co. 962,000
- --------------------------------------------------------------------------------
4,477,683
- --------------------------------------------------------------------------------
Health Care -- 12.3%
8,875 Amgen Inc.+ 697,242
8,325 Eli Lilly & Co. 673,805
2,745 Johnson & Johnson 223,717
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Schedules of Investments (continued) October 31, 1998
================================================================================
SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO
SHARES SECURITY VALUE
================================================================================
<S> <C> <C>
Health Care -- 12.3% (continued)
1,830 Merk & Co., Inc. $ 247,507
3,750 Pfizer Inc. 402,422
6,315 Warner-Lambert Co. 494,938
- --------------------------------------------------------------------------------
2,739,631
- --------------------------------------------------------------------------------
Technology -- 21.0%
5,487 Cisco Systems, Inc. 345,681
20,865 Compaq Computer Corp. 659,856
11,440 Intel Corp. 1,020,305
7,775 Lucent Technologies Inc. 623,458
7,960 Motorola, Inc. 413,920
16,470 Texas Instruments Inc. 1,053,051
12,720 Xilinx, Inc.+ 568,028
- --------------------------------------------------------------------------------
4,684,299
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $18,534,727) 19,437,820
================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT -- 12.7%
$2,825,000 Chase Securities Inc., 5.25% due 11/2/98;
Proceeds at maturity -- $2,826,236;
(Fully collateralized by U.S. Treasury Notes,
5.75% due 4/30/03; Market value -- $2,886,100)
(Cost -- $2,825,000) 2,825,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $21,359,727*) $22,262,820
================================================================================
</TABLE>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 19
<PAGE>
<TABLE>
<CAPTION>
=================================================================================
Statements of Assets and Liabilities October 31, 1998
=================================================================================
Smith Barney
AIM Capital Large
Appreciation Capitalization
Portfolio Growth Portfolio
=================================================================================
<S> <C> <C>
ASSETS:
Investments, at value
(Cost -- $167,601,567 and $18,534,727) $ 201,604,514 $ 19,437,820
Short-term investments, at value
(Cost -- $23,750,500 and $2,825,000) 23,750,500 2,825,000
Cash 10,102 880
Receivable for securities sold 2,310,976 --
Receivable for Fund shares sold 1,738,158 205,847
Dividends and interest receivable 34,560 11,461
Receivable from Manager 13,456 5,873
- ---------------------------------------------------------------------------------
Total Assets 229,462,266 22,486,881
- ---------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 3,388,068 1,674,392
Management fee payable 146,572 --
Accrued expenses 65,475 25,566
- ---------------------------------------------------------------------------------
Total Liabilities 3,600,115 1,699,958
- ---------------------------------------------------------------------------------
Total Net Assets $ 225,862,151 $ 20,786,923
=================================================================================
NET ASSETS:
Par value of capital shares $ 183 $ 21
Capital paid in excess of par value 201,626,897 19,885,850
Undistributed net investment income -- 17,597
Accumulated net realized loss from security
transactions, options and futures contracts (9,767,876) (19,638)
Net unrealized appreciation of investments 34,002,947 903,093
- ---------------------------------------------------------------------------------
Total Net Assets $ 225,862,151 $ 20,786,923
=================================================================================
Shares Outstanding 18,346,306 2,100,720
- ---------------------------------------------------------------------------------
Net Asset Value $12.31 $9.90
- ---------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
Statements of Operations For the Year Ended October 31, 1998
======================================================================================
Smith Barney
AIM Capital Large
Appreciation Capitalization
Portfolio Growth Portfolio(a)
======================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 1,150,976 $ 23,621
Dividends 609,340 26,996
- --------------------------------------------------------------------------------------
Total Investment Income 1,760,316 50,617
- --------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 1,783,860 25,610
Shareholder communications 57,536 6,000
Audit and legal 20,904 16,900
Custody 17,790 4,285
Directors' fees 8,436 1,488
System servicing fees 6,181 3,758
Other 2,608 500
- --------------------------------------------------------------------------------------
Total Expenses 1,897,315 58,541
Less: Management fee waiver (Note 2) -- (25,521)
- --------------------------------------------------------------------------------------
Net Expenses 1,897,315 33,020
- --------------------------------------------------------------------------------------
Net Investment Income (Loss) (136,999) 17,597
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FUTURES CONTRACTS
AND OPTIONS (NOTES 3, 6 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding
short-term securities) (8,250,975) (19,638)
Options written 2,351 --
Futures contracts (129,174) --
- --------------------------------------------------------------------------------------
Net Realized Loss (8,377,798) (19,638)
- --------------------------------------------------------------------------------------
Changes in Net Unrealized Appreciation
of Investments:
Beginning of year 32,885,817 --
End of year 34,002,947 903,093
- --------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 1,117,130 903,093
- --------------------------------------------------------------------------------------
Net Gain (Loss) on Investments,
Futures Contracts and Options (7,260,668) 883,455
- --------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $ (7,397,667) $ 901,052
======================================================================================
</TABLE>
(a) For the period from May 1, 1998 (commencement of operations) to
October 31, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 21
<PAGE>
<TABLE>
<CAPTION>
====================================================================================
Statements of Changes in Net Assets
====================================================================================
For the Years Ended October 31,
AIM Capital Appreciation Portfolio 1998 1997
====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (136,999) $ 323,723
Net realized gain (loss) (8,377,798) 2,801,386
Increase in net unrealized appreciation 1,117,130 22,640,331
- ------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (7,397,667) 25,765,440
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (323,315) (128,125)
- ------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (323,315) (128,125)
- ------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 64,713,956 66,474,952
Net asset value of shares issued
for reinvestment of dividends 323,315 128,125
Cost of shares reacquired (34,299,732) (2,299,468)
- ------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 30,737,539 64,303,609
- ------------------------------------------------------------------------------------
Increase in Net Assets 23,016,557 89,940,924
NET ASSETS:
Beginning of year 202,845,594 112,904,670
- ------------------------------------------------------------------------------------
End of year* $ 225,862,151 $ 202,845,594
====================================================================================
* Includes undistributed net investment income of: -- $322,959
====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
For the Period Ended October 31,
Smith Barney Large Capitalization Growth Portfolio 1998(a)
================================================================================
<S> <C>
OPERATIONS:
Net investment income $17,597
Net realized loss (19,638)
Increase in net unrealized appreciation 903,093
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 901,052
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gains --
- -------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders --
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 19,937,850
Cost of shares reacquired (51,979)
- -------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 19,885,871
- -------------------------------------------------------------------------------
Increase in Net Assets 20,786,923
NET ASSETS:
Beginning of period --
- -------------------------------------------------------------------------------
End of period $20,786,923
===============================================================================
* Includes undistributed net investment income of: $17,597
===============================================================================
</TABLE>
(a) For the period from May 1, 1998 (commencement of operations) to October 31,
1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 23
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The AIM Capital Appreciation Portfolio and Smith Barney Large Capitalization
Growth Fund ("Portfolio(s)") are separate investment portfolios of the Travelers
Series Fund Inc. ("Fund"). The Fund, a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company and consists of these portfolios and eleven other separate
investment portfolios: Smith Barney Large Cap Value (formerly known as Smith
Barney Income and Growth Portfolio), Alliance Growth, Van Kampen American
Capital Enterprise, Smith Barney International Equity, Smith Barney Pacific
Basin, TBC Managed Income, Putnam Diversified Income, GT Global Strategic
Income, Smith Barney High Income, MFS Total Return and Smith Barney Money Market
Portfolios. Shares of the Fund are offered only to insurance company separate
accounts that fund certain variable annuity and variable life insurance
contracts. The financial statements and financial highlights for the other
portfolios are presented in separate annual reports.
The significant accounting policies followed by the Portfolios are: (a) security
transactions are accounted for on trade date; (b) securities traded on national
securities markets are valued at the closing prices on such markets; securities
for which no sales price was reported and U.S. government agencies and
obligations are valued at the mean between the bid and asked prices; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Directors; (e) interest income is
recorded on an accrual basis; (f) dividend income is recorded on the ex-dividend
date; foreign dividends are recorded on the ex-dividend date or as soon as
practical after the Portfolios determines the existence of a dividend
declaration after exercising reasonable due diligence; (g) gains or losses on
the sale of securities are calculated by using the specific identification
method; (h) the accounting records of the Portfolios are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income or expense amounts recorded and collected or paid are adjusted
when reported by the custodian; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At October 31, 1998,
reclassifications were made to the AIM Capital Appreciation Portfolio's capital
accounts to reflect
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Accordingly, for the AIM Capital Appreciation
Portfolio, a portion of overdistributed net investment income amounting to
$137,355 was reclassified to paid-in capital. Net investment income, net
realized gains and net assets were not affected by this change; (j) the
Portfolios intend to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager of the Smith Barney Large
Capitalization Growth Porfolio ("SBLCG"). SBLCG pays MMC a management fee
calculated at an annual rate of 0.75% on the average daily net assets of the
Portfolio. Travelers Investment Adviser, Inc. ("TIA"), an affiliate of MMC, acts
as the investment manager of the AIM Capital Appreciation Portfolio ("AIMCAP").
AIMCAP pays TIA a management fee calculated at an annual rate of 0.80% on the
average daily net assets of the Portfolio. These fees are calculated daily and
paid monthly. MMC waived $25,521 of its management fees for the SBLCG for the
period ended October 31, 1998.
TIA has also entered into a sub-advisory agreement with AIM Capital Management,
Inc. ("AIM"). Pursuant to the sub-advisory agreement, AIM is responsible for the
day-to-day portfolio operations and investment decisions and is compensated for
such services at the annual rate of 0.375% of the Portfolio's average daily net
assets. TIA pays this fee to AIM on a monthly basis.
TIA has also entered into a Sub-Administrative Services Agreement with MMC. TIA
pays MMC, as sub-administrator, a fee calculated at an annual rate of 0.10% of
the Portfolio's average daily net assets.
Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, acts as the
primary broker for its portfolio agency transactions. During the period ended
October 31, 1998, SSB did not receive any brokerage commissions.
All officers and one Director of the Fund are employees of SSB.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 25
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
3. Investments
During the period ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
Smith Barney
AIM Capital Large Capitalization
Appreciation Growth
================================================================================
<S> <C> <C>
Purchases $169,259,112 $18,640,554
- --------------------------------------------------------------------------------
Sales 148,703,365 86,188
================================================================================
</TABLE>
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
Smith Barney
AIM Capital Large Capitalization
Appreciation Growth
===============================================================================
<S> <C> <C>
Gross unrealized appreciation $43,634,249 $1,211,770
Gross unrealized depreciation (9,631,302) (308,677)
- -------------------------------------------------------------------------------
Net unrealized appreciation $34,002,947 $ 903,093
===============================================================================
</TABLE>
4. Capital Loss Carryforward
At October 31, 1998, the AIM Capital Appreciation and Smith Barney Large
Capitalization Growth Portfolios had, for Federal income tax purposes,
approximately $9,589,000 and $20,000, respectively of capital loss carryforwards
available to offset any future capital gains. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed. Expiration occurs on October 31 of the
years shown below:
<TABLE>
<CAPTION>
Total 2004 2006
================================================================================
<S> <C> <C> <C>
AIM Capital Appreciation $9,589,000 $939,000 $8,650,000
- --------------------------------------------------------------------------------
Smith Barney Large Capitalization Growth 20,000 -- 20,000
================================================================================
</TABLE>
5. Lending of Portfolio Securities
Each Portfolio has an agreement with its custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities or high quality money market instruments that
are
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account.
At October 31, 1998, the Portfolios had no securities on loan.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolios record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolios basis in the contract.
The Portfolios enter into such contracts to hedge a portion of their portfolio.
The Portfolios bear the market risk that arise from changes in the value of the
financial instruments and securities indices (futures contracts).
At October 31, 1998, the Portfolios had no open futures contracts.
7. Options Contracts
When the Portfolios write a covered call option, an amount equal to the premium
received by the Portfolios are recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolios realize a
gain equal to the amount of the premium received. When the Portfolios enter into
a closing purchase transaction, the Portfolios realize a gain or loss depending
upon whether the cost of the closing transaction is greater or less than the
premium originally received, without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the cost of the security sold will be
decreased by the premium originally received. When written index options are
exercised, settlement is made in cash.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 27
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
The risk in writing a covered call option is that the Portfolios give up the
opportunity to participate in any increase in the price of the underlying
security beyond the exercise price.
The following covered call option transactions occurred in AIM Capital
Appreciation Portfolio during the year ended October 31, 1998:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
================================================================================
<S> <C> <C>
Options written, outstanding at October 31, 1997 0 $ 0
Options written during the year ended October 31, 1998 18 3,305
Options cancelled in closing purchase transactions (18) (3,305)
- -------------------------------------------------------------------------------
Options written, outstanding at October 31, 1998 0 $ 0
================================================================================
</TABLE>
The Portfolios had no open written covered call option contracts as of October
31, 1998.
8. Capital Shares
At October 31, 1998, the Fund had six billion shares of capital stock authorized
with a par value of $0.00001 per share. Each share of a Portfolio represents an
equal proportionate interest in that Portfolio with each other share of the same
Portfolio and has an equal entitlement to any dividends and distributions made
by the Portfolio.
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1998 October 31, 1997
================================================================================
<S> <C> <C>
AIM Capital Appreciation
Shares sold 5,060,116 5,684,968
Shares issued on reinvestment 23,548 11,595
Shares redeemed (2,728,617) (196,083)
- --------------------------------------------------------------------------------
Net Increase 2,355,047 5,500,480
================================================================================
Smith Barney Large Capitalization Growth*
Shares sold 2,105,804 --
Shares redeemed (5,084) --
- --------------------------------------------------------------------------------
Net Increase 2,100,720 --
================================================================================
</TABLE>
* For the period from May 1, 1998 (commencement of operations) to October 31,
1998.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
AIM Capital Appreciation Portfolio 1998 1997 1996(1) 1995(1)(2)
============================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.68 $10.76 $10.00 $10.00
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(3) (0.01) 0.02 0.02 0.02
Net realized and unrealized gain (loss) (0.34) 1.91 0.75 (0.02)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.35) 1.93 0.77 --
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) (0.01) (0.01) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.01) (0.01) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.31 $12.68 $10.76 $10.00
- ------------------------------------------------------------------------------------------------------------
Total Return (2.79)% 17.96% 7.71% 0.00%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $225,862 $202,846 $112,905 $8,083
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.85% 0.85% 0.96% 1.00%+
Net investment income (loss) (0.06) 0.20 0.22 4.07+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 75% 56% 44% 6%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from October 10, 1995 (commencement of operations) to
October 31, 1995.
