UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number | | 811-8372 |
Travelers Series Fund Inc.
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| (Exact name of registrant as specified in charter) |
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| 125 Broad Street, New York, | | NY 10004 |
| (Address of principal executive offices) | | (Zip code) |
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
300 First Stamford Place, 4th Floor
Stamford, CT 06902
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| (Name and address of agent for service) |
Registrant’s telephone number, including area code: (800) 451-2010
Date of fiscal year end: October 31
Date of reporting period: October 31, 2005
| ITEM 1. | REPORT TO STOCKHOLDERS. |
The Annual Report to Stockholders is filed herewith.
EXPERIENCE
ANNUAL REPORT
OCTOBER 31, 2005
Travelers Series Fund Inc.
SB Adjustable Rate
Income Portfolio
Smith Barney
High Income Portfolio
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Travelers Series Fund Inc.
SB Adjustable Rate Income Portfolio
Smith Barney High Income Portfolio
Annual Report • October 31, 2005
What’s
Inside
Under a licensing agreement between Citigroup and Legg Mason, the names of funds, the names of any classes of shares of funds, and the names of investment advisers of funds, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” “Citigroup Asset Management,” and “Davis Skaggs Investment Management”. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.
All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.
Letter from the Chairman
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
The U.S. economy was surprisingly resilient during the fiscal year. While surging oil prices, rising interest rates and the impact of Hurricanes Katrina and Rita threatened to derail economic expansion, growth remained solid throughout the period. After a 3.3% advance in the second quarter of 2005, third quarter gross domestic product (“GDP”)i growth grew to 4.3%, marking the tenth consecutive quarter in which GDP growth grew 3.0% or more.
As expected, the Federal Reserve Board (“Fed”)ii continued to raise interest rates in an attempt to ward off inflation. After raising rates three times from June 2004 through September 2004, the Fed increased its target for the federal funds rateiii in 0.25% increments eight additional times over the reporting period. The Fed again raised rates in early November, after the Funds’ reporting period had ended. All told, the Fed’s twelve rate hikes have brought the target for the federal funds rate from 1.00% to 4.00%. This represents the longest sustained Fed tightening cycle since 1976-1979.
During the 12-month period covered by this report, the U.S. stock market generated solid results, with the S&P 500 Indexiv returning 8.72%. Generally positive economic news, relatively benign core inflation and strong corporate profits supported the market during much of the period. Looking at the fiscal year as a whole, mid-cap stocks generated superior returns, with the Russell Midcap,v Russell 1000,vi and Russell 2000vii Indices returning 18.09%, 10.47%, and 12.08%, respectively. From a market style perspective, value-oriented stocks significantly outperformed their growth counterparts, with the Russell 3000 Valueviii and Russell 3000 Growthix Indices returning 11.96% and 8.99%, respectively.
During much of the fiscal year, the fixed income market confounded investors as short-term interest rates rose in
Travelers Series Fund Inc. 1
concert with the Fed rate tightening, while longer-term rates, surprisingly, declined. However, due to a spike late in the period, the 10-year Treasury yield was 4.56% on October 31, 2005, versus 4.11% when the period began. Nevertheless, this was still lower than its yield of 4.62% when the Fed began its tightening cycle on June 30, 2004. Looking at the one-year period as a whole, the overall bond market, as measured by the Lehman Brothers Aggregate Bond Index,x returned 1.13%.
Within this environment, the Funds performed as follows:
| | | | |
| Performance Snapshot as of October 31, 2005 (unaudited) |
| | |
| | | 6 months | | 12 months |
| | | | | |
SB Adjustable Rate Income Portfolio | | 1.09% | | 1.87% |
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Citigroup 6-Month U.S. Treasury Bill Index | | 1.59% | | 2.71% |
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Lipper Variable Short-Intermediate Investment Grade Debt Funds Category Average | | 0.70% | | 1.10% |
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Smith Barney High Income Portfolio | | 3.68% | | 3.14% |
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Citigroup High Yield Market Index | | 3.87% | | 3.55% |
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Bear Stearns High Yield Market Index | | 3.53% | | 3.47% |
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Lipper Variable High Current Yield Funds Category Average | | 3.53% | | 3.23% |
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| The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. |
| Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses. |
| Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the period ended October 31, 2005 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 36 funds for the six-month period and among the 33 funds for the 12-month period in the variable high current yield funds category. Returns were calculated among the 97 funds for the six-month period and among the 96 funds for the 12-month period in the variable short-intermediate investment grade debt funds category. |
Please read on for a more detailed look at prevailing economic and market conditions during the Fund’s fiscal year and to learn how those conditions have affected Fund performance.
Special Shareholder Notice
On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management
2 Travelers Series Fund Inc.
business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager (the “Manager”), previously an indirect
wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Funds’ existing investment management contract to terminate. The Funds’ shareholders previously approved a new investment management contract between the Funds and the Manager which became effective on December 1, 2005.
Information About Your Funds
As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.
Important information concerning the Funds and their Manager with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.
Travelers Series Fund Inc. 3
As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
December 1, 2005
All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
| i | | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
| ii | | The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. |
| iii | | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. |
| iv | | The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. |
| v | | The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05. |
| vi | | The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. |
| vii | | The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. |
| viii | | The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) |
| ix | | The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. |
| x | | The Lehman Brothers Aggregate Bond Index is a broad-based bond index comprised of Government, Corporate, Mortgage and Asset-backed issues, rated investment grade or higher, and having at least one year to maturity. |
4 Travelers Series Fund Inc.
Manager Overview
SB Adjustable Rate Income Portfolio
Special Shareholder Notice
Effective November 1, 2005, the management fee payable by SB Adjustable Rate Income Portfolio was reduced from 0.60% to 0.55% for asset values up to $1 billion and was calculated in accordance with the following breakpoint schedule with the management fee reduced at breakpoints beginning at asset levels over $1 billion:
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| Breakpoint Schedule | |
| |
| Based on Net Assets of the Fund | | Management Fee | |
First $1 Billion | | 0.550 | % |
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Next $1 Billion | | 0.525 | % |
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Next $3 Billion | | 0.500 | % |
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Next $5 Billion | | 0.475 | % |
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Over $10 Billion | | 0.450 | % |
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Q. What were the overall market conditions during the Fund’s reporting period?
A. During the 12 months ended October 31, 2005, markets were primarily driven by Federal Reserve (“Fed”)i activity, employment and inflation data and rising energy costs, exacerbated near period end by the devastating impact of Hurricane Katrina on the U.S. Gulf Coast. The Fed’s eight “measured” 25-basis-pointii hikes during the period brought the fed funds rateiii to 3.75% from 1.75% by period end. The Fed raised rates an additional quarter point to 4.00% on November 1, after the close of the reporting period. These measured, consecutive rate hikes exerted upward pressure on short-term bond yields, driving 2-year yields up about 183 basis points during the 12 months. However, in what Fed Chairman Alan Greenspan termed a “conundrum,” yields on the long bond stayed low during the period, even declining slightly (four basis points) over the 12 months despite relinquishing all gains to end 53 basis points higher by period end. This sharp rise in short yields and relative stagnation in longer yields resulted in the extensive yield curve flattening seen during the period.
As the market fully expected each 25-basis-point hike in the federal funds rate during the period — thanks to the Fed’s well-advertised intentions to raise rates at a measured pace — investors spent much of the period dissecting language from the Fed for clues on its assessment of the U.S. economy and the pace of rate hikes. The Fed reiterated throughout the year that it would increase rates “at a pace that is likely to be measured” and, starting in June 2004, added that, “the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.” In its most recent statement (from the September 20th meeting), the Fed noted that core inflation remained low near the end of the period and long-term inflation expectations remained “contained” (even if the language was downgraded from the “well contained” language used at prior meetings).
Travelers Series Fund Inc. 2005 Annual Report 5
Slowing global growth, rising inflation and surging oil prices undoubtedly restrained economic activity during the period, with gross domestic product (“GDP”)iv declining year-over-year to 3.8% growth in first quarter 2005 (from first quarter 2004’s 4.5% pace) and to 3.4% growth in second quarter 2005 (from second quarter 2004’s 3.5%). However, economic growth remained remarkably resilient into the third quarter, particularly after fears of a sharp slowdown in the wake of Hurricanes Katrina and Rita, gaining 3.8% on an annualized basis versus 3.9% last year and consensus expectations of 3.6% growth. Although growth remained strong throughout the period, fears of potential slowing, combined with increasing inflation, drove markets. Oil prices, which breached $70 per barrel before period end, continue to cast a pall on growth and consumer spending expectations.
This was particularly true in the latter half of the period, as investors assessed the potential impact of Hurricanes Katrina and Rita on U.S. economic growth, inflation and the pace of interest rates and growth indicators turned increasingly mixed. For example, the U.S. labor market began to pick up in early 2004 and continued to improve through most of the Fund’s fiscal year, although the pace of improvement remained uneven from month to month. Unemployment fell through the majority of the period, declining from 5.5% in October 2004 to 4.9% in August 2005. However, employment skyrocketed, even if not as much as expected, in the wake of Hurricane Katrina, and the unemployment rate rose to 5.0% in October. Industrial production and retail sales also remained positive through most of the period, even considering the volatility in the auto sector as General Motors and Ford were successively downgraded by three major statistical credit rating agencies to below investment grade. Again, however, as with employment, industrial production and retail sales data turned negative near period end as the effects of Hurricane Katrina roiled through the economy, reductions in auto production hit the market and the highly successful automotive dealer incentive packages offered through the summer came to an end.
While inflationary pressures from sustained high commodity prices began to creep into the economy, particularly near the end of the period, continued strong growth and limited wage pressures are keeping long-term inflation expectations “contained”. Core inflation rates, in particular, remained subdued throughout the period despite growing inflationary pressure. Specifically, core Consumer Price Index (“CPI”)v inflation rose only 0.1% year-over-year to 2.1% in October 2005, and core Producer Price Index (“PPI”)vi inflation edged up only 0.1% year-over-year to 1.9% in September 2005. However, both consumer and producer headline inflation rose dramatically by period end as continually high and rising energy prices and competitive pricing pressures began to be passed through to the consumer. Headline CPI inflation rose approximately 1.1% to 4.3% in October 2005 versus October 2004, and headline PPI inflation increased 1.5% to 5.9% over the same period. Pricing pressures were also seen in the core PCE deflator,vii the Fed’s preferred measure of inflation, which rose 0.5% versus September 2004 to 2.0% year-over-year in the latest September reading.
6 Travelers Series Fund Inc. 2005 Annual Report
Performance Update1
For the 12 months ended October 31, 2005, the SB Adjustable Rate Income Portfolio returned 1.87%. In comparison, the portfolio’s unmanaged benchmark, the Citigroup 6-Month Treasury Bill Index,viii returned 2.71%, and its Lipper Variable Short-Intermediate Investment Grade Debt Funds Category Average2 increased 1.10% over the same period.
Q. What were the most significant factors affecting Fund performance?
A. The overall reduction in fixed-rate in favor of floating-rate mortgages and the continued diversification across asset classes contributed to NAV stability during the volatile 12-month period.
What were the leading contributors to performance?
A. During the annual period, the adjustable-rate mortgage (ARMs) portion of the portfolio dominated performance, benefiting from the corresponding rate reset to underlying assets experienced in the wake of the Fed’s eight “measured” rate hikes. ARMs also benefited from improved technical support on diminished supply, with issuance increasingly shifting from hybrid ARMs to fixed as rates rose.
What were the leading detractors from performance?
A. The lag in adjustability of coupon as we overweighted floating-rate securities in an effort to provide stability to the NAV reduced the portfolio’s overall yield earlier in the period than would otherwise have occurred. In addition, the presence of mortgages in the portfolio detracted from portfolio performance versus the 100% U.S. Treasury benchmark, as mortgage spreads widened considerably during the period.
Q. Were there any significant changes to the Fund during the reporting period?
A. We opportunistically added to our collateralized mortgage obligation (CMO) position as fixed-rate mortgages underperformed during the majority of the period. We reduced our position in asset-backed securities during the 12 months, although we maintain a significant allocation in an effort to preserve diversification.
| 1 | | The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results. |
| 2 | | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 33 funds in the Fund’s Lipper category. |
Travelers Series Fund Inc. 2005 Annual Report 7
Thank you for your investment in the SB Adjustable Rate Income Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.
Sincerely,
| | |
 | |  |
| David A. Torchia | | Theresa M. Veres |
| Portfolio Manager | | Portfolio Manager |
December 1, 2005
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Collateralized Mortgage Obligations (40.7%), U.S. Government & Agency Obligations (29.0%), Asset-Backed Securities (24.0%) and Mortgage-Backed Securities (1.9%). The Fund’s portfolio composition is subject to change at any time.
RISKS: Keep in mind, the Fund is subject to fluctuations in share price as interest rates rise and fall. Adjustable rate securities are subject to additional risks such as prepayment risk. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance.
All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
| i | | The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. |
| ii | | A basis point is one one-hundredth (1/100 or 0.01) of one percent. |
| iii | | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. |
| iv | | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
| v | | The Consumer Price Index measures the average change in U.S. consumer prices over time in a fixed market basket of goods and services determined by the U.S. Bureau of Labor Statistics. |
| vi | | The Producer Price Index measures the change in wholesale prices as released monthly by the U.S. Bureau of Labor Statistics. |
| vii | | The PCE deflator is a nation-wide indicator of the average increase in prices for all domestic personal consumption. It’s derived from the largest Gross Domestic Product (GDP) component, personal consumption expenditures, and is indexed to a base of 100 in 1992. |
| viii | | The Citigroup 6-Month U.S. Treasury Bill Index performance is an average of the last 6-Month Treasury Bill issues. 6-Month U.S. Treasury Bills are guaranteed by the U.S. government and provide a fixed rate of return when held to maturity. |
8 Travelers Series Fund Inc. 2005 Annual Report
Fund at a Glance (unaudited)
SB Adjustable Rate Income Portfolio
Travelers Series Fund Inc. 2005 Annual Report 9
Fund Performance
SB Adjustable Rate Income Portfolio
| | | |
| Average Annual Total Returns† (unaudited) | |
Twelve Months Ended 10/31/05 | | 1.87 | % |
|
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9/12/03* through 10/31/05 | | 1.50 | |
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| | | |
| Cumulative Total Return† (unaudited) | |
9/12/03* through 10/31/05 | | 3.24 | % |
|
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| † | | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an Investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
| * | | Commencement of operations. |
10 Travelers Series Fund Inc. 2005 Annual Report
Historical Performance (unaudited)
Value of $10,000 Invested in Shares of the SB Adjustable Rate Income Portfolio vs.
Citigroup 6 Month U.S. Treasury Bill Index† (September 2003 — October 2005)
| † | | Hypothetical illustration of $10,000 invested in shares of the SB Adjustable Rate Income Portfolio on September 12, 2003 (commencement of operations), assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Citigroup 6-Month U.S. Treasury Bill Index includes 6-Month Treasury Bills that are guaranteed by the U.S. government and provide a fixed rate of return when held to maturity. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index. |
All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment, which will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The graph does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.
Travelers Series Fund Inc. 2005 Annual Report 11
Manager Overview
Smith Barney High Income Portfolio
Q. What were the overall market conditions during the Fund’s reporting period?
A. During the 12 months ended October 31, 2005, the high yield market, as represented by the Citigroup High Yield Market Index,i returned 3.55%. High yield debt markets rallied through the last two months of 2004 as investors gained confidence that inflation was contained and the Federal Reserve Board (“Fed”)ii would continue to raise rates at a “measured pace.” Reduced U.S. Treasury market volatility, combined with the continued low interest rate environment, set a positive tone for high yield, engendering generally positive mutual fund flows and contributing both to the record number of deals that came to market during 2004 and strong demand for higher yielding assets. Additionally, default rates reached 20-year lows as the improving economy and the low interest rate environment enabled companies to extend their debt maturities and improve their liquidity.