(3) The Manager waived all of its fees and reimbursed expenses of $13,456 for
the period ended October 31, 1995. If such fees were not waived, the per
share effect on net investment income would have been a decrease of $0.03
and the expense ratio would have been 5.95% (annualized).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 29
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of capital stock outstanding throughout the period ended October 31:
<TABLE>
<CAPTION>
Smith Barney Large Capitalization Growth Portfolio 1998(1)
================================================================================
<S> <C>
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01
Net realized and unrealized loss (0.11)*
- --------------------------------------------------------------------------------
Total Loss From Operations (0.10)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
- --------------------------------------------------------------------------------
Total Distributions --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.90
- --------------------------------------------------------------------------------
Total Return++ (1.00)%
- --------------------------------------------------------------------------------
Net Assets, End of period (000s) $20,787
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses(2) 1.00%
Net investment income 0.52
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 1%
================================================================================
</TABLE>
(1) For the period from May 1, 1998 (commencement of operations) to October 31,
1998.
(2) The Manager waived all or part of its fees for the period ended October 31,
1998. If such fees were not waived, the per share effect on net investment
income and the expense ratio would have been as follows:
<TABLE>
<CAPTION>
Net Investment Income Expense Ratio
Per Share Decreases Without Fee Waiver
--------------------- ------------------
<S> <C> <C>
1998 $0.02 1.77%+
</TABLE>
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year ended
October 31, 1998:
o Percentage of ordinary dividends paid as qualifying for the corporate
dividends received deduction:
o AIM Capital Appreciation Portfolio 99.89%
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the AIM Capital Appreciation Portfolio and
Smith Barney Large Capitalization Growth Portfolio of Travelers Series Fund Inc.
as of October 31, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended and for the period from October 10, 1995
(commencement of operations) to October 31, 1995, with respect to the AIM
Capital Appreciation Portfolio, and the statement of operations, and the
statement of changes in net assets and financial highlights for the period from
May 1, 1998 (commencement of operations) to October 31, 1998, with respect to
the Smith Barney Large Capitalization Growth Portfolio. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 31
<PAGE>
================================================================================
Independent Auditors' Report (continued)
================================================================================
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
AIM Capital Appreciation Portfolio and Smith Barney Large Capitalization Growth
Portfolio of Travelers Series Fund Inc. as of October 31, 1998, the results of
their operations for the year then ended, the changes in their net assets and
the financial highlights for the periods described above, in conformity with
generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
New York, New York
December 18, 1998
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Additional Shareholder Information (unaudited)
================================================================================
On February 20, 1998, a special meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage
Name of Directors For Shares Voted Against Shares Voted
=================================================================================================
<S> <C> <C> <C> <C>
Victor K. Atkins 231,059,252.884 97.271% 6,481,382.874 2.729%
Abraham E. Cohen 231,294,945.547 97.371 6,245,690.211 2.629
Robert A. Frankel 230,999,179.846 97.246 6,541,455.912 2.754
Rainer Greeven 231,468,718.650 97.444 6,071,917.108 2.556
Susan M. Heilbron 231,485,321.942 97.451 6,055,313.816 2.549
Heath B. McLendon 231,463,894.239 97.442 6,076,741.519 2.558
James M. Shuart 231,410,828.580 97.419 6,129,807.178 2.581
=================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental investment policies of the Porfolios in order to modernize them in
view of certain regulatory, business or industry developments that have occurred
since original adoption of these policies by the Portfolios. The following chart
demonstrates that all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; and "R" indicates
the reclassification of the policy from fundamental (which would require
shareholder approval to change) to non-fundamental (which can be changed by a
vote of the Board of Directors).
================================================================================
M Underwriting of Securities Approved
- --------------------------------------------------------------------------------
M Lending by the Fund Approved
- --------------------------------------------------------------------------------
M Real Estate Approved
- --------------------------------------------------------------------------------
R Exercising Control or Management Approved
- --------------------------------------------------------------------------------
R Investments in Oil, Gas and Mineral Exploration Approved
- --------------------------------------------------------------------------------
M Industry Concentration Approved
================================================================================
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Porfolio on all proposals.
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
================================================================================================
<S> <C> <C> <C> <C> <C>
15,017,101.264 91.264% 261,443.305 1.589% 1,175,949.412 7.147%
================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 33
<PAGE>
SalomonSmithBarney
---------------------------
A member of citigroup[LOGO]
Directors Investment Managers
Victor K. Atkins Mutual Management Corp.
A.E. Cohen Travelers Investment Adviser, Inc.
Robert A. Frankel
Rainer Greeven Custodian
Susan M. Heilbron PNC Bank, N.A.
Heath B. McLendon, Chairman
Annuity Administration
Officers Travelers Annuity I
Heath B. McLendon 5 State House Square
President and 1 Tower Square
Chief Executive Officer Hartford, CT 06183
Lewis E. Daidone This report is submitted for the general
Senior Vice President information of the shareholders of the
and Treasurer Travelers Series Fund Inc. -- AIM
Capital Appreciation and Smith Barney
Thomas M. Reynolds Large Capitalization Growth Portfolios.
Controller It is not authorized for distribution to
prospective investors unless accompanied
Christina T. Sydor or preceded by a current Prospectus for
Secretary the Portfolios, which contains
information concerning the Portfolios'
investment policies and expenses as well
as other pertinent information.
Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc.
Travelers Series Fund Inc.
388 Greenwich Street, MF-2
New York, New York 10013
IN0794 12/98
<PAGE>
[GRAPHIC]
Travelers Series Fund Inc.
MFS Total Return Portfolio
TBC Managed Income
Portfolio
Smith Barney Money
Market Portfolio
- -------------
ANNUAL REPORT
- -------------
October 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Travelers Series
Fund Inc.
[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the annual report for the Travelers Series Fund Inc. -
MFS Total Return Portfolio, TBC Managed Income Portfolio and Smith Barney Money
Market Portfolio ("Portfolios") for the year ended October 31, 1998. For your
convenience, we have summarized the period's prevailing economic and market
conditions and outlined each Portfolio's investment strategy. A detailed summary
of performance and current holdings can be found in the appropriate sections
that follow.
Portfolio Highlights
MFS Total Return Portfolio
The primary investment objective of the MFS Total Return Portfolio is to obtain
above-average income (compared to a portfolio entirely invested in stocks)
consistent with the prudent employment of capital. While current income is the
primary objective, the Portfolio's managers believe there should also be a
reasonable opportunity for growth of capital since many of the securities
offering a better-than-average yield may also possess growth potential.
For the year ended October 31, 1998, the Portfolio provided a total return of
10.94%. This compares unfavorably to the 22.01% return for the Standard and
Poor's 500 Composite Index ("S&P 500"), a popular, unmanaged index of common
stock total return performance, and to the 11.28% return for the Lehman Brothers
Government Corporate Bond Index, an unmanaged, market-value-weighted index of
U.S. Treasury and government-agency securities (excluding mortgage-backed
securities), and investment-grade domestic corporate debt. As a balanced fund, a
large portion of the Portfolio's total assets are invested in both stocks and
bonds. In addition, the Portfolio's managers can also purchase preferred stocks
and convertible bonds, which in many cases, may provide similar returns to that
of common stocks but with less risk.
The MFS Total Return Portfolio had a solid showing during the year under review
as both the stock market and bond market provided positive returns. As a
balanced fund, the managers typically have large positions in both stocks and
bonds; however, stocks typically make up the majority of the Portfolio. Over the
past 12 months, stocks (including convertible bonds and convertible preferreds)
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 1
<PAGE>
made up between 53%-59% of the Portfolio while bonds and other short-term
investments made up between 41%-47%.
In the Portfolio managers' opinion, the major influence on the world's markets
during the past 12 months has been the turmoil in Asia and Eastern Europe. Many
countries in these regions have been hit hard with currency devaluations and
severe recessions. In turn, these problems have led to lower confidence in the
developed nations of Western Europe and the United States. Despite the problems
abroad, the U.S. economy was able to grow moderately in 1998, providing a solid
foundation for many U.S. company stock prices.
During the past 12 months, the Portfolio had large weightings in the financial
services, utilities, energy and healthcare industries. Financial company stocks
did well in the early part of the period under review but trailed off over the
past several months due to concerns over their earnings stability. Utility
stocks did poorly in the early part of the reporting period but were strong
performers over the past few months as investors sought out earnings stability.
The managers have positioned the Portfolio defensively as they expect continued
market volatility and slowing U.S. economic growth. Their current weighting in
stocks is roughly 55% of assets. Over time, the managers anticipate that
weighting to be closer to 60%. However, because of challenging market
conditions, the managers have had a difficult time finding value and expect
better valuation opportunities in the months ahead. The managers are also taking
a defensive stance with the make-up of the stock portion of the Portfolio. They
have a large percentage invested in electric utility and telephone stocks that
generally do better when the stock market is sluggish.
With respect to the bond portion of the Portfolio, the managers have maintained
a duration close to six years for some time now. They believe interest rates are
likely to be flat or lower over the next six months as the global economy
continues to slow down.
While the managers are cautious near-term, they are optimistic about the
long-term, especially for select U.S. companies. As previously noted, they
anticipate getting their weighting in stocks back towards 60% as valuations
become more compelling.
TBC Managed Income Portfolio
Please note that on Tuesday, November 24, 1998, the shareholders of the TBC
Managed Income Portfolio of Travelers Series Fund Inc. voted to approve a new
Management Agreement. Travelers Asset Management International Corporation
("TAMIC") will begin managing the Portfolio on December 1, 1998 and is replacing
Travelers Investment Advisor Inc., the current manager and The
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
Boston Company Asset Management Inc., the sub-adviser. In addition, effective
December 1, 1998, the TBC Managed Income Portfolio will change its name to
Travelers Managed Income Portfolio.
For the year ended October 31, 1998, the TBC Managed Income Portfolio
("Portfolio") had a total return of 5.71% underperforming the total return of
9.34% for the Lehman Brothers Aggregate Bond Index, an unmanaged bond index made
up of more than 5,900 issues of U.S. Treasurys and agencies, corporate bonds,
mortgage-backed securities, and asset-backed securities.
The period under review has been one of the most volatile for the financial
markets in recent memory. The Asian financial crisis was the catalyst that
started the trend toward wider spreads that has dominated 1998 so far. The
managers had already eliminated almost all of their exposure to Asia and Latin
America by that time. During 1998, domestic corporate bond spreads slowly
widened over the course of the year. However, the events of the last three
months have completely overshadowed the first nine months of the Portfolio's
fiscal year. The late August collapse of the Russian currency and debt markets,
the Japanese economic recession and the spreading economic contagion to Latin
America, all served as catalysts for a dramatic decline in bond yields. Fearing
the impact a slowing global economy would have on U.S. economic activity, the
Federal Reserve Board ("Fed") abandoned its neutral monetary policy by lowering
the federal-funds rate 25 basis points to 5.25% in late September. On October
15, 1998, the Fed lowered rates again in a highly unusual move and noted its
fears of a growing credit crunch. In particular, the lack of liquidity in the
bond market was a key reason cited by the Fed for its interest rate cut.
The incredible demand for U.S. Treasurys drove yields down by roughly 1.50% for
the year ended October 31, 1998. However, this higher demand caused other
out-of-favor bond sectors to dramatically lag U.S. Treasurys. Corporate bonds
suffered their worst relative performance this decade, as investors demanded
sharply higher risk premiums to compensate for perceptions of heightened credit
risk. The investment-grade corporate bond market underperformed comparable
maturity U.S. Treasury securities by approximately 435 basis points. The
high-yield sector lagged by more than 1200 basis points. Mortgage-backed bonds
also performed poorly as falling interest rates increased the prepayment
vulnerability of these types of securities.
The Portfolio's performance during its fiscal year was driven by its allocation
in corporate bonds (both high-yield and investment-grade) and mortgage-backed
securities. The managers began the year with 49% in corporate bonds, 25% in
mortgage-backed securities, 3% in asset-backed securities, and 22% in U.S.
Treasurys. During the year under review, their allocation to corporate bonds
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 3
<PAGE>
dropped roughly by 11%, while their allocation to mortgage-backed securities
increased roughly by 6%. The managers' allocation to asset-backed securities
also rose roughly by 5% during this period.
The managers believe that the performance of the bond markets over the last few
months has been driven primarily by a flight to quality and an unprecedented
demand for liquidity. They do not believe that current valuations are
representative of longer-term fundamentals. While they are cautious about the
economy as we head toward 1999, the managers do not believe that the prospects
for the U.S. economy are nearly as bad as current prices in the market may
imply. In fact, the managers believe that these market conditions offer the
opportunity to selectively add exposure to bonds that their research indicates
may be mispriced.
Smith Barney Money Market Portfolio
The Smith Barney Money Market Portfolio seeks maximum current income and
preservation of capital. Investors should be aware that their investment in the
Portfolio is neither insured nor guaranteed by the U.S. government. The
Portfolio will seek to maintain a stable net asset value of $1.00 per share;
however, there is no assurance that it will be able to do so at all times.
The impact of negative global events in Russia, Japan and other Asian countries
have finally reached the United States. Many U.S. financial institutions have
suffered losses due to their Russian exposure and a widening spread on debt
instruments in many emerging markets. The widening spread of debt instruments
has even occurred among the "AA"-rated banks and brokerage firms and their
future earnings remain in doubt. Moreover, the near default of a major hedge
fund caused spreads to widen further as it began to unwind its portfolio.