However, rising oil prices, weak equity markets and isolated hawkish comments from the Fed regarding inflation led the market down in the first few months of 2005. The steady stream of negative auto sector headlines through Spring 2005, including General Motor’s unexpected negative earnings warning in mid-March and Ford’s reduced earnings guidance and second quarter production cuts announced in late April, reintroduced investor fears of both companies’ potential downgrades to high yield status. This caused spreads to widen dramatically within the auto sector and across fixed income credit markets. Markets began recovering in mid-May on stronger technicals, positive economic developments and S&P and Fitch’s long-anticipated downgrades of Ford and GM to non-investment grade. The rating agencies’ actions removed some of the uncertainty in the market surrounding the credits’ ultimate resting places, allowing both high yield and investment grade investors to shore up their positions.
Improving technicals, better overall demand and the relative absence of further negative headlines continued to buoy markets through June and July, despite a stronger new issue calendar in June and renewed outflows from high yield mutual funds. Resurgent investor risk appetites on the back of strong U.S. economic news and positive 2Q earnings announcements also contributed to positive performance, allowing markets to outperform despite the July 7th terrorist bombings in London (and the July 21st reprise) and weaker consumer sentiment.
However, higher-than-expected August new issuance, combined with stronger inflation, increasingly mixed economic data and rising energy prices, slowed activity near the end of the period, although low trading volumes and light issuance in the latter half of August (ahead of the Labor Day holiday) kept markets in positive territory. High yield markets continued to decline through October end, as volatility in the auto sector, higher energy costs, rising inflation and fears of a potentially slowing economy in the aftermath of Hurricane Katrina converged with abundant new supply and continued retail outflows following the Labor Day holiday.
12 Travelers Series Fund Inc. 2005 Annual Report
Spreads tightened 45 basis pointsiii during the 12-month period ended October 31, 2005 to close at 363 basis points over U.S. Treasuries. Based on the 8.13% yieldiv of the Citigroup High Market Yield Index as of October 31, 2005, high-yield bonds continued to offer competitive yields relative to U.S. Treasury notes.v However, high-yield issues are subject to additional risks, such as the increased possibility of default because of their lower credit quality, and yields and prices will fluctuate.
Performance Update1
For the 12 months ended October 31, 2005, the Smith Barney High Income Portfolio returned 3.14%. The Fund underperformed the Lipper Variable High Current Yield Funds Category Average,2 which increased 3.23%. In comparison, the Fund’s unmanaged benchmark, the Citigroup High Yield Market Index, returned 3.55% while the Fund’s former benchmark, the Bear Stearns High Yield Market Index,vi returned 3.47% for the same period.
Q. What were the most significant factors affecting Fund performance?
What were the leading contributors to performance?
A. Over the 12 months ending October 31, 2005, the Fund benefited from positive issue selection in the airlines and utilities sectors. Our security selection in CCC-rated and below securities also contributed positively to Fund performance.
What were the leading detractors from performance?
A. Our underweight to the telecommunications sector, higher-than-normal cash position and issue selection in the building products, telecommunications and containers sectors detracted from Fund performance during the period.
Q. Were there any significant changes to the Fund during the reporting period?
A. During the period, we added to our positions in automotive, cable & other media and energy and decreased our exposure to the chemicals, services/other, tower and utilities sectors. We also decreased our exposure to B- and CCC- rated securities during the 12-month period in favor of higher quality debt. BB-rated and above exposure increased 6.55% over the annual period.
| 1 | | The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results. |
| 2 | | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 96 funds in the Fund’s Lipper category. |
Travelers Series Fund Inc. 2005 Annual Report 13
Thank you for your investment in the Smith Barney High Income Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.
Sincerely,
| | |
| |
 | |  |
| Peter J. Wilby, CFA | | Beth A. Semmel, CFA |
| Portfolio Manager | | Portfolio Manager |
December 1, 2005
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Consumer Discretionary (29.1%), Telecommunication Services (10.5%), Materials (10.2%), Industrials (8.7%) and Energy (7.0%). The Fund’s portfolio composition is subject to change at any time.
RISKS: Keep in mind, high-yielding bonds are rated below investment grade and carry more risk than higher rated securities. Also, the Fund is subject to fluctuations in share price as interest rates rise and fall and is subject to certain risks of overseas investing, including currency fluctuations, differing securities regulations and periods of illiquidity, which could result in significant market fluctuations. These risks are magnified in emerging markets. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.
All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
| i | | The Citigroup High Yield Market Index is a broad-based unmanaged index of high yield securities. |
| ii | | The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. |
| iii | | A basis point is one one-hundredth (1/100 or 0.01) of one percent. |
| iv | | As measured by the yield on the Citigroup High Yield Market Index as of the period’s close. |
| v | | Yields are subject to change and will fluctuate. |
| vi | | The Bear Stearns High Yield Index comprises securities across a wide spectrum of industries with at least one year to maturity. All fixed-income, non-convertible, dollar-denominated securities rated both BB+ and Ba1 or lower (split-rated crossover issues are not included) with outstanding par value of at least $100 million are included. Effective January 1, 2005, the Citigroup High Yield Market Index replaced the Bear Stearns High Yield Index as the Fund’s sole benchmark. The manager has determined that the Citigroup High Yield Market Index reflects more closely the composition of the Fund’s portfolio. Performance for the Bear Stearns High Yield Index may not be included in future reports. |
14 Travelers Series Fund Inc. 2005 Annual Report
Fund at a Glance (unaudited)
Smith Barney High Income Portfolio
Travelers Series Fund Inc. 2005 Annual Report 15
Fund Performance
Smith Barney High Income Portfolio
| | | | | |
| Average Annual Total Returns† (unaudited) | |
Twelve Months Ended 10/31/05 | | 3.14 | % |
|
|
Five Years Ended 10/31/05 | | 5.37 | |
|
|
Ten Years Ended 10/31/05 | | 5.21 | |
|
|
6/16/94* through 10/31/05 | | 5.87 | |
|
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| | | | | |
| Cumulative Total Return† (unaudited) | |
10/31/95 through 10/31/05 | | 66.18 | % |
|
|
| † | | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
| * | | Commencement of operations. |
16 Travelers Series Fund Inc. 2005 Annual Report
Historical Performance (unaudited)
Value of $10,000 Invested in Shares of the Smith Barney High Income Portfolio vs. Citigroup High Yield Market Index and Bear Stearns High Yield Index† (October 1995 —October 2005)
| † | | Hypothetical illustration of $10,000 invested in shares of the Smith Barney High Income Portfolio on October 31, 1995, assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Bear Stearns High Yield Index is a broad-based unmanaged index of high-yield corporate bonds. The Citigroup High Yield Market Index is a broad-based unmanaged index of high yield securities. Effective January 1, 2005, the Citigroup High Yield Market Index replaced the Bear Stearns High Yield Index as the Fund’s benchmark. Management determined that the Citigroup High Yield Market Index was a more appropriate benchmark reflecting more closely the portfolio of securities and more representative of the management style. Each Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. |
All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.
Travelers Series Fund Inc. 2005 Annual Report 17
Fund Expenses (unaudited)
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and/or service (12b-1) Fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on May 1, 2005 and held for the six months ended October 31, 2005.