Instability in the capital markets and the downturn in the U.S. stock market
prompted the Fed to take a preemptive move and lower the federal-funds rate from
5.50% to 5.00%. The managers expected that the Fed needed to lower interest
rates even more to avoid a credit crunch and possible recession. The major G-7
countries are closely monitoring the financial markets and global interest rate
cuts have begun. In addition, the International Monetary Fund is also devising
liquidity plans for emerging countries in Latin America and Asia to avoid
funding disruptions as capital flows around the world become increasingly
volatile.
The investment parameters for the Portfolio remain conservative. All the
instruments in the Portfolio are currently rated "A1" or "P1." In addition, the
Portfolio remains well diversified with 47 names that are highly rated such as
General Electric and Ford Motor Credit. The Money Market Portfolio is 50%
invested in banks and 50% in corporate bonds. Since the managers expect
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
interest rates to decline over the next several months, they have extended the
Portfolio's average life from 30 to 40 days the past several months.
In closing, thank you for investing in the Travelers Series Fund Inc. - MFS
Total Return, TBC Managed Income and Smith Barney Money Market Portfolios. We
look forward to helping you pursue your investment goals in the years ahead.
Sincerely,
/s/Heath B. McLendon
Heath B. McLendon
Chairman
November 10, 1998
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
MFS Total Return Portfolio
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End of Income Capital Gains Total
Year Ended of Year Year Dividends Distribution Returns+
================================================================================
10/31/98 $15.31 $16.23 $0.28 $0.48 10.94%
- --------------------------------------------------------------------------------
10/31/97 13.13 15.31 0.29 0.18 20.64
- --------------------------------------------------------------------------------
10/31/96 11.53 13.13 0.27 0.08 17.16
- --------------------------------------------------------------------------------
10/31/95 9.98 11.53 0.05 0.00 16.12
- --------------------------------------------------------------------------------
6/16/94* - 10/31/94 10.00 9.98 0.00 0.00 (0.20)++
================================================================================
Total $0.89 $0.74
================================================================================
- --------------------------------------------------------------------------------
TBC Managed Income Portfolio
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End of Income Capital Gains Total
Year Ended of Year Year Dividends Distribution Returns+
================================================================================
10/31/98 $11.55 $11.65 $0.54 $0.02 5.71%
- --------------------------------------------------------------------------------
10/31/97 11.06 11.55 0.49 0.00 9.19
- --------------------------------------------------------------------------------
10/31/96 11.16 11.06 0.46 0.15 4.61
- --------------------------------------------------------------------------------
10/31/95 10.04 11.16 0.13 0.00 12.68
- --------------------------------------------------------------------------------
6/16/94* - 10/31/94 10.00 10.04 0.00 0.00 0.40++
================================================================================
Total $1.62 $0.17
================================================================================
It is the Funds' policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
MFS Total TBC Managed
Return Income
Portfolio Portfolio
================================================================================
Year Ended 10/31/98 10.94% 5.71%
- --------------------------------------------------------------------------------
6/16/94* through 10/31/98 14.62 7.39
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns+
- --------------------------------------------------------------------------------
MFS Total TBC Managed
Return Income
Portfolio Portfolio
================================================================================
6/16/94* through 10/31/98 81.72% 36.61%
================================================================================
+ Assumes the reinvestment of all dividends and capital gains distributions
at net asset value.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Shares of
MFS Total Return Portfolio vs. S&P 500 Index and
Lehman Brothers Government Corporate Bond Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[LINE GRAPH APPEARS HERE]
Lehman Brothers
MFS Total Government
Return S&P 500 Corporate
Portfolio Index Bond Index
--------- ----- ----------
6/16/94 10,000 10,000 10,000
10/94 9,980 10,324 10,075
4/95 10,614 11,404 10,777
10/95 11,589 13,053 11,704
4/96 12,740 14,684 11,709
10/96 13,577 16,018 12,335
4/97 14,711 18,374 12,496
10/97 16,380 21,159 13,423
4/98 18,317 25,920 13,911
10/31/98 18,172 25,817 14,802
+ Hypothetical illustration of $10,000 invested in shares of the MFS Total
Return Portfolio on June 16, 1994 (commencement of operations), assumes
reinvestment of dividends and capital gains, if any, at net asset value
through October 31, 1998. The Standard & Poor's 500 Composite Stock Index
("S&P 500 Index") is an index of widely held common stocks listed on the
New York and American Stock Exchanges and the over-the-counter markets.
Figures for the S&P 500 Index include reinvestment of dividends. The
Lehman Brothers Government/Corporate Bond Index is comprised of over 5,000
issues of U.S. Government Treasury and Agency securities and Corporate and
Yankee securities. The indexes are unmanaged and are not subject to the
same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Shares of the
TBC Managed Income Portfolio vs.
Lehman Brothers Aggregate Bond Index+
- --------------------------------------------------------------------------------
June 1994 -- October 1998
[LINE GRAPH APPEARS HERE]
TBC Managed Lehman Brothers
Income Aggregate
Portfolio Bond Index
--------- ----------
6/16/94 10,000 10,000
10/94 10,040 10,052
4/95 10,533 10,757
10/95 11,313 11,626
4/96 11,289 11,687
10/96 11,835 12,305
4/97 12,084 12,515
10/97 12,923 13,399
4/98 13,438 13,880
10/31/98 13,661 14,651
+ Hypothetical illustration of $10,000 invested in shares of the TBC Managed
Income Portfolio on June 16, 1994 (commencement of operations), assumes
reinvestment of dividends and capital gains, if any, at net asset value
through October 31, 1998. The Lehman Brothers Aggregate Bond Index is
comprised of over 6,500 issues of U.S. Treasury and Agency securities,
Corporate Bonds and Mortgage-Backed securities. The index is unmanaged and
is not subject to the same management and trading expenses of a mutual
fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
COMMON STOCK -- 51.0%
Aerospace -- 2.5%
39,400 General Dynamics Corp. $ 2,331,987
29,300 Lockheed Martin Corp. 3,263,288
18,706 Raytheon Co., Class A Shares 1,047,536
26,900 Raytheon Co., Class B Shares 1,561,881
49,200 TRW Inc. 2,801,325
3,500 United Technologies Corp. 333,375
- --------------------------------------------------------------------------------------------
11,339,392
- --------------------------------------------------------------------------------------------
Automotive -- 0.7%
10,600 Ford Motor Co. 575,050
12,400 Lear Corp. 398,350
97,000 Volvo Aktiebolaget, ADR 2,121,875
- --------------------------------------------------------------------------------------------
3,095,275
- --------------------------------------------------------------------------------------------
Banks & Credit Companies -- 1.9%
13,700 Bank of New York Co., Inc. 432,406
71,800 National City Corp. 4,617,638
60,000 Norwest Corp. 2,231,250
15,100 PNC Bank Corp. 755,000
15,500 Washington Mutual Bank 580,281
- --------------------------------------------------------------------------------------------
8,616,575
- --------------------------------------------------------------------------------------------
Business Machines -- 1.4%
42,300 International Business Machines Corp. 6,278,906
- --------------------------------------------------------------------------------------------
Business Services -- 0.4%
22,300 CVS Trust Automatic Common Exchange Securities 1,917,800
- --------------------------------------------------------------------------------------------
Cellular Phones -- 0.2%
18,600 Telephone Data Systems Inc. 741,675
- --------------------------------------------------------------------------------------------
Communication Services -- 4.1%
57,200 American Telephone & Telegraph Corp. 3,560,700
44,800 Bell Atlantic Corp. 2,380,000
95,700 GTE Corp. 5,616,394
80,624 SBC Communications Inc. 3,733,899
47,700 Sprint Corp. 3,660,975
- --------------------------------------------------------------------------------------------
18,951,968
- --------------------------------------------------------------------------------------------
Computer Software - Systems -- 0.2%
42,700 Alcatel Alsthom, ADR 939,400
- --------------------------------------------------------------------------------------------
Conglomerates -- 1.2%
128,400 Allied Signal Inc. 4,999,575
12,500 Tyco International Ltd. 774,219
- --------------------------------------------------------------------------------------------
5,773,794
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
Consumer Goods & Services -- 2.1%
56,900 Kimberly-Clark Corp. $ 2,745,425
83,400 Philip Morris Cos. Inc. 4,263,825
76,900 Rubbermaid Inc. 2,552,119
- --------------------------------------------------------------------------------------------
9,561,369
- --------------------------------------------------------------------------------------------
Electrical Equipment - Utilities -- 1.1%
41,900 Emerson Electric Co. 2,765,400
9,700 General Electric Co. 848,750
38,500 Hubbell Inc., Class B Shares 1,535,187
- --------------------------------------------------------------------------------------------
5,149,337
- --------------------------------------------------------------------------------------------
Electronics -- 0.3%
24,423 AMP Inc. 1,002,869
15,000 Analog Devices Inc.+ 298,125
- --------------------------------------------------------------------------------------------
1,300,994
- --------------------------------------------------------------------------------------------
Entertainment -- 1.5%
43,800 Time Warner Inc. 4,065,188
49,600 Viacom Inc.+ 2,969,800
- --------------------------------------------------------------------------------------------
7,034,988
- --------------------------------------------------------------------------------------------
Financial Institutions -- 2.4%
62,900 A.G. Edwards Inc. 2,173,981
37,700 American Express Co. 3,331,738
28,895 Associates First Capital Corp. 2,037,097
61,100 Federal Home Loan Mortgage Corp. 3,513,250
100 Federated Investors, Inc. 1,794
- --------------------------------------------------------------------------------------------
11,057,860
- --------------------------------------------------------------------------------------------
Food & Beverages -- 1.8%
193,825 Archer-Daniels-Midland Co. 3,234,455
23,300 General Mills Inc. 1,712,550
27,800 Hershey Foods Corp. 1,885,187
25,000 Hormel Foods Corp. 814,062
29,600 McCormick & Co., Inc. 919,450
- --------------------------------------------------------------------------------------------
8,565,704
- --------------------------------------------------------------------------------------------
Forest & Paper Products -- 0.9%
42,000 Champion International Corp. 1,341,375
57,800 Weyerhaeuser Co. 2,705,763
- --------------------------------------------------------------------------------------------
4,047,138
- --------------------------------------------------------------------------------------------
Health Care -- 3.4%
36,900 American Home Products Corp. 1,798,875
1 Astra AB, ADR 16
11,900 Baxter International Inc. 713,256
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
Health Care -- 3.4% (continued)
29,500 Bristol-Myers Squibb Co. $ 3,261,594
137,000 Columbia HCA Healthcare 2,877,000
55,300 Glaxo Holdings PLC 3,442,425
41,100 Smithkline Beecham, ADR 2,620,125
26,800 United Healthcare Corp. 1,167,475
- --------------------------------------------------------------------------------------------
15,880,766
- --------------------------------------------------------------------------------------------
Insurance -- 4.5%
60,600 Chubb Corp. 3,726,900
6,700 Cigna Corp. 488,681
74,700 The Equitable Cos., Inc. 3,660,300
32,250 Jefferson-Pilot Corp. 1,959,188
41,800 Lincoln National Corp. 3,171,575
5,500 Progressive Corp. - Ohio 809,875
28,500 Provident Co. 828,281
64,900 Torchmark Corp. 2,839,375
33,000 Transamerica Corp. 3,432,000
- --------------------------------------------------------------------------------------------
20,916,175
- --------------------------------------------------------------------------------------------
Metals & Minerals -- 0.4%
21,900 Aluminum Co. of America 1,735,575
- --------------------------------------------------------------------------------------------
Oil Production -- 6.3%
40,000 Amoco Corp. 2,245,000
3,300 Atlantic Richfield Co. 227,287
69,385 British Petroleum Co. PLC, ADR 6,136,236
138,800 Coastal Corp. 4,892,700
60,000 Conoco Inc., Class A Shares+ 1,492,500
31,300 Exxon Corp. 2,230,125
26,600 Mobil Corp. 2,013,288
39,600 Royal Dutch Petroleum Co., ADR 1,950,300
32,400 Schlumberger Ltd. 1,701,000
55,300 Texaco Inc. 3,279,981
60,800 Unocal Corp. 2,063,400
31,200 USX-Marathon Group Inc. 1,019,850
- --------------------------------------------------------------------------------------------
29,251,667
- --------------------------------------------------------------------------------------------
Photographic Products -- 0.7%
41,200 Eastman Kodak Co. 3,193,000
- --------------------------------------------------------------------------------------------
Pollution Control -- 0.5%
71,300 Browning-Ferris Industries Inc. 2,526,694
- --------------------------------------------------------------------------------------------
Printing & Publishing -- 0.8%
38,300 Gannett Co., Inc. 2,369,812
52,200 New York Times Co., Class A Shares 1,474,650
- --------------------------------------------------------------------------------------------
3,844,462
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
Railroads -- 0.7%
30,300 Canadian National Railway Co. $ 1,528,256
52,500 Norfolk Southern Corp. 1,729,219
- --------------------------------------------------------------------------------------------
3,257,475
- --------------------------------------------------------------------------------------------
Real Estate -- 0.7%
18,400 Arden Realty Group Inc. 397,900
16,000 Boston Properties Inc. 456,000
11,700 Hospitality Properties Trust Corp. 310,050
28,700 Prime Group Realty Trust 460,994
48,000 Trinet Corporate Realty Trust, Inc. 1,380,000
- --------------------------------------------------------------------------------------------
3,004,944
- --------------------------------------------------------------------------------------------
Retail -- 1.6%
50,200 American Stores Co. 1,634,638
26,600 Dayton Hudson Corp. 1,127,175
15,000 J.C. Penney & Co. Inc. 712,500
75,100 Rite Aid Corp. 2,980,531
18,000 Sears, Roebuck & Co. 808,875
- --------------------------------------------------------------------------------------------
7,263,719
- --------------------------------------------------------------------------------------------
Special Products & Services -- 0.8%
22,100 Illinois Tool Works Inc. 1,417,163
28,100 McDonalds Corp. 1,879,188
3,000 Xerox Corp. 290,625
- --------------------------------------------------------------------------------------------
3,586,976
- --------------------------------------------------------------------------------------------
Supermarkets -- 1.4%
28,100 Albertsons, Inc. 1,561,306
50,700 Fred Meyer Inc. 2,702,944
48,300 Safeway Inc. 2,309,344
- --------------------------------------------------------------------------------------------
6,573,594
- --------------------------------------------------------------------------------------------
Utilities - Electric -- 4.6%
76,000 Carolina Power & Light Co. 3,486,500
54,400 Cinergy Corp. 1,876,800
21,000 CMS Energy Corp. 925,312
73,200 DPL Inc. 1,386,225
48,600 GPU Inc. 2,095,875
43,600 New Century Energies Inc. 2,106,425
51,000 PacifiCorp 972,187
62,100 Pinnacle West Capital Co. 2,720,756
60,600 Sempra Energy 1,575,600
29,000 Sierra Pacific Resources 1,056,687
89,800 Southern Co. 2,531,238
19,500 Texas Utilities Co. 853,125
- --------------------------------------------------------------------------------------------
21,586,730
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
Utilities - Gas -- 1.9%
51,800 Columbia Energy Group $ 2,997,925
42,900 Eastern Enterprises 1,761,581
43,000 Keyspan Energy Corp. 1,284,625
24,400 National Fuel Gas Co. 1,152,900
52,000 UGI Corp. 1,189,500
8,000 Williams Cos., Inc. 219,500
- --------------------------------------------------------------------------------------------
8,606,031
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $218,943,813) 235,599,983
============================================================================================
CONVERTIBLE PREFERRED STOCK -- 1.7%
Banks -- 0.2%
7,400 McKesson Corp., 5.000% 788,100
- --------------------------------------------------------------------------------------------
Consumer Goods & Services -- 0.4%
31,000 Newell Financial Trust, 5.250% 1,654,625
- --------------------------------------------------------------------------------------------
Insurance -- 0.4%
64,200 Lincoln National Corp., 7.750% 1,588,950
- --------------------------------------------------------------------------------------------
Medical & Health Technology & Services -- 0.1%
6,000 McKesson Financing Trust, 5.000% 634,500
- --------------------------------------------------------------------------------------------
Telecommunications -- 0.3%
28,400 MediaOne Group Inc., Premium Income
Exchangeable Securities 1,530,050
- --------------------------------------------------------------------------------------------
Utilities - Electric -- 0.3%
25,500 Texas Utilities Co., 9.250% 1,437,563
- --------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost -- $7,354,620) 7,633,788
============================================================================================
PREFERRED STOCK -- 0.2%
Consumer Goods & Services -- 0.1%
9,500 Newell Financial Trust, 5.250% 507,062
- --------------------------------------------------------------------------------------------
Printing & Publishing -- 0.1%
400 NB Capital Corp., 8.350% 422,000
- --------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $918,324) 929,062
============================================================================================
FOREIGN COMMON STOCK -- 1.8%
Netherlands -- 1.0%
33,800 Akzo Nobel NV 1,313,851
69,221 ING Groep NV 3,350,419
- --------------------------------------------------------------------------------------------
4,664,270
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
Switzerland -- 0.7%
1,520 Nestle AG $3,232,609
- --------------------------------------------------------------------------------------------
United Kingdom -- 0.1%
22,392 Diageo PLC 241,875
- --------------------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCK
(Cost -- $9,004,435) 8,138,754
============================================================================================
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
CORPORATE BONDS -- 18.2%
Airlines -- 0.6%
Continental Airlines Inc.:
$ 500,000 BB- 9.500% due 12/15/01 522,500
381,645 BBB+ 9.500% due 10/15/13 426,947
94,892 BBB- 10.220% due 7/2/14 114,535
150,000 AA+ 6.648% due 3/15/19 148,305
Jet Equipment Trust:
250,000 A2* 9.410% due 6/15/10++ 300,656
187,663 A+ 8.640% due 11/1/12 210,577
300,000 BBB- 11.440% due 11/1/14 383,850
100,000 BBB 10.690% due 5/1/15 124,140
Northwest Airlines Inc.:
535,000 BB 7.625% due 3/15/05 500,894
205,000 BB 8.700% due 3/15/07 200,131
- --------------------------------------------------------------------------------------------
2,932,535
- --------------------------------------------------------------------------------------------
Apparel -- 0.1%
280,000 BBB+ Jones Apparel Group, Inc., 6.250% due 10/1/01 281,050
- --------------------------------------------------------------------------------------------
Automotive -- 0.3%
Federal-Mogul:
500,000 BB+ 7.500% due 7/1/04 527,500
175,000 BB+ 7.750% due 7/1/06 177,406
425,000 A Ford Motor Co., 8.900% due 1/15/32 541,875
- --------------------------------------------------------------------------------------------
1,246,781
- --------------------------------------------------------------------------------------------
Bank/Finance -- 3.1%
200,000 BBB+ BCI U.S. Funding Corp., 8.010% due 12/29/49 168,940
550,000 BBB- Capital One Bank, 6.700% due 5/15/08 525,250
400,000 BB+ Capital One Financial Corp., 7.250% due 12/1/03 421,000
400,000 BB Colonial Capital II, 8.920% due 1/15/27 458,000
1,370,000 B+ Contifinancial Corp. 7.500% due 3/15/02 876,800
310,000 A- Donaldson, Lufkin & Jenrette, 6.500% due 6/1/08 300,313
500,000 BBB- First Empire Capital Trust, 8.234% due 2/1/27 515,000
4,000,000 A+ Goldman Sachs Group, 5.900% due 1/15/03 3,975,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Bank/Finance -- 3.1% (continued)
GS Escrow Corp.:
$ 2,085,000 BB+ 6.750% due 8/1/01 $ 2,137,125
1,470,000 BB+ 7.125% due 8/1/05 1,497,563
600,000 BB+ MBNA Capital Trust Corp., 8.278% due 12/1/26 672,000
345,000 BBB+ Natexis Ambs Co., 8.440% due 12/29/49 312,225
400,000 BB- Providian Capital I, 9.525% due 2/1/27++ 477,500
500,000 BBB- Providian National, 6.700% due 3/15/03 508,750
50,000 BB Riggs Cap Trust II, 8.875% due 3/15/27 54,188
400,000 BB+ Riggs National Bank Corp., 8.500% due 2/1/06 419,000
400,000 A State Street Bank, 7.940% due 12/30/26 407,000
600,000 BBB- Washington Mutual Capital Trust, 8.375% due 6/1/27 642,000
- --------------------------------------------------------------------------------------------
14,367,654
- --------------------------------------------------------------------------------------------
Building & Construction -- 1.2%
1,500,000 B+ Nortek Inc., 9.250% due 3/15/07 1,496,250
4,000,000 BB+ Owens-Illinois, Inc., 7.350% due 5/15/10 4,005,000
- --------------------------------------------------------------------------------------------
5,501,250
- --------------------------------------------------------------------------------------------
Business Services -- 0.1%
740,000 BBB- HEALTHSOUTH CORP., 3.250% due 4/1/03 599,400
- --------------------------------------------------------------------------------------------
Chemicals -- 0.0%
100,000 BBB Solutia Inc., 7.375% due 10/15/27 97,750
- --------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations -- 1.1%
1,267,268 AAA Beneficial Mortgage Corp., 5.647% due 9/28/37 1,256,966
386,468 Baa2* Blackrock Capital Finance LLC, 7.750% due 9/25/26++ 378,878
2,150,000 A Criimi Mae, Inc., 7.000% due 3/2/11 2,064,667
1,300,000 AAA Residential Accredit Loan Inc., 7.000% due 3/25/28 1,319,903
- --------------------------------------------------------------------------------------------
5,020,414
- --------------------------------------------------------------------------------------------
Consumer Goods & Services -- 1.1%
400,000 BBB Fingerhut Cos., 7.375% due 9/15/99 405,500
1,803,000 BBB- Hearst-Argyle Television, Inc., 7.500% due 11/15/27 1,857,090
55,000 A Lowe's Cos., 6.875% due 2/15/28 56,375
280,000 BBB Nabisco Inc., 6.375% due 2/1/35 276,500
890,000 BBB- Protection One, Inc., 7.375% due 8/15/05 921,150
Tommy Hilfiger Corp.:
430,000 BBB- 6.500% due 6/1/03 447,200
330,000 BBB- 6.850% due 6/1/08 331,650
730,000 A- Tyco International Group, 6.125% due 11/1/08 723,613
- --------------------------------------------------------------------------------------------
5,019,078
- --------------------------------------------------------------------------------------------
Entertainment -- 1.5%
183,000 A Hasbro, Inc., 5.600% due 11/1/05 182,085
287,880 Ba3* Jasmine Submarine Telecom, 8.483% due 5/30/11 201,516
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Entertainment -- 1.5% (continued)
News America Holdings:
$ 510,000 BBB- 8.000% due 10/14/16 $ 546,338
1,000,000 BBB- 8.875% due 4/26/23 1,168,750
385,000 BBB- 9.500% due 7/15/24 476,919
200,000 B Outdoor Systems Inc., 8.875% due 6/15/07 203,750
Time Warner Inc.:
2,000,000 BBB- 6.100% due 12/30/01 2,040,000
335,000 BBB- 8.375% due 7/15/33 398,231
30,000 BBB- Turner Broadcasting, 8.375% due 7/1/13 34,613
1,840,000 BBB- Viacom Inc., 6.750% due 1/15/03 1,904,400
- --------------------------------------------------------------------------------------------
7,156,602
- --------------------------------------------------------------------------------------------
Forest & Paper Products -- 0.3%
400,000 BB+ Boise Cascade Corp., 7.430% due 10/10/05 418,000
Georgia-Pacific Corp.:
200,000 BBB- 9.875% due 11/1/21 223,250
345,000 BBB- 7.250% due 6/1/28 338,100
200,000 B+ The Timberlands Co., 9.625% due 11/15/07 188,250
- --------------------------------------------------------------------------------------------
1,167,600
- --------------------------------------------------------------------------------------------
Gaming -- 0.2%
Circus Circus Enterprises:
500,000 BBB- 6.450% due 2/1/06 479,375
230,000 BBB- 7.000% due 11/15/36 227,125
400,000 BBB- 6.700% due 11/15/2096 408,000
- --------------------------------------------------------------------------------------------
1,114,500
- --------------------------------------------------------------------------------------------
Industrial -- 0.2%
60,000 BBB- Burlington Industries Inc., 7.250% due 8/1/27 64,875
591,228 BBB+ Federal Express Corp., 7.650% due 1/15/14 615,616
400,000 BBB- Northrop-Grumman Corp., 9.375% due 10/15/24 466,500
- --------------------------------------------------------------------------------------------
1,146,991
- --------------------------------------------------------------------------------------------
Insurance -- 0.5%
220,000 BBB Atlantic Mutual Ins. Co., 8.125% due 2/15/28 223,300
600,000 BBB Conseco, Inc., 6.400% due 6/15/01 615,750