Actual Expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
| | | | | | | | | | | | | | | |
| Based on Actual Total Return(1) | | | | | | | | | | | | | |
| | | | | |
| | | Actual Total
Return(2) | | | Beginning
Account
Value | | Ending
Account
Value | | Annualized
Expense
Ratio | | | Expenses
Paid During
the Period(3) |
SB Adjustable Rate Income Portfolio | | 1.09 | % | | $ | 1,000.00 | | $ | 1,010.90 | | 0.97 | % | | $ | 4.92 |
|
Smith Barney High Income Portfolio | | 3.68 | | | | 1,000.00 | | | 1,036.80 | | 0.67 | | | | 3.44 |
|
| (1) | | For the six months ended October 31, 2005. |
| (2) | | Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. |
| (3) | | Expenses (net of contractual or voluntary fee waiver) are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
18 Travelers Series Fund Inc. 2005 Annual Report
Fund Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | |
| Based on Hypothetical Total Return(1) | | | | | | | | | |
| | | | | |
| | | Hypothetical
Annualized
Total Return | | | Beginning
Account
Value | | Ending
Account
Value | | Annualized
Expense
Ratios | | | Expenses
Paid During
the Period(2) |
SB Adjustable Rate Income Portfolio | | 5.00 | % | | $ | 1,000.00 | | $ | 1,020.32 | | 0.97 | % | | $ | 4.94 |
|
Smith Barney High Income Portfolio | | 5.00 | | | | 1,000.00 | | | 1,021.83 | | 0.67 | | | | 3.41 |
|
| (1) | | For the six months ended October 31, 2005. |
| (2) | | Expenses (net of contractual or voluntary fee waiver) are equal each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
Travelers Series Fund Inc. 2005 Annual Report 19
Schedules of Investments (October 31, 2005)
SB ADJUSTABLE RATE INCOME PORTFOLIO
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | ASSET-BACKED SECURITIES — 24.0% | | | | |
| | Automobiles — 2.7% | | | | |
| $ | 300,000 | | AAA | | Chesapeake Funding LLC, Series 2004-1A, Class A2,
4.050% due 7/7/16 (a)(b) | | $ | 300,321 | |
| | 400,000 | | AAA | | Franklin Auto Trust, Series 2004-1, Class A2, 3.570% due 3/16/09 | | | 395,594 | |
| | 350,000 | | AAA | | Household Automotive Trust, Series 2003-2, Class A4, 3.020% due 12/17/10 | | | 342,259 | |
|
|
|
| | | | | | Total Automobiles | | | 1,038,174 | |
|
|
|
| | Credit Card — 2.2% | | | | |
| | 250,000 | | AAA | | Advanta Business Card Master Trust, Series 2003-B, Class A, 4.350% due 12/22/08 (a) | | | 250,649 | |
| | 375,000 | | AAA | | Capital One Master Trust, Series 2001-1, Class A, 4.170% due 12/15/10 (a) | | | 376,864 | |
| | 225,000 | | AAA | | Circuit City Credit Card Master Trust, Series 2003-2, Class A, 4.400% due 4/15/11 (a) | | | 225,460 | |
|
|
|
| | | | | | Total Credit Card | | | 852,973 | |
|
|
|
| | Diversified Financial Services — 1.5% | | | | |
| | | | | | Business Loan Express: | | | | |
| | 114,538 | | Aaa(c) | | Series 2001-1A, Class A, 4.650% due 7/20/27 (a)(b) | | | 115,226 | |
| | 144,010 | | AAA | | Series 2002-AA, Class A, 4.688% due 6/25/28 (a)(b) | | | 145,013 | |
| | 104,451 | | AAA | | Series 2003-2A, Class A, 4.838% due 1/25/32 (a)(b) | | | 106,311 | |
| | 189,889 | | AAA | | Series 2003-AA, Class A, 4.920% due 5/15/29 (a)(b) | | | 194,218 | |
|
|
|
| | | | | | Total Diversified Financial Services | | | 560,768 | |
|
|
|
| | Home Equity — 16.3% | | | | |
| | | | | | Ameriquest Mortgage Securities Inc.: | | | | |
| | 191,022 | | AAA | | Series 2003-AR2, Class A4, 4.388% due 5/25/33 (a) | | | 191,249 | |
| | 299,112 | | AAA | | Series 2004-R8, Class A5, 4.408% due 9/25/34 (a) | | | 299,892 | |
| | 164,085 | | AAA | | Argent Securities Inc., Series 2004-W10, Class A2,
4.428% due 10/25/34 (a) | | | 164,502 | |
| | 220,552 | | AAA | | Asset-Backed Securities Corp., Home Equity Loan Trust, Series 2001-HE3, Class A1, 4.240% due 11/15/31 (a) | | | 220,702 | |
| | | | | | Bayview Financial Acquisition Trust: | | | | |
| | 325,343 | | AAA | | Series 2003-E, Class A, 4.570% due 10/28/34 (a) | | | 326,437 | |
| | 130,000 | | AAA | | Series 2003-G, Class A1, 4.670% due 1/28/39 (a) | | | 130,406 | |
| | 181,579 | | AAA | | Bear Stearns Asset-Backed Securities I Trust, Series 2004-B01, Class 2A2, 4.438% due 9/25/34 (a) | | | 181,878 | |
| | | | | | Bear Stearns Asset-Backed Securities Inc.: | | | | |
| | 286,337 | | AAA | | Series 2003-1, Class A1, 4.538% due 11/25/42 (a) | | | 287,751 | |
| | 324,667 | | AAA | | Series 2003-SD1, Class A, 4.488% due 12/25/33 (a) | | | 325,649 | |
| | 85,679 | | AAA | | Series 2003-SD3, Class A, 4.518% due 10/25/33 (a) | | | 85,891 | |
| | 220,661 | | AAA | | CDC Mortgage Capital Trust, Series 2002-HE1, Class A,
4.348% due 1/25/33 (a) | | | 221,098 | |
| | 139,865 | | AAA | | Cendant Mortgage Corp., Series 2003-A, Class A3,
4.588% due 7/25/43 (a)(b) | | | 140,415 | |
See Notes to Financial Statements.
20 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Home Equity — 16.3% (continued) | | | | |
| $ | 213,938 | | AAA | | Countrywide Asset-Backed Certificates, Series 2004-6, Class 2A4,
4.488% due 11/25/34 (a) | | $ | 214,576 | |
| | 248,000 | | AA+ | | Credit Suisse First Boston Mortgage Securities Corp., Series 2001-HE16, Class M1, 4.688% due 11/25/31 (a) | | | 248,721 | |
| | 50,679 | | AAA | | First Franklin Mortgage Loan Trust, Series 2002-FF3, Class A2,
4.498% due 8/25/32 (a) | | | 50,783 | |
| | 36,603 | | AAA | | Fremont Home Loan Trust, Series 2003-A, Class 2A2,
4.393% due 8/25/33 (a) | | | 36,653 | |
| | 388,579 | | AAA | | GMAC Mortgage Corp. Loan Trust, Series 2004-HE2, Class A2,
2.880% due 10/25/33 (a) | | | 382,593 | |
| | 96,364 | | AAA | | Household Home Equity Loan Trust, Series 2002-4, Class A,