390,000 BBB+ Fairfax Financial Holdings Ltd., 7.375% due 4/15/18 356,850
1,000,000 A Safeco Capital Trust I, 8.072% due 7/15/37 1,018,750
- --------------------------------------------------------------------------------------------
2,214,650
- --------------------------------------------------------------------------------------------
Medical & Health Products -- 0.2%
Bausch & Lomb Inc.:
355,000 BBB 6.500% due 8/1/05 368,756
355,000 BBB 7.125% due 8/1/28 356,331
- --------------------------------------------------------------------------------------------
725,087
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Medical Services -- 0.2%
Columbia Healthcare Corp.:
$ 100,000 BBB 6.500% due 3/15/99 $ 100,000
160,000 BBB 6.875% due 7/15/01 159,400
380,000 BBB 7.690% due 6/15/25 333,925
Tenet Healthcare Corp.:
60,000 BB- 8.625% due 1/15/07 61,425
400,000 BB+ 7.625% due 6/1/08 401,500
- --------------------------------------------------------------------------------------------
1,056,250
- --------------------------------------------------------------------------------------------
Oil/Oil Services -- 2.5%
Coastal Corp.:
440,000 BBB- 6.500% due 6/1/08 465,300
1,150,000 BBB- 7.750% due 10/15/35 1,204,625
1,845,000 BBB- 7.420% due 2/15/37 1,856,531
885,000 BBB- Husky Oil Ltd., 8.900% due 8/15/28 871,725
60,000 B- KCS Energy Inc., 8.875% due 1/15/08 42,675
445,000 BBB Lasmo Inc., 6.750% due 12/12/07 426,644
985,000 BBB- McDermott Inc., 9.375% due 3/15/02 1,078,575
500,000 BB+ ORYX Energy Co., 8.375% due 7/15/04 551,250
670,000 BBB Petro Geo-Services, 7.125% due 3/30/28 641,525
322,000 BBB- Seagull Energy Corp., 7.500% due 9/15/27 282,555
3,000,000 BBB Sun Co. Inc., 9.000% due 11/1/24 3,768,750
200,000 A- Transocean Offshore Inc., 8.000% due 4/15/27 236,250
115,000 BBB Ultramar Diamond Shamroc, 7.200% due 10/15/17 123,338
- --------------------------------------------------------------------------------------------
11,549,743
- --------------------------------------------------------------------------------------------
Retail -- 0.1%
355,000 BBB Dillard's, Inc., 7.130% due 8/1/18 364,763
- --------------------------------------------------------------------------------------------
Telecommunications -- 1.3%
2,100,000 BB- Century Communications Corp., zero coupon bond to yield
7.424% due 1/15/08 992,250
200,000 B Chancellor Media Co., 8.750% due 6/15/07 197,000
571,000 BBB- Continental Cablevision, 11.000% due 6/1/07 618,821
1,500,000 B FrontierVision Holdings, 11.000% due 10/15/06 1,661,250
Tele-Communications Inc.:
240,000 BBB- 8.000% due 8/1/05 268,200
465,000 BBB- 7.875% due 8/1/13 524,288
760,000 BB+ 9.650% due 3/31/27 930,050
380,000 BBB- 7.125% due 2/15/28 401,850
Worldcom Inc.:
175,000 BBB+ 7.550% due 4/1/04 190,750
100,000 BBB+ 8.875% due 1/15/06 109,750
- --------------------------------------------------------------------------------------------
5,894,209
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Utillities -- 3.6%
$ 1,425,000 BB- Beaver Valley II Funding Corp., 9.000% due 6/1/17 $ 1,676,156
CalEnergy Co. Inc.:
360,000 BB+ 7.230% due 9/15/05 365,400
70,000 BB+ 7.630% due 10/15/07 72,888
540,000 BB+ 7.520% due 9/15/08 557,550
Cleveland Electric Illuminating Co.:
315,000 BB+ 7.430% due 11/1/09 333,506
500,000 BB+ 7.880% due 11/1/17 503,125
100,000 BB+ 9.000% due 7/1/23 106,625
Commonwealth Edison Co.:
180,000 BBB- 7.625% due 1/15/07 196,650
505,000 BBB- 6.950% due 7/15/18 506,894
Connecticut Lighting & Power Co.:
500,000 BB+ 7.875% due 10/1/24 533,125
1,500,000 NR Niantic Bay Fuel, 8.590% due 6/4/03++ 1,560,750
135,000 BB+ El Paso Electric Co., 8.900% due 2/1/06 150,694
400,000 A- Empresa National Electrical, 7.325% due 2/1/37 325,500
1,556,160 BBB- GGIB Funding Corp., 7.430% due 1/15/11 1,635,913
109,000 B Midland Funding II, 11.750% due 7/23/05 125,350
365,000 BBB NGC Corp., 8.316% due 6/1/27 424,313
Niagara Mohawk Power Corp.:
411,000 BBB- 7.750% due 5/15/06 448,504
1,018,000 BB+ 8.770% due 1/1/18 1,082,898
Niagara Power Corp.:
450,000 BBB- 8.750% due 4/1/22 472,500
140,000 BBB- 8.500% due 7/1/23 145,075
163,000 B+ North Atlantic Energy, 9.050% due 6/1/02 166,871
249,488 B+ Northeast Utilities, 8.580% due 12/1/06 259,156
Salton Sea Funding:
90,218 BBB- 7.370% due 5/30/05 96,646
1,100,000 BBB- 7.840% due 5/30/10 1,230,625
1,831,779 BBB- Seabrook, 7.830% due 1/2/19 1,968,302
215,000 BBB Tennessee Gas Pipeline Co., 7.000% due 10/15/28 205,594
400,000 BBB Texas Gas Transmission Corp., 7.250% due 7/15/27 404,500
120,000 BBB Texas Utilities Electric Co., 6.375% due 1/1/08 122,550
400,000 BB+ Toledo Edison Co., 7.875% due 8/1/04 437,500
100,000 BBB Utilicorp United Inc., 8.450% due 11/15/99 103,125
345,000 BBB- Waterford 3 - Entergy, 8.090% due 1/2/17 374,756
- --------------------------------------------------------------------------------------------
16,593,041
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $83,531,247) 84,049,348
============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
CONVERTIBLE CORPORATE BOND -- 0.2%
$ 335,000 AA+ Deutsche Bank Finance BV, zero coupon bond to yield
4.557% due 2/12/17++ $ 163,731
1,670,000 A- Xerox Corp., 0.570% due 4/21/18 953,988
- --------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BOND
(Cost -- $1,124,947) 1,117,719
============================================================================================
FOREIGN BONDS -- 0.5%
Argentina -- 0.4%
1,958,000 NR Hidroelectrica Alicura S.A., 8.375% due 3/15/99 1,899,260
- --------------------------------------------------------------------------------------------
Colombia -- 0.1%
346,000 BBB- Republic of Colombia, 8.820% due 8/13/05 297,993
- --------------------------------------------------------------------------------------------
Finland -- 0.0%
140,000 BBB+ UPM Kymmene Co., 7.450% due 11/26/27++ 132,650
- --------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost -- $2,448,186) 2,329,903
============================================================================================
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 13.7%
7,145,000 U.S. Treasury Bond, 5.625% due 5/15/08 7,699,309
5,276,000 U.S. Treasury Bond, 6.125% due 11/15/27 5,951,328
13,100,000 U.S. Treasury Note, 5.500% due 1/31/02 13,677,186
400,000 U.S. Treasury Note, 6.625% due 3/31/02 428,004
400,000 U.S. Treasury Note, 7.875% due 11/15/04 469,956
5,385,000 U.S. Treasury Note, 6.500% due 10/15/06 6,044,447
100,000 U.S. Treasury Note, 9.875% due 11/15/15 151,653
6,300,000 U.S. Treasury Note, 6.375% due 8/15/27 7,273,035
4,289,507 Federal National Mortgage Association,
6.500% due 3/1/13 4,353,851
1,624,258 Government National Mortgage Association,
7.000% due 4/15/28 through 7/15/28 1,664,345
10,890,977 Government National Mortgage Association,
7.500% due 8/15/25 through 12/15/27 11,221,094
4,388,818 Government National Mortgage Association,
8.000% due 6/20/25 through 12/15/26 4,556,938
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCIES & OBLIGATIONS
(Cost -- $62,770,307) 63,491,146
============================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $386,095,879) 403,289,703
============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
============================================================================================
<C> <S> <C>
SHORT-TERM SECURITIES -- 12.7%
Federal Home Loan Bank:
$ 22,400,000 5.400% due 11/2/98 $ 22,393,280
12,800,000 4.740% due 11/2/98 12,794,944
3,700,000 Federal Home Loan Mortgage Corp.,
5.050% due 11/6/98 3,696,886
7,000,000 Student Loan Mortgage Association,
4.770% due 11/3/98 6,997,218
Tennessee Valley Authority:
8,400,000 4.750% due 11/6/98 8,393,350
4,400,000 4.770% due 11/9/98 4,394,753
- --------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost -- $58,670,431) 58,670,431
============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $444,766,310**) $461,960,134
============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Services ("Standard &
Poor's"), except that those which are identified by an asterisk (*), are
rated by Moody's Investors Service Inc. ("Moody's").
+ Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be sold in transactions that are exempt from
registration, normally to qualified institutional buyers.
# Variable rate-resets monthly.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 31 for definition of ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
CORPORATE BONDS -- 33.1%
Aerospace & Defense -- 1.8%
$ 95,000 B BE Aerospace, Inc., Sr. Sub. Notes, Series B,
9.875% due 2/1/06 $ 98,919
205,000 A3* Lockheed Martin Corp., 7.750% due 5/1/26 231,650
245,000 B- Pacific Aerospace & Electronics, Sr. Sub. Notes,
11.250% due 8/1/05+ 196,000
Raytheon Co.:
240,000 Baa1* 5.950% due 3/15/01 243,300
375,000 Baa1* 6.450% due 8/15/02 389,062
- --------------------------------------------------------------------------------------------
1,158,931
- --------------------------------------------------------------------------------------------
Banking -- 1.3%
250,000 A- First National Bank of Boston, Sub. Notes,
7.375% due 9/15/06 277,500
95,000 A3* First Security Corp., Sr. Notes, 6.875% due 11/15/06 98,681
295,000 A3* Great Western Financial Trust II, Inc., 8.206% due 2/1/27 303,113
165,000 A NationsBank Corp., 6.800% due 3/15/28 156,750
- --------------------------------------------------------------------------------------------
836,044
- --------------------------------------------------------------------------------------------
Financial Services -- 7.0%
450,000 BBB AT&T Capital Corp., 6.250% due 5/15/01 460,125
125,000 BBB+ Avalonbay Communities, Inc., Sr. Notes,
6.500% due 7/15/03 124,844
50,000 B+ Dollar Financial Group, Sr. Notes, Series A,
10.875% due 11/15/06 47,000
170,000 A Equitable Cos. Inc., 7.000% due 4/1/28 170,850
285,000 A- Finova Capital Corp., 6.220% due 3/1/00 287,137
330,000 A- Fleet Financial Group, Sub. Debentures, 6.875% due 1/15/28 329,587
General Motors Acceptance Corp.:
45,000 A 7.125% due 5/1/01 46,969
105,000 A 6.875% due 7/15/01 109,331
50,000 BBB+ H.F. Ahmanson & Co., Sr. Notes, 7.650% due 4/15/00 51,625
Jefferson-Pilot Capital Trust:
140,000 AA- 8.140% due 1/15/46+ 148,575
100,000 AA- Series B, 8.285% due 3/1/46+ 110,750
Lehman Brothers Holdings, Inc.:
560,000 A 6.250% due 4/1/03 544,600
200,000 A 8.500% due 5/1/07 211,500
200,000 A Sr. Sub. Notes, 6.125% due 2/1/01 197,000
PaineWebber Group Inc.:
35,000 BBB+ 7.625% due 10/15/08 36,794
220,000 BBB+ 7.390% due 10/16/17 203,775
190,000 BBB+ Sr. Notes, 8.060% due 1/17/17 188,100
115,000 BBB+ Sr. Notes, 7.810% due 2/13/17 111,119
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Financial Services -- 7.0% (continued)
$ 315,000 A- Sears Roebuck Acceptance, 6.000% due 3/20/03 $ 323,662
175,000 A Sun Hung Kai Finance Corp., 5.625% due 11/24/98 174,840
425,000 AA Sun Life Canada Capital, 8.526% due 5/29/49+ 498,844
150,000 A3* Washington Mutual CapitaI I, 8.375% due 6/1/27 160,500
- --------------------------------------------------------------------------------------------
4,537,527
- --------------------------------------------------------------------------------------------
Health Care -- 0.5%
130,000 BB ICN Pharmaceuticals, Inc., 9.250% due 8/15/05 128,050
Tenet Healthcare Corp., Sr. Notes:
50,000 BB+ 8.625% due 12/1/03 51,875
110,000 BB+ 8.000% due 1/15/05 112,750
- --------------------------------------------------------------------------------------------
292,675
- --------------------------------------------------------------------------------------------
Industrial -- 13.1%
150,000 B- Advanced Accessory Systems LLC, Sr. Sub. Notes, Series B,
9.750% due 10/1/02 143,437
155,000 B- Alliance Laundry Systems, Sr. Sub. Notes,
9.625% due 5/1/08+ 142,600
290,000 B Amazon.com, Inc., Sr. Discount Notes,
step bond to yield 10.000% due 5/1/08 165,662
50,000 B- Amphenol Corp., Sr. Sub. Notes, 9.875% due 5/15/07 48,500
290,000 B- Axia Inc., Sr. Sub. Notes, 10.750% due 7/15/08+ 272,962
375,000 BB+ Beckman Instruments Inc., Sr. Notes, 7.100% due 3/4/03 392,812
190,000 A- The BF Goodrich Co., 7.000% due 4/15/38 199,737
130,000 B- Brunner Mond Group PLC Capital, Sr. Sub. Notes,
11.000% due 7/15/08 113,100
162,000 BBB- Burlington Industries Inc., 7.250% due 8/1/27 175,162
50,000 A- Carpenter Technology Corp., 7.440% due 8/16/99 50,875
55,000 B- Compass Aerospace Corp, Sr. Sub. Notes,
10.125% due 4/15/05+ 53,900
300,000 NR Dobson Wireline Co., Sr. Notes, 12.250% due 6/15/08+ 268,500
150,000 B Dyncorp, Inc., Sr. Sub. Notes, 9.500% due 3/1/07 148,875
145,000 B- Eagle-Picher Industries, 9.375% due 3/1/08 131,406
230,000 B- Favorite Brands International Inc., 10.750% due 5/15/06+ 163,300
180,000 B Fedders North America, Sr. Sub. Notes, 9.375% due 8/15/27 174,600
80,000 BBB- Federated Department Stores, Sr. Notes, 8.125% due 10/15/02 87,400
135,000 B Finlay Enterprises, Inc., Sr. Debentures, 9.000% due 5/1/08 120,488
55,000 A1* Ford Motor Co., 7.400% due 11/1/46 59,125
100,000 B+ GCI Inc., Sr. Notes, 9.750% due 8/1/07 94,250
105,000 B+ Global Health Sciences Inc., Sr. Notes, 11.000% due 5/1/08 98,175
45,000 BBB+ Hilton Hotels Corp., 7.375% due 6/1/02 45,900
50,000 B HS Resources, Inc., Sr. Sub. Notes, 9.250% due 11/15/06 45,500