4.550% due 10/20/32 (a) | | | 96,444 | |
| | 184,741 | | AAA | | Morgan Stanley ABS Capital I Trust, Series 2003-HE1, Class A4,
4.538% due 5/25/33 (a) | | | 185,072 | |
| | 450,000 | | AA | | New Century Home Equity Loan Trust, Series 2004-2, Class M2,
4.658% due 8/25/34 (a) | | | 452,257 | |
| | 633,958 | | AAA | | Option One Mortgage Loan Trust, Series 2003-1, Class A2,
4.458% due 2/25/33 (a) | | | 635,902 | |
| | | | | | Renaissance Home Equity Loan Trust: | | | | |
| | 377,867 | | AAA | | Series 2003-2, Class A, 4.478% due 8/25/33 | | | 379,164 | |
| | 397,667 | | AAA | | Series 2003-3, Class A, 4.538% due 12/25/33 (a) | | | 400,291 | |
| | 31,288 | | AAA | | Saxon Asset Securities Trust, Series 2002-1, Class AV1,
4.288% due 3/25/32 (a) | | | 31,338 | |
| | 115,798 | | AAA | | Securitized Asset Backed Receivables LLC Trust, Series 2004-OP1,
Class A2, 4.288% due 2/25/34 (a) | | | 115,866 | |
| | 63,643 | | AAA | | Soundview Home Equity Loan Trust, Series 2003-1, Class A,
4.488% due 8/25/31 (a) | | | 63,853 | |
| | 26,186 | | Aaa(c) | | Specialty Underwriting & Residential Finance Trust, Series 2003-BC1, Class A, 4.378%) due 1/25/34 (a) | | | 26,219 | |
| | | | | | Structured Asset Investment Loan Trust: | | | | |
| | 75,812 | | AAA | | Series 2003-BC1, Class A2, 4.378% due 1/25/33 (a) | | | 76,001 | |
| | 274,835 | | AAA | | Series 2003-BC10, Class 3A5, 4.518% due 10/25/33 (a) | | | 275,233 | |
|
|
|
| | | | | | Total Home Equity | | | 6,246,836 | |
|
|
|
| | Other — 0.8% | | | | |
| | 320,102 | | AAA | | Lehman XS Trust, Series 2005-2, Class 2A1A,
4.188% due 8/25/35 (a) | | | 320,002 | |
|
|
|
| | Student Loan — 0.5% | | | | |
| | 200,000 | | AAA | | Saco I Trust, Series 2005-WM3, Class A1,
4.330% due 9/25/35 (a) | | | 200,000 | |
|
|
|
| | | | | | TOTAL ASSET-BACKED SECURITIES
(Cost — $9,209,567) | | | 9,218,753 | |
|
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 21
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | MORTGAGE-BACKED SECURITIES(a) — 1.9% | | | | |
| | FHLMC — 0.7% | | | | |
| $ | 265,578 | | | | Federal Home Loan Mortgage Corp. (FHLMC), 4.669% due 1/1/27 | | $ | 270,139 | |
|
|
|
| | FNMA — 1.2% | | | | |
| | 462,051 | | | | Federal National Mortgage Association (FNMA), 4.007% due 5/1/42 (e) | | | 464,644 | |
|
|
|
| | | | | | TOTAL MORTGAGE-BACKED SECURITIES
(Cost — $734,330) | | | 734,783 | |
|
|
|
| | COLLATERALIZED MORTGAGE OBLIGATIONS — 40.7% | | | | |
| | 300,000 | | AAA | | ABN AMRO Mortgage Corp., Series 2003-5, Class A11, PAC,
4.750% due 4/25/33 | | | 296,477 | |
| | | | | | Banc of America Mortgage Securities Inc.: | | | | |
| | 193,874 | | AAA | | Series 2003-F, Class 1A1, 2.969% due 7/25/33 (a) | | | 191,842 | |
| | 131,936 | | AAA | | Series 2004-A, Class 1A1, 3.487% due 2/25/34 (a) | | | 131,039 | |
| | 158,251 | | AAA | | Series 2005-A, Class 2A1, 4.468% due 2/25/35 (a) | | | 155,409 | |
| | 273,424 | | AAA | | Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-12, Class 1A1, 4.154% due 2/25/35 (a) | | | 269,938 | |
| | 127,651 | | AAA | | Bear Stearns Alternate-A Trust, Series 2004-11, Class 1A2,
4.458% due 11/25/34 (a) | | | 127,954 | |
| | 346,688 | | AAA | | Bear Stearns Asset-Backed Securities Inc., Series 2003-AC5, Class A3, 4.638% due 10/25/33 (a) | | | 346,847 | |
| | | | | | Countrywide Home Loan Mortgage Pass-Through Trust: | | | | |
| | 225,742 | | AAA | | Series 2001-HYB1, Class 1A1, 4.684% due 6/19/31 (a) | | | 226,907 | |
| | 127,357 | | AAA | | Series 2002-26, Class A4, 4.538% due 12/25/17 (a) | | | 127,604 | |
| | 139,188 | | AAA | | Series 2003-HYB3, Class 7A1, 3.800% due 11/19/33 (a) | | | 134,445 | |
| | 178,346 | | Aaa(c) | | Series 2004-19, Class A1, 5.500% due 10/25/34 | | | 178,190 | |
| | 416,367 | | AAA | | Deutsche Mortgage Securities Inc., Series 2004-4, Class 7AR2,
4.488% due 6/25/34 (a) | | | 416,888 | |
| | | | | | Federal Home Loan Mortgage Corp. (FHLMC): | | | | |
| | 250,000 | | AAA | | Series 2852, Class TE, PAC, 5.000% due 1/15/13 | | | 250,344 | |
| | 375,000 | | AAA | | Series 2866, Class WA, PAC, 5.000% due 8/15/16 | | | 375,538 | |
| | | | | | Federal National Mortgage Association (FNMA): | | | | |
| | | | | | Grantor Trust: | | | | |
| | 396,282 | | AAA | | Series 2001-T1, Class A2, 4.866% due 10/25/40 (a) | | | 399,923 | |
| | 230,810 | | AAA | | Series 2002-T18, Class A5, 4.909% due 5/25/42 (a) | | | 234,649 | |
| | 173,807 | | AAA | | Series 2002-T19, Class A4, 4.923% due 3/25/42 (a) | | | 176,926 | |
| | | | | | REMIC Trust: | | | | |
| | 275,156 | | AAA | | Series 1997-20, Class F, 3.571% due 3/25/27 (a) | | | 272,258 | |
| | 128,223 | | AAA | | Series 2003-111, Class HR, PAC, 3.750% due 5/25/30 | | | 124,860 | |
| | 315,025 | | AAA | | Series 2003-117, Class KF, PAC, 4.438% due 8/25/33 (a) | | | 316,500 | |
| | 60,509 | | AAA | | Series 2003-124, Class F, 4.338% due 1/25/34 (a) | | | 60,675 | |
| | 347,691 | | AAA | | Series 2004-31, Class FG, 4.438% due 8/25/33 (a) | | | 348,865 | |
| | 169,264 | | AAA | | Series 2005-86, Class FC, 4.338% due 10/25/35 (a) | | | 169,043 | |
| | | | | | Whole Loan: | | | | |
| | 105,370 | | AAA | | Series 2003-W6, Class F, 4.388% due 9/25/42 (a) | | | 105,891 | |
| | 131,818 | | AAA | | Series 2003-W14, Class 2A, 4.812% due 1/25/43 (a) | | | 133,665 | |
| | 226,303 | | AAA | | Series 2003-W15, Class 3A, 4.871% due 12/25/42 (a) | | | 229,795 | |
| | 228,207 | | AAA | | Series 2004-T2, Class 2A, 4.822% due 7/25/43 (a) | | | 231,221 | |
See Notes to Financial Statements.