310,000 A- Ingersoll-Rand Corp., Sr. Notes, 6.255% due 2/15/01 320,075
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Industrial -- 13.1% (continued)
$ 190,000 B3* Insilco Corp., Sr. Notes, 10.250% due 8/15/07 $191,900
100,000 B Iron Mountain Inc., Sr. Sub. Notes, 10.125% due 10/1/06 104,250
130,000 B- Kindercare Learning Centers, Sr. Sub. Notes,
9.500% due 2/15/09 122,688
70,000 B- KSL Recreation Group, Inc., Sr. Sub. Notes,
10.250% due 5/1/07 73,500
75,000 B1* Lodgenet Entertainment, Inc., Sr. Notes,
10.250% due 12/15/06 74,531
200,000 BB Lowen Group International, Inc., Sr. Guaranteed Notes,
Series I, 7.500% due 4/15/01 159,000
120,000 B+ Mediacom LLC, Sr. Notes, 8.500% due 4/15/08 116,400
60,000 B+ Muzak Corp., Sr. Notes, 10.000% due 10/1/03 60,825
280,000 BBB Nabisco Inc., 6.000% due 2/15/11 278,600
Navistar International Corp.:
140,000 BB+ Sr. Notes, 7.000% due 2/1/03 137,900
75,000 BB- Sr. Sub. Notes, 8.000% due 2/1/08 73,500
55,000 B- Numatics Corp., Sr. Sub. Notes, 9.625% due 4/1/08 51,700
230,000 B+ Octel Developments PLC, Sr. Sub. Notes, 10.000% due 5/1/06 223,963
70,000 B+ Pioneer Americas Acquisition Corp., Sr. Secured Notes,
Series B, 9.250% due 6/15/07 52,500
40,000 B+ Plastic Container, Inc., Sr. Secured Notes,
10.000% due 12/15/06 40,100
123,000 BB+ Protection One Alarm, Inc., Sr. Sub. Notes, Series B,
13.625% due 6/30/05 134,070
33,000 B Rayovac Corp., Sr. Sub. Notes, Series B, 10.250% due 11/1/06 34,691
235,000 B- Regional Independent Media Group, Sr. Notes,
10.500% due 7/1/08+ 230,300
170,000 B- Reliant Building Products, Inc., Sr. Sub. Notes, Series B,
10.875% due 5/1/04 148,750
350,000 B Republic Group Inc., Sr. Sub. Notes, 9.500% due 7/15/08+ 317,188
185,000 B Revlon Consumer Product Corp., Sr. Notes,
8.125% due 2/1/06 179,913
Royal Caribbean Cruises, Sr. Notes:
85,000 BBB- 7.125% due 9/18/02 90,419
180,000 BBB- 7.500% due 10/15/27 163,125
90,000 B- Silver Cinemas, Sr. Sub. Notes, 10.500% due 4/15/05 85,500
50,000 A+ Sony Corp., 6.125% due 3/4/03 51,438
275,000 BB- Standard Commercial Corp., Sr. Notes, 8.875% due 8/1/05 270,188
250,000 B3* Steel Heddle Manufacturing Co., Sr. Sub. Notes,
10.625% due 6/1/08+ 205,312
440,000 Ba1* Tricon Global Restaurants Inc., Sr. Notes,
7.450% due 5/15/05 461,450
70,000 B U.S. Can Corp. Sr. Sub. Notes, Series B,
10.125% due 10/15/06 71,050
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Industrial -- 13.1% (continued)
$ 500,000 B United International Holdings, Sr. Secured Discount Notes,
step bond to yield 10.750% due 2/15/08 $ 235,000
110,000 BBB+ USA Waste Services Inc., Sr. Notes, 7.125% due 10/1/07 120,175
42,000 BBB+ Waste Management Inc., 6.625% due 7/15/02 43,575
250,000 B Wesco Distribution Inc., Sr. Sub. Notes, 9.125% due 6/1/08 245,000
95,000 BBB+ WMX Technologies, Inc., 7.700% due 10/1/02 102,362
- --------------------------------------------------------------------------------------------
8,467,204
- --------------------------------------------------------------------------------------------
Media -- 1.7%
200,000 B Brill Media Co. LLC, Sr. Notes, Series B,
7.500% due 12/15/07++ 181,800
Chancellor Media Corp., Sr. Sub. Notes:
115,000 Ba3* 9.375% due 10/1/04 115,288
320,000 Ba3* 9.000% due 10/1/08+ 321,600
290,000 B3* Cumulus Media Inc., Sr. Sub. Notes, 10.375% due 7/1/08 286,375
200,000 B2* Time Warner, Sr. Notes, 9.750% due 7/15/08 200,500
- --------------------------------------------------------------------------------------------
1,105,563
- --------------------------------------------------------------------------------------------
Oil & Gas -- 0.7%
150,000 B Canadian Forest Oil Ltd., Sr. Sub. Notes, 8.750% due 9/15/07 133,875
120,000 B1* Chesapeake Energy Corp., Sr. Notes, Series B,
7.875% due 3/15/04 96,000
115,000 BBB- Coastal Corp., Sr. Notes, 8.125% due 9/15/02 127,075
30,000 A- Noble Drilling Corp., Sr. Notes, 9.125% due 7/1/06 30,675
35,000 BBB Norcen Energy Resources, Ltd., 7.375% due 5/15/06 36,662
40,000 BB ORYX Energy Co., 10.000% due 4/1/01 43,800
- --------------------------------------------------------------------------------------------
468,087
- --------------------------------------------------------------------------------------------
Special Purpose -- 1.6%
275,000 BB+ GS Escrow Corp., Sr. Notes, 7.000% due 8/1/03+ 286,344
345,000 A Safeco Capital Trust Inc., Series B, 8.072% due 7/15/37 351,469
350,000 AA Zurich Capital, 8.376% due 6/1/37+ 390,687
- --------------------------------------------------------------------------------------------
1,028,500
- --------------------------------------------------------------------------------------------
Telecommunications -- 3.0%
400,000 NR Adelphia Communications, Sr. Notes, 8.125% due 7/15/03+ 399,000
125,000 BB- Century Communications Corp., Sr. Notes, 9.500% due 8/15/00 129,375
75,000 BB+ Comcast Cellular Holdings, Inc., Sr. Notes, Series B,
9.500% due 5/1/07 77,625
300,000 CCC+ ICO Global Communications, Sr. Notes, 15.000% due 8/1/05 186,000
300,000 B- Iridium LLC Capital Corp., Sr. Notes, Series C,
11.250% due 7/15/05 213,000
45,000 B Jacor Communications Co., Sr. Sub. Notes, Series B,
8.750% due 6/15/07 47,137
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Telecommunications -- 3.0% (continued)
$ 150,000 B+ McLeod USA Inc., Sr. Notes, 9.250% due 7/15/07 $ 148,688
610,000 B2* Nextel Communications Inc., Sr. Discount Notes, step bond
to yield 10.602% due 10/31/07 332,450
150,000 B+ Orion Network Systems, Inc., Sr. Notes, 11.250% due 1/15/07 149,437
110,000 B Price Communications Wireless, Sr. Secured Notes,
9.125% due 12/15/06+ 106,975
410,000 Caa2* 21st Century Telecom Group, Sr. Discount Notes,
step bond to yield 12.250% due 2/15/08 169,638
- --------------------------------------------------------------------------------------------
1,959,325
- --------------------------------------------------------------------------------------------
Transportation -- 0.5%
300,000 BBB Canadian National Railway Co., 6.900% due 7/15/28 299,625
- --------------------------------------------------------------------------------------------
Utilities - Electrical -- 1.4%
330,000 A- Avon Energy Partners Holdings, 6.730% due 12/11/02+ 343,167
525,000 BB+ Calenergy Co. Inc., Sr. Notes, 7.230% due 9/15/05 532,875
- --------------------------------------------------------------------------------------------
876,042
- --------------------------------------------------------------------------------------------
Yankee Bonds -- 0.5%
160,000 BBB+ Embotelladora Andina SA, 7.000% due 10/1/07 125,600
96,000 A+ Quebec Province, 7.500% due 7/15/23 104,520
155,000 BB- Rogers Communications Inc., convertible
2.000% due 11/26/05 98,038
- --------------------------------------------------------------------------------------------
328,158
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $22,013,730) 21,357,681
============================================================================================
FIXED RATE MORTGAGE PASS-THROUGH SECURITIES -- 0.5%
196,446@ Aaa* Credit Suisse-First Boston Mortgage Securities Corp.,
Series 1997-C2, 1.215% due 11/17/22 196,446
142,147@ Aaa* First Union-Lehman Brothers Commercial Mortgage Trust,
Series 1997-C1, Passthrough Certificates,
1.307% due 4/18/29 142,147
- --------------------------------------------------------------------------------------------
TOTAL FIXED RATE MORTGAGE
PASS-THROUGH SECURITIES (Cost -- $346,799) 338,593
============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
ASSET-BACKED SECURITIES -- 7.8%
$ 258,631 Aaa* Amresco Residential Securities Series 1998-2 Passthrough
Certificates Class A8, 5.748% due 5/25/28 $ 258,632
123,000 AAA Associates Manufactured Housing Series1997-2,
6.475% due 3/15/28 124,919
189,000 AAA Case Equipment Loan Trust 1998-A Class A3,
5.740% due 8/15/02 189,832
441,000 AAA CIT Holdings Series 1997-A Class A4, 6.200% due 2/15/06 444,704
559,000 AAA Chase Credit Card Series 1997-2 Class A, 6.300% due 4/15/03 571,930
705,000 AAA EQCC Home Equity Loan Trust, Series 1998-2,
6.229% due 3/15/13 706,671
65,957 A- Fleetwood Credit Grantor Trust Series 1997-A Class A,
6.640% due 9/15/12 68,645
608,000 AAA Ford Credit Auto Loan Master Trust Series 1995-1,
6.500% due 8/15/02 622,349
410,000 AAA Green Tree Financial Corp., Series 1996-4 Passthrough
Certificates Class A7, 7.900% due 6/15/27 461,820
310,000 Aaa* Lehman Brothers Commercial Conduit Mortgage Trust
Series 98-C1 Class A2, 6.400% due 8/18/07 311,054
709,000 AAA MBNA Master Credit Card Trust II Series 1995-D Class A,
6.050% due 11/15/02 725,839
The Money Store Inc., Home Equity Trust:
153,000 AAA Series 1996-C Class A6, 7.690% due 5/15/24 162,844
64,000 AAA Series 1997-A Class A4, 6.890% due 3/15/16 65,190
Oakwood Mortgage Investments Inc.:
138,000 AAA Series 1997-C, Sr. Sub. Passthrough Certificates Class A6,
7.350% due 11/15/27 142,223
148,000 AAA Series 1998-A, Sr. Sub. Passthrough Certificates Class A3,
6.050% due 5/15/28 148,829
- --------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $4,945,885) 5,005,481
============================================================================================
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.4%
Asset Securitization Co.:
90,182 AAA 1996-MD6 Passthrough Certificates Class A 1A,
6.720% due 11/13/26 92,229
195,000 AAA 1996-MD6 Passthrough Certificates Class A 1C,
7.040% due 11/13/26 204,691
158,000 AAA 1997-D4 Passthrough Certificates Class A 1D,
7.490% due 4/14/27 170,150
Morgan Stanley Capital Inc. Passthrough Certificates:
270,000 AAA Series 1997-C1 Class A 1C, 7.630% due 2/15/20 288,198
150,000 AAA Series 1998-WF1 Class A2, 6.550% due 12/15/07 167,130
- --------------------------------------------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost -- $883,138) 922,398
============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
============================================================================================
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 43.6%
$ 891,000 U.S. Treasury Bond, 7.250% due 8/15/22 $ 1,110,195
4,889,000 U.S. Treasury Bond Principal Only, 7.250% due 8/15/22 1,317,341
5,035,000 U.S. Treasury Notes, 5.375% due 1/31/00 5,097,082
1,523,000 U.S. Treasury Notes, 6.375% due 8/15/02 1,627,249
500,000 U.S. Treasury Notes, 6.500% due 10/15/06 561,230
132,156 Federal Home Loan Mortgage Corp. Gold, 9.500% due 7/25/22 140,747
1,937,638 Federal Home Loan Mortgage Corp. Gold, 7.000% due 8/1/27 1,977,592
2,007,000 Federal National Mortgage Association, 6.000% due 5/15/08 2,128,002
955,000 Federal National Mortgage Association, 6.000% due 11/25/13# 957,684
179,811 Federal National Mortgage Association, 6.000% due 12/1/10 180,597
150,714 Federal National Mortgage Association, 6.500% due 10/1/28 153,782
936,000 Federal National Mortgage Association, 7.000% due 11/25/13# 953,840
49,790 Federal National Mortgage Association, 7.000% due 7/1/22 50,894
141,157 Federal National Mortgage Association, 7.000% due 7/1/23 144,288
1,488,000 Federal National Mortgage Association, 7.000% due 11/15/29# 1,518,683
7,574 Federal National Mortgage Association, 7.500% due 4/1/05 7,780
236,567 Federal National Mortgage Association, 7.536% due 6/1/16 256,912
1,941,270 Federal National Mortgage Association, 8.500% due 8/1/26 2,021,949
77,000 Federal National Mortgage Association Passthrough
Certificates, 6.839% due 6/17/11++ 79,164
2,880,330 Government National Mortgage Association,
6.500% due 11/15/28 2,914,484
2,051,690 Government National Mortgage Association,
7.000% due 1/15/26 through 6/15/27 2,102,326
2,305,691 Government National Mortgage Association,
7.500% due 12/15/23 through 9/15/27 2,375,799
416,296 Government National Mortgage Association,
8.000% due 6/15/27 through 7/15/27 432,038
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost -- $28,082,147) 28,109,658
============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
TBC MANAGED INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<C> <S> <C>
PREFERRED STOCK -- 0.2%
2,300 Eagle Picher Holdings (Cost -- $129,667) $ 110,400
============================================================================================
WARRANT -- 0.0%
150 Loral Orion Network Systeims Inc., Expire 1/31/07
(Cost -- $105) 1,725
============================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $56,401,471) 55,845,936
============================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
============================================================================================
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 13.4%
$ 8,665,000 U.S. Treasury Note, 5.250% due 11/2/98
(Cost -- $8,665,000) 8,665,000
============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $65,066,471**) $64,510,936
============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Services ("Standard &
Poor's"), except that those which are identified by an asterisk (*) are
rated by Moody's Investors Service Inc. ("Moody's").
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be sold in transactions that are exempt from
registration, normally to qualified institutional buyers.
++ Variable rate security.
@ Represents amortized cost on 10/31/98.
# Security is traded on a "to-be-announced" basis (See Note 10).
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 31 for definition of ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
============================================================================================
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.2%
$ 2,000,000 Federal Home Loan Mortgage Corp. matures 3/26/99
(Cost -- $1,960,367) 5.04% $1,960,367
============================================================================================
COMMERCIAL PAPER -- 75.2%
4,000,000 AIG Funding matures 11/5/98 5.26 3,997,671
1,000,000 Alliance & Leicester Bank PLC matures 2/1/99 5.55 986,149
3,000,000 American Express Credit Corp. matures 11/5/98 5.27 2,998,250
3,000,000 Associates Corp of North America matures 1/12/99 5.23 2,969,040
4,000,000 Bank of New York matures 11/9/98 5.30 3,995,307
2,000,000 Bank of Nova Scotia matures 11/9/98 5.50 1,997,578
3,000,000 BCI Funding Corp. matures 12/2/98 to 12/14/98 5.51 to 5.61 2,982,277
5,000,000 Bell Atlantic Financial Services matures 11/17/98 5.11 4,988,667
4,000,000 Chase Manhattan Bank Corp. matures 1/29/99 5.20 3,949,468
2,000,000 Commerzbank matures 2/12/99 5.60 1,968,814
3,000,000 Credito Italiano Delaware, Inc. matures 12/4/98 5.55 2,984,957
2,000,000 Cregem North America matures 3/29/99 5.17 1,958,560
4,000,000 Daimler-Benz North America Co.
mature 11/13/98 to 12/9/98 5.33 to 5.55 3,984,940
2,000,000 Den Danske Bank matures 11/6/98 5.57 1,998,472
2,000,000 Dresdner US Finance matures 12/16/98 5.40 1,986,675
4,000,000 E.I. du Pont De Nemours & Co. matures 12/21/98 5.07 3,972,056
5,000,000 Ford Motor Credit mature 11/10/98 to 1/27/99 5.10 to 5.58 4,960,783
4,000,000 General Electric Capital Corp.
mature 11/9/98 to 11/12/98 5.29 to 5.60 3,994,291
5,000,000 General Motors Acceptance Corp.
mature 12/28/98 to 1/25/99 5.13 to 5.63 4,943,534
4,000,000 Generale Bank mature 12/3/98 to 1/15/99 5.51 to 5.65 3,967,430
2,000,000 Goldman, Sachs & Co. matures 11/12/98 5.65 1,996,642
5,000,000 Halifax PLC matures 11/2/98 5.28 4,999,269
5,000,000 IBM Credit Corp. matures 11/3/98 5.04 4,998,603
3,000,000 International Lease Finance matures 12/7/98 5.25 2,984,400
4,000,000 International Nederlanden US Funding Corp.
matures 12/11/98 5.20 3,977,156
4,000,000 J.P. Morgan & Co. mature 12/18/98 to 12/21/98 5.41 to 5.64 3,970,834
4,500,000 Merrill Lynch & Co., Inc. mature 11/18/98
to 1/29/99 5.17 to 5.58 4,458,279
3,000,000 Morgan Stanley Dean Witter & Co. matures 1/14/99 5.26 2,967,933
2,000,000 Procter & Gamble Co. matures 1/26/99 5.60 1,973,961
5,000,000 Province De Quebec matures 11/3/98 5.28 to 5.53 4,998,516
4,000,000 SBC Communications matures 11/6/98 5.49 3,996,978
5,000,000 Siemans Corp. matures 11/16/98 5.01 4,989,604
1,000,000 Svenska Handelsbanken matures 12/17/98 5.60 993,011
2,000,000 Transamerica Finance Corp. matures 1/20/99 5.60 1,975,689
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
============================================================================================
<C> <S> <C> <C>
COMMERCIAL PAPER -- 75.2% (continued)
$ 4,300,000 USAA Capital Corp. matures 11/5/98 5.50% $ 4,297,396
3,000,000 Walt Disney Co. matures 11/4/98 5.27 2,998,686
2,000,000 Westdeutsche Landesbank matures 12/16/98 5.25 1,987,000
- --------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost -- $124,148,876) 124,148,876
============================================================================================
DOMESTIC BANK OBLIGATIONS -- 6.1%
4,000,000 FCC National matures 11/10/98 5.48 4,000,040
2,000,000 First Union National Bank matures 2/4/99 5.62 2,000,000
4,000,000 Harris Bank matures 12/4/98 5.42 3,999,991
- --------------------------------------------------------------------------------------------
TOTAL DOMESTIC BANK OBLIGATIONS
(Cost -- $10,000,031) 10,000,031
============================================================================================
DOMESTIC CERTIFICATES OF DEPOSIT -- 5.5%
2,000,000 Bank of Nova Scotia matures 3/23/99 5.73 1,998,853
3,000,000 Canadian Imper Bank matures 1/14/99 5.27 3,000,000
4,000,000 NationsBank matures 2/22/99 5.24 4,000,000
- --------------------------------------------------------------------------------------------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT
(Cost -- $8,998,853) 8,998,853
============================================================================================
FOREIGN CERTIFICATES OF DEPOSIT -- 1.2%
2,000,000 Toronto Dominion matures 1/4/99
(Cost -- $2,000,027) 5.23 2,000,027
============================================================================================
TIME DEPOSITS -- 9.1%
5,000,000 Bank Austriaengesellschaft
(Bank Austria) matures 11/2/98 5.69 5,000,000
5,000,000 First Chicago matures 11/2/98 5.56 5,000,000
5,000,000 Paribas matures 11/2/98 5.69 5,000,000
- --------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost -- $15,000,000) 15,000,000
============================================================================================
REPURCHASE AGREEMENT -- 1.7%
2,855,000 Morgan Stanley Dean Witter & Co.,
5.38% due 11/2/98; Proceeds at maturity -- $2,856,280;
(Fully collateralized by U.S. Treasury Bills due 5/15/99;
Market value -- $2,940,000) (Cost -- $2,855,000) 5.38 2,855,000
============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $164,963,154**) $164,963,154
============================================================================================
</TABLE>
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "CCC" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in
a small degree.
A -- Bonds rated "A" have 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
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B and -- Bonds rated "BB" and "B" are regarded, on balance, as
CCC predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" represents a lower degree of speculation than
"B," and "CCC" the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are outweighted by large uncertainties or
major risk exposure to adverse conditions.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "A" to "Caa," where 1 is the highest and 3 the lowest rating within its
generic category.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered
adequate, but elements may be present that suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payment and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate thereby
not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this
class.
B -- Bonds rated "B" generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period
of time may be small.
Caa -- Bonds that are rated "Caa" are of poor standing. Such issues may
be in default or present elements of danger with respect to
principal or interest.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 31
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smith Barney
MFS Total TBC Managed Money
Return Income Market
Portfolio Portfolio Portfolio
====================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value
(Cost -- $386,095,879 and
$56,401,471, respectively) $403,289,703 $55,845,936 $ --
Short-term investments, at value
(Cost -- $58,670,431,
$8,665,000 and $164,963,154,
respectively) 58,670,431 8,665,000 164,963,154
Cash -- -- 96
Receivable for securities sold 4,168,821 6,126,268 --
Receivable for Fund shares sold 9,302 170,930 --
Receivable from Manager -- 9,747 --
Dividends and interest receivable 3,168,722 761,466 200,160
- ----------------------------------------------------------------------------------------------------
Total Assets 469,306,979 71,579,347 165,163,410
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,650,509 13,903,855 --
Management fees payable 296,524 84,526 71,058
Payable to bank 36,819 4,803 --
Payable for open forward foreign
currency contract (Note 5) 7,909 -- --
Dividends payable -- -- 338,260
Deferred interest income -- 4,025 --
Accrued expenses 41,440 26,442 76,648
- ----------------------------------------------------------------------------------------------------
Total Liabilities 7,033,201 14,023,651 485,966
- ----------------------------------------------------------------------------------------------------
Total Net Assets $462,273,778 $ 57,555,696 $164,677,444
====================================================================================================
NET ASSETS:
Par value of capital shares $ 285 $ 49 $ 1,647
Capital paid in excess of par value 402,760,998 55,064,127 164,675,797
Undistributed net investment income 12,670,197 2,440,668 --
Accumulated net realized gain
from security transactions 29,621,868 606,387 --
Net unrealized appreciation (depreciation)
of investments and foreign currencies 17,220,430 (555,535) --
- ----------------------------------------------------------------------------------------------------
Total Net Assets $462,273,778 $ 57,555,696 $164,677,444
====================================================================================================
Shares Outstanding 28,475,906 4,941,272 164,677,444
- ----------------------------------------------------------------------------------------------------
Net Asset Value $ 16.23 $ 11.65 $ 1.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smith Barney
MFS Total TBC Managed Money
Return Income Market
Portfolio Portfolio Portfolio
====================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 11,017,994 $ 2,778,948 $ 6,706,794
Dividends 4,664,209 -- --
Less: Foreign withholding tax (58,838) -- --
- ----------------------------------------------------------------------------------------------------
Total Investment Income 15,623,365 2,778,948 6,706,794
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 2,992,300 258,425 622,117
Shareholder communications 57,538 5,522 13,136
Custody 51,143 8,976 19,653
Audit and legal 26,130 17,312 24,797
Pricing service fees 14,072 24,009 --
Directors' fees 10,216 4,328 6,500
System servicing fees 8,526 6,914 7,509
Registration fees -- 5,485 4,280
Other 4,961 3,568 69,731
- ----------------------------------------------------------------------------------------------------
Total Expenses 3,164,886 334,539 767,723
- ----------------------------------------------------------------------------------------------------
Net Investment Income 12,458,479 2,444,409 5,939,071
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 4 AND 5):
Realized Gain (Loss) From:
Security transactions
(excluding short-term securities*) 29,873,664 606,030 50
Foreign currency transactions (9,870) -- --
- ----------------------------------------------------------------------------------------------------
Net Realized Gain 29,863,794 606,030 50
- ----------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments and
Foreign Currencies:
Beginning of year 26,417,291 581,871 --
End of year 17,220,430 (555,535) --
- ----------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation) (9,196,861) (1,137,406) --
- ----------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and
Foreign Currencies 20,666,933 (531,376) 50
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 33,125,412 $ 1,913,033 $ 5,939,121
====================================================================================================
</TABLE>
* Represents only gains from the sale of short-term securities for the Smith
Barney Money Market Portfolio.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 33
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended October 31,
MFS Total Return Portfolio 1998 1997
=============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,458,479 $ 6,906,142
Net realized gain 29,863,794 11,632,148
Increase (decrease) in net unrealized appreciation (9,196,861) 15,804,047
- ---------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 33,125,412 34,342,337
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,865,134) (3,166,892)
Net realized gains (11,682,166) (1,937,784)
- ---------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (18,547,300) (5,104,676)
- ---------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 167,526,814 98,021,137
Net asset value of shares issued
for reinvestment of dividends 18,547,300 5,104,675
Cost of shares reacquired (1,963,578) (3,307,736)
- ---------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 184,110,536 99,818,076
- ---------------------------------------------------------------------------------------------
Increase in Net Assets 198,688,648 129,055,737
NET ASSETS:
Beginning of year 263,585,130 134,529,393
- ---------------------------------------------------------------------------------------------
End of year* $ 462,273,778 $ 263,585,130
=============================================================================================
* Includes undistributed net investment income of: $ 12,670,197 $ 6,905,623
=============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended October 31,
TBC Managed Income Portfolio 1998 1997
============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,444,409 $ 1,765,010
Net realized gain 606,030 420,487
(Increase) decrease in net unrealized depreciation (1,137,406) 292,261
- -------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,913,033 2,477,758
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,768,427) (1,060,922)
Net realized gains (75,046) --
- -------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,843,473) (1,060,922)
- -------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 27,200,431 7,828,206
Net asset value of shares issued
for reinvestment of dividends 1,843,473 1,060,922
Cost of shares reacquired (3,336,756) (2,059,096)
- -------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 25,707,148 6,830,032
- -------------------------------------------------------------------------------------------
Increase in Net Assets 25,776,708 8,246,868
NET ASSETS:
Beginning of year 31,778,988 23,532,120
- -------------------------------------------------------------------------------------------
End of year* $ 57,555,696 $ 31,778,988
===========================================================================================
* Includes undistributed net investment income of: $ 2,440,668 $ 1,768,287
===========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 35
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended October 31,
Smith Barney Money Market Portfolio 1998 1997
============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,939,071 $ 5,355,692
Net realized gain 50 47
- -------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 5,939,121 5,355,739
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (5,939,071) (5,355,692)
Net realized gains (50) (47)
- -------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,939,121) (5,355,739)
- -------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 456,432,130 199,654,882
Net asset value of shares issued
for reinvestment of dividends 5,823,491 5,314,435
Cost of shares reacquired (408,746,205) (192,951,787)
- -------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 53,509,416 12,017,530
- -------------------------------------------------------------------------------------------
Increase in Net Assets 53,509,416 12,017,530
NET ASSETS:
Beginning of year 111,168,028 99,150,498
- -------------------------------------------------------------------------------------------
End of year $ 164,677,444 $ 111,168,028
===========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The MFS Total Return, TBC Managed Income and Smith Barney Money Market
Portfolios ("Portfolio(s)") are separate investment portfolios of the Travelers
Series Fund Inc. ("Fund"). The Fund, a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company and consists of these Portfolios and ten other
separate investment portfolios: Alliance Growth, AIM Capital Appreciation,
GTGlobal Strategic Income, Putnam Diversified Income, Smith Barney High Income,
Smith Barney Large Cap Value (formerly known as Smith Barney Income and Growth
Portfolio), Smith Barney International Equity, Smith Barney Pacific Basin, Smith
Barney Large Capitalization Growth and Van Kampen American Capital Enterprise
Portfolios. Shares of the Fund are offered only to insurance company separate
accounts that fund certain variable annuity and variable life insurance
contracts. The financial statements and financial highlights for the other
portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) the Smith Barney
Money Market Portfolio uses the amortized cost method for valuing all of its
portfolios securities; the MFS Total Return and TBC Managed Income Portfolios
use the amortized cost method for valuing securities with maturities less than
60 days, accordingly, the cost of securities plus accreted discount or minus
amortized premium, approximates value; (c) securities traded on national
securities markets are valued at the closing prices on such markets; securities
for which no sales price was reported and U.S. government agencies and
obligations are valued at the mean between the bid and ask prices; (d) dividend
income is recorded on the ex-dividend date; foreign dividends are recorded on
the ex-dividend date or as soon as practical after the Portfolio determines the
existence of a dividend declaration after exercising reasonable due diligence;
(e) gains or losses on the sale of securities are calculated by using the
specific identification method; (f) interest income, adjusted for amortization
of premium and accretion of discount, is recorded on an accrual basis; (g)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) the accounting records of the Portfolios are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income or expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At October 31, 1998,
reclassifications were made to the capital accounts
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
of the MFS Total Return Portfolio and the TBC Managed Income Portfolio to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
accumulated net realized gain amounting to $13,675 was reclassified to paid-in
capital for the MFS Total Return Portfolio. Net investment income, net realized
gains and net assets were not affected by this change; (j) the Portfolios intend
to comply with the requirements of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; and (k) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Dividends
The Smith Barney Money Market Portfolio declares and records a dividend of
substantially all its net investment income on each business day. Such dividends
are paid or reinvested monthly on the payable date.
3. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager of the Smith Barney Money Market
Portfolio ("SBMM"). Travelers Investment Adviser, Inc. ("TIA"), an affiliate of
MMC, acts as the investment manager of the MFS Total Return ("MFSTR") and the
TBC Managed Income ("TBCMI") Portfolios. Effective March 27, 1998, the
management fee SBMM pays MMC was decreased from an annual rate of 0.60% to 0.50%
of the average daily net assets of the Portfolio. MFSTR and TBCMI pay TIA a
management fee calculated at an annual rate of 0.80% and 0.65%, respectively, of
the average daily net assets of each Portfolio. These fees are calculated daily
and paid monthly.
TIA has sub-advisory agreements with Massachusetts Financial Services Company
("MFS") and The Boston Company Asset Management, Inc. ("TBC"). Pursuant to each
sub-advisory agreement, MFS and TBC are responsible for the day-to-day portfolio
operations and investment decisions for MFSTR and TBCMI, respectively, and are
compensated for such services at an annual rate of 0.375% and 0.30%,
respectively, of the average daily net assets of MFSTR and TBCMI. These fees are
calculated daily and paid monthly.
TIA has entered into a Sub-Administrative Services Agreement with MMC. TIA pays
MMC, as sub-administrator, a fee calculated at an annual rate of 0.10% of the
average daily net assets of MFSTR and TBCMI.
- --------------------------------------------------------------------------------
38 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, acts as the
primary broker for its portfolio agency transactions.
All officers and one Director of the Fund are employees of SSB.
4. Investments
During the year ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
MFSTR TBCMI
================================================================================
Purchases $543,220,908 $154,098,042
- --------------------------------------------------------------------------------
Sales 390,245,149 128,091,744
================================================================================
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
MFSTR TBCMI
================================================================================
Gross unrealized appreciation $ 28,796,881 $ 625,744
Gross unrealized depreciation (11,603,057) (1,181,279)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 17,193,824 $ (555,535)
================================================================================
5. Forward Foreign Currency Contracts
At October 31, 1998, MFSTR had open forward foreign currency contracts as
described below. The Portfolio bears the market risk that arises from changes in
foreign currency exchange rates. The unrealized loss on the contracts reflected
in the accompanying financial statements were as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Loss
================================================================================
MFS Total Return Portfolio
To Buy:
Swiss Franc 230,480 $ 170,196 11/04/98 $ (425)
German Mark 316,948 191,801 12/15/98 (1,992)
Dutch Guilder 523,846 280,476 11/03/98 (602)
- --------------------------------------------------------------------------------
(3,019)
- --------------------------------------------------------------------------------
To Sell:
German Mark 354,769 214,688 12/15/98 (4,890)
- --------------------------------------------------------------------------------
Total Unrealized Loss on Open
Forward Foreign Currency
Contracts $ (7,909)
================================================================================
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
6. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
7. Futures Contracts
MFSTR has the ability to enter into futures contracts.
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. MFSTR enters into such
contracts to hedge a portion of its portfolio. The Portfolio bears the market
risk that arises from changes in the value of the financial instruments and
securities indices(futures contracts).
At October 31, 1998, MFSTR had no open futures contracts.
8. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios are collateralized by
cash, U.S. government securities, high quality money market instruments or other
securities that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
between 2% and 5% depending on the type of securities loaned. The custodian
establishes and maintains the collateral in segregated accounts.
At October 31, 1998, the Portfolios had no securities on loan.
- --------------------------------------------------------------------------------
40 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
9. Options Contracts
Premiums paid when put or call options are purchased by the Portfolios represent
investments, which are marked-to-market daily and are included in the schedule
of investments. When a purchased option expires, the Portfolios will realize a
loss in the amount of the premium paid. When the Portfolios enter into a closing
sales transaction, the Portfolios will realize a gain or loss depending on
whether the proceeds from the closing sales transaction are greater or less than
the premium paid for the option. When the Portfolios exercise a put option, they
will realize a gain or loss from the sale of the underlying security and the
proceeds from such sale will be decreased by the premium originally paid. When
the Portfolios exercise a call option, the cost of the security which the
Porfolios purchase upon exercise will be increased by the premium originally
paid.
At October 31, 1998, the Portfolios had no open purchased put or call option
contracts.
When the Porfolios write a covered call or put option, an amount equal to the
premium received by the Portfolios is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Portfolios
realize a gain. When the Portfolios enter into a closing purchase transaction,
the Portfolios realize a gain or loss depending upon whether the cost of the
closing transaction is greater or less than the premium originally received
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a written call option
is exercised, the cost of the security sold will be decreased by the premium
originally received. When a put option is exercised, the amount of the premium
originally received will reduce the cost of the security which the Portfolios
purchased upon exercise. When the written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolios enter into options for hedging purposes. The risk in
writing a covered call option is that the Portfolios give up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Portfolios are
exposed to the risk of a loss if the market price of the underlying security
declines.
During the year ended October 31, 1998, the Portfolios did not write any
options.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
10. Securities Traded on a To-Be-Announced Basis
The Portfolios may trade securities on a "to-be-announced" ("TBA") basis. In a
TBA transaction, the Portfolios commit to purchasing or selling securities for
which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the
Portfolios normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner as
for other securities.
At October 31, 1998, TBCMI held three TBA securities with a cost of $3,440,044.
11. Capital Shares
At October 31, 1998, the Fund had six billion shares of capital stock authorized
with a par value of $0.00001 per share. Each share of a Portfolio represents an
identical interest in that Portfolio with each share of the same Portfolio and
has an equal entitlement to any dividends and distributions made by the
Portfolio.
Transactions in shares of each Portfolio were as follows:
Year Ended Year Ended
October 31, 1998 October 31, 1997
================================================================================
MFS Total Return Portfolio
Shares sold 10,257,417 6,821,186
Shares issued on reinvestment 1,123,398 383,810
Shares redeemed (125,704) (230,566)
- --------------------------------------------------------------------------------
Net Increase 11,255,111 6,974,430
================================================================================
TBC Managed Income Portfolio
Shares sold 2,314,924 710,326
Shares issued on reinvestment 157,967 98,782
Shares redeemed (283,065) (184,846)
- --------------------------------------------------------------------------------
Net Increase 2,189,826 624,262
================================================================================
SB Money Market Portfolio
Shares sold 456,432,130 199,654,882
Shares issued on reinvestment 5,823,491 5,314,435
Shares redeemed (408,746,205) (192,951,787)
- --------------------------------------------------------------------------------
Net Increase 53,509,416 12,017,530
================================================================================
- --------------------------------------------------------------------------------
42 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
12. Subsequent Event
On November 24, 1998, shareholders of the TBC Managed Income Portfolio of the
Travelers Series Fund Inc. (the "Fund") approved a new management agreement
between the Fund on behalf of the TBC Managed Income Portfolio and Travelers
Asset Management International Corporation ("TAMIC").
Effective December 1, 1998, TAMIC will assume all of the duties previously
performed by Travelers Investment Adviser, Inc., the TBC Managed Income
Portfolio's manager, and The Boston Company Asset Management, Inc., the TBC
Managed Income Portfolio's sub-adviser. Also, the Board of Directors of the Fund
have voted to change the name of the Portfolio to the Travelers Managed Income
Portfolio from the TBC Managed Income Portfolio to be effective on December 1,
1998, with the assumption by TAMIC of the management.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 43
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
MFS Total Return Portfolio 1998 1997 1996 1995 1994(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 15.31 $ 13.13 $ 11.53 $ 9.98 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.32 0.38 0.33 0.45 0.13
Net realized and unrealized gain (loss) 1.36 2.27 1.62 1.15 (0.15)
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.68 2.65 1.95 1.60 (0.02)
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.29) (0.27) (0.05) --
Net realized gains (0.48) (0.18) (0.08) -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.76) (0.47) (0.35) (0.05) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 16.23 $ 15.31 $ 13.13 $ 11.53 $ 9.98
- ------------------------------------------------------------------------------------------------------------
Total Return 10.94% 20.64% 17.16% 16.12% (0.20)%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $462,274 $263,585 $134,529 $ 49,363 $ 8,504
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.84% 0.86% 0.91% 0.95% 0.93%+
Net investment income 3.32 3.54 3.82 4.40 3.51+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 118% 99% 139% 104% 18%
============================================================================================================
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the Manager
has reimbursed the Portfolio for $13,857 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not
reimbursed, the per share effect on net investment income and expense
ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement
------------------- -----------------
1995 $0.01 1.06%
1994 0.06 2.51+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
44 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
TBC Managed Income Portfolio 1998(1) 1997(1) 1996(1) 1995 1994(2)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.55 $ 11.06 $ 11.16 $ 10.04 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.72 0.63 0.65 0.61 0.21
Net realized and unrealized gain (loss) (0.06) 0.35 (0.14) 0.64 (0.17)
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.66 0.98 0.51 1.25 0.04
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.54) (0.49) (0.46) (0.13) --
Net realized gains (0.02) -- (0.15) -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.49) (0.61) (0.13) --
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.65 $ 11.55 $ 11.06 $ 11.16 $ 10.04
- ------------------------------------------------------------------------------------------------------------
Total Return 5.71% 9.19% 4.61% 12.68% 0.40%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 57,556 $ 31,779 $ 23,532 $ 11,279 $ 3,840
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.84% 0.87% 0.92% 0.92% 0.87%+
Net investment income 6.11 6.48 6.19 6.13 5.67+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 327% 259% 255% 170% 42%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the Manager
has reimbursed the Portfolio for $15,557 in expenses for the period ended
October 31, 1994. If such fees were not waived and expenses not
reimbursed, the per share effect on net investment income and the expense
ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement
------------------- -----------------
1995 $0.04 1.29%
1994 0.07 2.91+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 45
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended October 31:
<TABLE>
<CAPTION>
Smith Barney Money Market Portfolio 1998 1997 1996 1995 1994(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------
Net investment income(2) 0.050 0.049 0.049 0.052 0.014
Distributions from net
investment income (0.050) (0.049) (0.049) (0.052) (0.014)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------
Total Return 5.11% 5.05% 5.05% 5.35% 1.46%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $164,677 $111,168 $ 99,150 $ 37,487 $ 5,278
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.64% 0.65% 0.65% 0.65% 0.66%+
Net investment income 4.99 4.94 4.86 5.26 3.83+
============================================================================================================
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager waived all or part of its fees for the years ended October 31,
1997, October 31, 1996 and October 31, 1995 and the period ended October
31, 1994. In addition, the Manager reimbursed the Portfolio for $15,423 in
expenses for the period ended October 31, 1994. If such fees were not
waived and expenses not reimbursed, the per share effect on net investment
income and the expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement
------------------- -----------------
1997 $0.000* 0.67%
1996 0.001 0.74
1995 0.003 0.94
1994 0.005 2.11+
* Amount represents less than $0.001.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
46 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the MFS Total Return, TBC Managed Income and
Smith Barney Money Market Portfolios of Travelers Series Fund Inc. as of October
31, 1998, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the four-year
period then ended and the period from June 16, 1994 (commencement of operations)
to October 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
MFS Total Return, TBC Managed Income and Smith Barney Money Market Portfolios of
Travelers Series Fund Inc. as of October 31, 1998, and the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the four-year period then ended and for the period from
June 16, 1994 to October 31, 1994, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
December 18, 1998
- --------------------------------------------------------------------------------
Travelers Series Fund Inc. 47
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Travelers Series Fund Inc. hereby designates for
the fiscal year ended October 31, 1998:
o Long-term capital gain distribution paid:
MFS Total Return Portfolio $7,709,725
TBC Managed Income Portfolio 73,786
o A total of 32.86% of the ordinary dividends paid by the MFS Total
Return Portfolio quality for the corporate dividends received
deduction.
o A total of 6.94% of the ordinary dividends paid by the TBC Managed
Income Portfolio from net investment income are derived from Federal
obligations and may be exempt from taxation at the state level.
- --------------------------------------------------------------------------------
48 1998 Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
--------------------
A member of citigroup [LOGO]
Directors Investment Managers
Mutual Management Corp.
Victor K. Atkins Travelers Investment Adviser, Inc.
A.E. Cohen
Robert A. Frankel Custodian
Rainer Greeven
Susan M. Heilbron PNC Bank, N.A.
Heath B. McLendon, Chairman
Annuity Administration
Officers Travelers Annuity Investor Services
5 State House Square
Heath B. McLendon 1 Tower Square
President and Hartford, CT 06183
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer This report is submitted for the
general information of the
Phyllis Zahorodny shareholders of Travelers Series Fund
Vice President Inc. -- MFS Total Return, TBC Managed
Income and Smith Barney Money Market
Irving P. David Portfolios. It is not authorized for
Controller distribution to prospective investors
unless accompanied or preceded by a
Thomas M. Reynolds current Prospectus for the Portfolios
Controller which contains information concerning
the Portfolios' investment policies
Christina T. Sydor and expenses as well as other
Secretary pertinent information.
Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc.
Travelers Series Fund Inc.
388 Greenwich Street, MF-2
New York, New York 10013
IN0253 12/98