22 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | COLLATERALIZED MORTGAGE OBLIGATIONS — 40.7% (continued) | | | | |
| $ | 77,219 | | AAA | | GGP Mall Properties Trust, Series 2001-C1A, Class A3,
4.670% due 2/15/14 (a)(b) | | $ | 77,378 | |
| | 280,791 | | AAA | | GMAC Commercial Mortgage Asset Corp., Series 2003-SNFA, Class A, 4.770% due 1/17/18 (a)(b) | | | 281,366 | |
| | 196,393 | | AA+ | | IMPAC CMB Trust, Series 2003-8, Class 1A2, 4.538% due 10/25/33 (a) | | | 196,632 | |
| | 122,151 | | AAA | | IMPAC Secured Assets Corp., Series 2004-3, Class 1A4,
4.438% due 11/25/34 (a) | | | 122,520 | |
| | 499,183 | | AAA | | Indymac Index Mortgage Loan Trust, Series 2005-AR21, Class 4A1, 5.470% due 10/25/35 (a) | | | 497,589 | |
| | 315,193 | | AAA | | Lehman Structured Securities Corp., Series 2005-1, Class A1,
4.391% due 9/26/45 (a)(b) | | | 315,132 | |
| | 389,071 | | AAA | | MASTR Adjustable Rate Mortgages Trust, Series 2003-6, Class 5A1, 3.950% due 12/25/33 (a) | | | 389,071 | |
| | 372,979 | | AAA | | MASTR Alternative Loans Trust, Series 2003-7, Class 7A1, PAC,
4.438% due 11/25/33 (a) | | | 373,984 | |
| | | | | | Merrill Lynch Mortgage Investors Inc.: | | | | |
| | 8,540 | | AAA | | Series 2003-A5, Class 2A3, 3.246% due 8/25/33 (a) | | | 8,518 | |
| | 261,207 | | AAA | | Series 2005-A2, Class A4, 4.498% due 2/25/35 (a) | | | 257,160 | |
| | 125,790 | | AAA | | Morgan Stanley Mortgage Loan Trust, Series 2004-5AR, Class 1A2, 3.695% due 7/25/34 (a) | | | 125,306 | |
| | | | | | Residential Asset Securitization Trust: | | | | |
| | 142,571 | | AAA | | Series 2003-A11, Class A2, PAC, 4.488% due 11/25/33 (a) | | | 142,615 | |
| | 351,444 | | AAA | | Series 2004-A2, Class 1A3, PAC, 4.438% due 5/25/34 (a) | | | 352,039 | |
| | 417,292 | | AAA | | Series 2004-A4, Class A2, PAC, 4.388% due 8/25/34 (a) | | | 417,407 | |
| | 117,906 | | AAA | | Residential Funding Mortgage Securities I Trust, Series 2003-S10,
Class A2, 4.438% due 6/25/33 (a) | | | 117,962 | |
| | 365,741 | | Aaa(c) | | Saco I Trust, Series 2005-2, Class A, 4.238% due 4/25/35 (a)(b) | | | 365,741 | |
| | | | | | Sequoia Mortgage Trust: | | | | |
| | 52,005 | | AAA | | Series 9, Class 2A, 5.161% due 9/20/32 (a) | | | 52,324 | |
| | 162,467 | | AAA | | Series 2003-2, Class A1, 4.330% due 6/20/33 (a) | | | 162,556 | |
| | | | | | Structured ARM Loan Trust: | | | | |
| | | | | | Series 2004-1: | | | | |
| | 194,388 | | AAA | | Class 1A, 5.764% due 2/25/34 (a) | | | 196,796 | |
| | 62,483 | | AAA | | Class 2A, 4.348% due 2/25/34 (a) | | | 62,540 | |
| | 78,866 | | AAA | | Series 2004-7, Class A1, 4.308% due 6/25/34 (a) | | | 78,906 | |
| | 100,483 | | Aaa(c) | | Series 2004-17, Class A1, 4.520% due 11/25/34 (a) | | | 100,378 | |
| | 150,000 | | AAA | | Series 2005-3XS, Class A2, 4.288% due 1/25/35 (a) | | | 150,103 | |
| | 352,390 | | AAA | | Series 2005-17, Class 4A2, 5.150% due 8/25/35 (a) | | | 350,458 | |
| | 349,001 | | AAA | | Series 2005-18, Class 9A1, 5.250% due 9/25/35 (a) | | | 347,634 | |
| | | | | | Structured Asset Mortgage Investments Inc.: | | | | |
| | 61,832 | | AAA | | Series 2002-AR1, Class 1A, 5.325% due 3/25/32 (a) | | | 62,233 | |
| | 91,434 | | AAA | | Series 2002-AR1, Class 2A, 4.669% due 3/25/32 (a) | | | 91,813 | |
| | 281,175 | | AAA | | Series 2003-AR2, Class A1, 4.367% due 12/19/33 (a) | | | 282,113 | |
| | 318,020 | | AAA | | Series 2005-AR3, Class 2A1, 5.335% due 8/25/35 (a) | | | 324,041 | |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 23
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | COLLATERALIZED MORTGAGE OBLIGATIONS — 40.7% (continued) | | | | |
| | | | | | Structured Asset Securities Corp.: | | | | |
| $ | 101,970 | | AA(d) | | Series 1998-3, Class M1, 5.038% due 3/25/28 (a) | | $ | 102,090 | |
| | 113,557 | | AA | | Series 1998-8, Class M1, 4.978% due 8/25/28 (a) | | | 113,686 | |
| | 180,484 | | AAA | | Series 2002-8A, Class 7A1, 5.152% due 5/25/32 (a) | | | 181,017 | |
| | 73,275 | | AAA | | Series 2002-16A, Class 1A1, 5.637% due 8/25/32 (a) | | | 74,170 | |
| | 43,985 | | AAA | | Series 2002-18A, Class 4A, 5.722% due 9/25/32 (a) | | | 44,744 | |
| | 40,574 | | AAA | | Series 2003-8, Class 2A9, 4.538% due 4/25/33 (a) | | | 40,586 | |
| | 6,887 | | AAA | | Series 2003-NP3, Class A1, 4.538% due 11/25/33 (a)(b) | | | 6,892 | |
| | 210,135 | | Aaa(c) | | Series 2004-NP1, Class A, 4.438% due 9/25/33 (a)(b) | | | 210,384 | |
| | 232,812 | | AAA | | Series 2005-RF3, Class 2A, 4.655% due 6/25/35 (a)(b) | | | 237,032 | |
| | | | | | Thornburg Mortgage Securities Trust: | | | | |
| | 199,560 | | AAA | | Series 2004-1, Class I2A, 4.488% due 3/25/44 (a) | | | 200,025 | |
| | 194,562 | | AAA | | Series 2004-3, Class A, 4.408% due 9/25/34 (a) | | | 195,160 | |
| | 374,240 | | AAA | | Series 2005-3, Class A4, 4.308% due 10/25/35 (a) | | | 374,240 | |
| | | | | | Washington Mutual: | | | | |
| | 253,719 | | AAA | | Series 2003-S6, Class 2A8, 4.438% due 7/25/18 (a) | | | 254,215 | |
| | 131,102 | | AAA | | Series 2004-AR2, Class A, 4.419% due 4/25/44 (a) | | | 131,197 | |
| | | | | | Washington Mutual Mortgage Pass-Through Certificates: | | | | |
| | 262,991 | | AAA | | Series 2002-AR1, Class 1A1, 5.507% due 11/25/30 (a) | | | 262,956 | |
| | 176,876 | | AAA | | Series 2003-AR10, Class A3B, 3.890% due 10/25/33 (a) | | | 176,077 | |
| | | | | | Wells Fargo Mortgage Backed Securities Trust: | | | | |
| | 120,874 | | Aaa(c) | | Series 2003-5, Class A4, PAC, 4.438% due 5/25/33 (a) | | | 121,125 | |
| | 200,000 | | AAA | | Series 2004-N, Class A2, 3.599% due 8/25/34 (a) | | | 199,385 | |
| | 95,992 | | AAA | | Series 2004-S, Class A2, 3.540% due 9/25/34 (a) | | | 95,631 | |
| | 234,781 | | AAA | | Series 2004-Y, Class 1A1, 4.584% due 11/25/34 (a) | | | 230,449 | |
|
|
|
| | | | | | TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost — $15,663,363) | | | 15,587,069 | |
|
|
|
| | U.S. GOVERNMENT & AGENCY OBLIGATIONS — 29.0% | | | | |
| | U.S. Government Agencies — 29.0% | | | | |
| | | | | | Federal Home Loan Mortgage Corp. (FHLMC): | | | | |
| | | | | | One Year CMT ARM: | | | | |
| | 195,849 | | | | 4.853% due 2/1/23 (a) | | | 199,702 | |
| | 160,344 | | | | 4.687% due 4/1/26 (a) | | | 163,444 | |
| | 202,953 | | | | 5.286% due 7/1/29 (a) | | | 209,422 | |
| | 110,528 | | | | 5.056% due 8/1/30 (a) | | | 113,449 | |
| | 135,320 | | | | 3.333% due 10/1/33 (a) | | | 134,241 | |
| | 494,520 | | | | One Year LIBOR, 4.065% due 5/1/33 (a) | | | 486,068 | |
| | | | | | Federal National Mortgage Association (FNMA): | | | | |
| | 299,302 | | | | 12.000% due 4/20/16 | | | 348,954 | |
| | | | | | One Year CMT ARM: | | | �� | |
| | 495,254 | | | | 4.568% due 8/1/15 (a)(e) | | | 496,738 | |
| | 320,540 | | | | 4.259% due 4/1/20 (a)(e) | | | 319,581 | |
| | 311,547 | | | | 5.119% due 11/1/25 (a) | | | 316,108 | |
| | 419,910 | | | | 5.244% due 1/1/26 (a)(e) | | | 427,736 | |
| | 481,191 | | | | 5.187% due 7/1/26 (a) | | | 493,262 | |
See Notes to Financial Statements.
24 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | | | Security | | Value | |
| | | | | | | | | | |
| | U.S. Government Agencies (continued) | | | | |
| $ | 259,511 | | | | 4.862% due 5/1/28 (a)(e) | | $ | 262,866 | |
| | 135,615 | | | | 4.995% due 5/1/28 (a) | | | 139,672 | |
| | 285,469 | | | | 5.149% due 9/1/30 (a)(e) | | | 293,737 | |
| | 135,531 | | | | 4.718% due 9/1/32 (a) | | | 135,450 | |
| | 99,282 | | | | 3.831% due 1/1/33 (a) | | | 100,772 | |
| | 121,787 | | | | 4.284% due 2/1/33 (a) | | | 121,448 | |
| | 119,024 | | | | 4.051% due 5/1/33 (a) | | | 116,995 | |
| | 266,190 | | | | 4.198% due 7/1/33 (a) | | | 259,146 | |
| | 314,509 | | | | 3.649% due 9/1/33 (a) | | | 305,921 | |
| | | | | | One Year LIBOR: | | | | |
| | 90,450 | | | | 4.151% due 1/1/33 (a) | | | 90,620 | |
| | 174,341 | | | | 4.187% due 6/1/33 (a) | | | 171,978 | |
| | 263,034 | | | | 4.055% due 7/1/33 (a) | | | 259,022 | |
| | 112,351 | | | | 3.122% due 8/1/33 (a) | | | 110,678 | |
| | 137,712 | | | | 4.125% due 10/1/33 (a) | | | 135,374 | |
| | 332,921 | | | | 4.433% due 2/1/34 (a) | | | 326,277 | |
| | 431,448 | | | | 3.381% due 4/1/34 (a) | | | 427,811 | |
| | 284,674 | | | | 4.275% due 8/1/34 (a) | | | 280,377 | |
| | 363,086 | | | | 4.757% due 10/1/34 (a) | | | 360,595 | |
| | 471,368 | | | | 4.302% due 3/1/35 (a)(e) | | | 463,336 | |
| | 133,500 | | | | 3.491% due 7/1/43 (a) | | | 132,823 | |
| | | | | | Six Month LIBOR: | | | | |
| | 91,335 | | | | 4.872% due 2/1/33 (a) | | | 91,926 | |
| | 230,478 | | | | 4.251% due 4/1/33 (a) | | | 227,855 | |
| | 246,813 | | | | 4.271% due 4/1/33 (a) | | | 246,919 | |
| | 308,078 | | | | 4.272% due 4/1/33 (a) | | | 306,027 | |
| | 214,153 | | | | 5.919% due 4/1/33 (a) | | | 219,250 | |
| | 108,615 | | | | 4.558% due 5/1/33 (a) | | | 108,555 | |
| | 45,770 | | | | 4.434% due 6/1/33 (a) | | | 45,457 | |
| | 358,561 | | | | 3.967% due 8/1/34 (a) | | | 349,651 | |
| | 284,153 | | | | 4.275% due 10/1/34 (a) | | | 281,161 | |
| | | | | | Government National Mortgage Association (GNMA) II, One Year CMT ARM: | | | | |
| | 127,434 | | | | 4.375% due 5/20/26 (a) | | | 127,951 | |
| | 111,860 | | | | 4.375% due 5/20/32 (a) | | | 112,110 | |
| | 75,947 | | | | 3.500% due 7/20/34 (a) | | | 73,821 | |
| | 436,299 | | | | 4.000% due 1/20/35 (a) | | | 437,125 | |
| | 275,183 | | | | 4.000% due 2/20/35 (a) | | | 269,659 | |
|
|
|
| | | | | | TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $11,239,889) | | | 11,101,070 | |
|
|
|
| | | | | | TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $36,847,149) | | | 36,641,675 | |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 25
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | | | Security | | Value | |
| | SHORT-TERM INVESTMENTS — 6.1% | | | | |
| | Repurchase Agreements — 6.1% | | | | |
| $ | 1,317,000 | | | | Interest in $572,678,000 joint tri-party repurchase agreement dated 10/31/05 with Deutche Bank Securities Inc., 4.000% due 11/1/05, Proceeds at maturity — $1,317,146; (Fully collateralized by various U.S. Government Agency Obligations 2.000% to 7.125% due 11/28/05 to 1/15/30; Market value — $1,343,347) | | $ | 1,317,000 | |
| | 1,000,000 | | | | Interest in $689,187,000 joint tri-party repurchase agreement dated 10/31/05 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.000% due 11/1/05, Proceeds at maturity — $1,000,111; (Fully collateralized by U.S. Treasury obligations, 0.000% to 3.750% due 11/03/05 to 5/15/08; Market value — $1,020,002)(e) | | | 1,000,000 | |
|
|
|
| | | | | | TOTAL SHORT-TERM INVESTMENTS
(Cost — $2,317,000) | | | 2,317,000 | |
|
|
|
| | | | | | TOTAL INVESTMENTS — 101.7% (Cost — $39,164,149#) | | | 38,958,675 | |
| | | | | | Liabilities in Excess of Other Assets — (1.7)% | | | (643,551 | ) |
|
|
|
| | | | | | TOTAL NET ASSETS — 100.0% | | $ | 38,315,124 | |
|
|
|
| ‡ | | All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. All ratings are unaudited. |
| (a) | | Variable rate securities. Coupon rates disclosed are those which are in effect at October 31, 2005. |
| (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. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted. |
| (c) | | Rating by Moody’s Investors Service. All ratings are unaudited. |
| (d) | | Rating by Fitch Ratings. All ratings are unaudited. |
| (e) | | All or a portion of this security is segregated for open futures contracts. |
| # | | Aggregate cost for federal income tax purposes is substantially the same. |
See pages 42 and 43 for definitions of ratings.
| | |
Abbreviations used in this schedule:
|
| ARM | | — Adjustable Rate Mortgage |
| CMT | | — Constant Maturity Treasury Index |
| LIBOR | | — London Interbank Offered Rate |
| MASTR | | — Mortgage Asset Securitization Transactions Inc. |
| PAC | | — Planned Amortization Class |
| REMIC | | — Real Estate Mortgage Investment Conduit |
See Notes to Financial Statements.
26 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
SMITH BARNEY HIGH INCOME PORTFOLIO
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | CORPORATE BONDS & NOTES — 88.9% | | | | |
| | Aerospace & Defense — 0.8% | | | | |
| $ | 1,225,000 | | B | | Argo-Tech Corp., Senior Notes, 9.250% due 6/1/11 | | $ | 1,267,875 | |
| | 650,000 | | BB+ | | L-3 Communications Corp., Senior Subordinated Notes,
7.625% due 6/15/12 | | | 682,500 | |
| | 325,000 | | BB- | | Sequa Corp., Senior Notes, 9.000% due 8/1/09 | | | 338,813 | |
|
|
|
| | | | | | Total Aerospace & Defense | | | 2,289,188 | |
|
|
|
| | Airlines — 0.8% | | | | |
| | | | | | Continental Airlines Inc., Pass-Through Certificates: | | | | |
| | 150,794 | | B+ | | Series 2000-2, Class C, 8.312% due 4/2/11 | | | 129,535 | |
| | 885,000 | | B | | Series 2001-2, Class D, 7.568% due 12/1/06 | | | 772,262 | |
| | | | | | United Airlines Inc., Pass-Through Certificates: | | | | |
| | 437,290 | | NR | | Series 2000-1, Class B, 8.030% due 7/1/11 (a) | | | 261,217 | |
| | 888,598 | | NR | | Series 2000-2, Class B, 7.811% due 10/1/09 (a) | | | 659,975 | |
| | | | | | Series 2001-1: | | | | |
| | 160,000 | | NR | | Class B, 6.932% due 9/1/11 (a) | | | 136,046 | |
| | 365,000 | | NR | | Class C, 6.831% due 9/1/08 (a) | | | 232,080 | |
|
|
|
| | | | | | Total Airlines | | | 2,191,115 | |
|
|
|
| | Auto Components — 0.9% | | | | |
| | 260,000 | | B | | Arvin Capital I, Capital Securities, 9.500% due 2/1/27 | | | 260,000 | |
| | 715,000 | | BB | | Dana Corp., Notes, 6.500% due 3/1/09 | | | 609,537 | |
| | 225,000 | | B- | | Rexnord Corp., Senior Subordinated Notes, 10.125% due 12/15/12 | | | 247,500 | |
| | | | | | Tenneco Automotive Inc.: | | | | |
| | 400,000 | | B- | | Senior Secured Notes, Series B, 10.250% due 7/15/13 | | | 434,000 | |
| | 925,000 | | B- | | Senior Subordinated Notes, 8.625% due 11/15/14 | | | 888,000 | |
| | 97,000 | | BB- | | TRW Automotive Inc., Senior Subordinated Notes,
11.000% due 2/15/13 | | | 108,883 | |
|
|
|
| | | | | | Total Auto Components | | | 2,547,920 | |
|
|
|
| | Automobiles — 2.6% | | | | |
| | | | | | Ford Motor Co.: | | | | |
| | | | | | Debentures: | | | | |
| | 360,000 | | BB+ | | 6.625% due 10/1/28 | | | 248,400 | |
| | 350,000 | | BB+ | | 8.900% due 1/15/32 | | | 287,875 | |
| | 4,675,000 | | BB+ | | Notes, 7.450% due 7/16/31 | | | 3,459,500 | |
| | | | | | General Motors Corp.: | | | | |
| | | | | | Senior Debentures: | | | | |
| | 750,000 | | BB- | | 8.250% due 7/15/23 | | | 556,875 | |
| | 2,925,000 | | BB- | | 8.375% due 7/15/33 | | | 2,182,781 | |
| | 975,000 | | BB- | | Senior Notes, 7.125% due 7/15/13 | | | 775,125 | |
|
|
|
| | | | | | Total Automobiles | | | 7,510,556 | |
|
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 27
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Beverages — 0.7% | | | | |
| $ | 1,575,000 | | B+ | | Constellation Brands Inc., Senior Subordinated Notes, Series B,
8.125% due 1/15/12 | | $ | 1,647,844 | |
| | 330,000 | | B+ | | Cott Beverages USA Inc., Senior Subordinated Notes,
8.000% due 12/15/11 | | | 339,075 | |
|
|
|
| | | | | | Total Beverages | | | 1,986,919 | |
|
|
|
| | Building Products — 1.0% | | | | |
| | | | | | Associated Materials Inc.: | | | | |
| | 2,000,000 | | CCC+ | | Senior Discount Notes, step bond to yield 11.250% due 3/1/14 | | | 950,000 | |
| | 160,000 | | CCC+ | | Senior Subordinated Notes, 9.750% due 4/15/12 | | | 149,600 | |
| | 750,000 | | CCC+ | | Nortek Inc., Senior Subordinated Notes, 8.500% due 9/1/14 | | | 720,000 | |
| | 1,275,000 | | B- | | Ply Gem Industries Inc., Senior Subordinated Notes,
9.000% due 2/15/12 | | | 1,039,125 | |
|
|
|
| | | | | | Total Building Products | | | 2,858,725 | |
|
|
|
| | Capital Markets — 0.5% | | | | |
| | 1,235,000 | | B- | | BCP Crystal U.S. Holdings Corp., Senior Subordinated Notes,
9.625% due 6/15/14 | | | 1,364,675 | |
|
|
|
| | Chemicals — 4.3% | | | | |
| | 345,000 | | BB- | | Airgas Inc., Senior Subordinated Notes, 9.125% due 10/1/11 | | | 367,856 | |
| | 475,000 | | B- | | Borden U.S. Finance Corp./Nova Scotia Finance ULC, Second Priority Senior Secured Notes, 9.000% due 7/15/14 (c) | | | 469,656 | |
| | 1,150,000 | | BB- | | Equistar Chemicals LP, Senior Notes, 10.625% due 5/1/11 | | | 1,259,250 | |
| | 675,000 | | B+ | | Hercules Inc., Senior Subordinated Notes, 6.750% due 10/15/29 | | | 654,750 | |
| | 1,250,000 | | B | | Huntsman Advanced Materials LLC, Senior Secured Notes,
11.000% due 7/15/10 | | | 1,393,750 | |
| | 655,000 | | BB- | | ISP Chemco Inc., Senior Subordinated Notes, Series B,
10.250% due 7/1/11 | | | 700,031 | |
| | 600,000 | | B+ | | ISP Holdings Inc., Senior Secured Notes, Series B,
10.625% due 12/15/09 | | | 633,000 | |
| | 655,000 | | BB- | | Lyondell Chemical Co., Senior Secured Notes, 11.125% due 7/15/12 | | | 733,600 | |
| | 760,000 | | BBB- | | Methanex Corp., Senior Notes, 8.750% due 8/15/12 | | | 846,450 | |
| | 1,700,000 | | BB- | | Millennium America Inc., Senior Notes, 9.250% due 6/15/08 | | | 1,831,750 | |
| | 235,000 | | B- | | OM Group Inc., Senior Subordinated Notes, 9.250% due 12/15/11 | | | 227,363 | |
| | 1,050,000 | | B- | | Resolution Performance Products LLC, Senior Subordinated Notes, 13.500% due 11/15/10 | | | 1,111,688 | |
| | 225,000 | | B- | | Resolution Performance Products LLC/RPP Capital Corp.,
Secured Notes, 9.500% due 4/15/10 | | | 228,375 | |
| | | | | | Rhodia SA: | | | | |
| | | | | | Senior Notes: | | | | |
| | 750,000 | | CCC+ | | 7.625% due 6/1/10 | | | 729,375 | |
| | 225,000 | | CCC+ | | 10.250% due 6/1/10 | | | 240,750 | |
| | 650,000 | | CCC+ | | Senior Subordinated Notes, 8.875% due 6/1/11 | | | 617,500 | |
| | 390,000 | | BB- | | Westlake Chemical Corp., Senior Notes, 8.750% due 7/15/11 | | | 419,250 | |
|
|
|
| | | | | | Total Chemicals | | | 12,464,394 | |
|
|
|
See Notes to Financial Statements.
28 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Commercial Services & Supplies — 3.7% | | | | |
| $ | 1,125,000 | | B | | Aleris International Inc., Senior Secured Notes,
10.375% due 10/15/10 | | $ | 1,234,687 | |
| | 850,000 | | B- | | Allied Security Escrow Corp., Senior Subordinated Notes,
11.375% due 7/15/11 | | | 815,429 | |
| | | | | | Allied Waste North America Inc.: | | | | |
| | 225,000 | | BB- | | Senior Notes, 7.250% due 3/15/15 (c) | | | 223,875 | |
| | | | | | Senior Secured Notes, Series B: | | | | |
| | 890,000 | | BB- | | 8.500% due 12/1/08 | | | 930,050 | |
| | 1,500,000 | | B+ | | 7.375% due 4/15/14 | | | 1,413,750 | |
| | 133,000 | | BB- | | Senior Secured Subordinated Notes, 9.250% due 9/1/12 | | | 144,019 | |
| | 575,000 | | CCC+ | | Brand Services Inc., Senior Notes, 12.000% due 10/15/12 | | | 612,375 | |
| | | | | | Cenveo Corp.: | | | | |
| | 530,000 | | B+ | | Senior Notes, 9.625% due 3/15/12 | | | 561,800 | |
| | 800,000 | | B- | | Senior Subordinated Notes, 7.875% due 12/1/13 | | | 744,000 | |
| | | | | | Iron Mountain Inc., Senior Subordinated Notes: | | | | |
| | 700,000 | | B | | 8.250% due 7/1/11 | | | 702,030 | |
| | 850,000 | | B | | 8.625% due 4/1/13 | | | 890,375 | |
| | 1,175,000 | | B | | 7.750% due 1/15/15 | | | 1,175,000 | |
| | | | | | Service Corp. International: | | | | |
| | 460,000 | | BB | | Debentures, 7.875% due 2/1/13 | | | 486,450 | |
| | 570,000 | | BB | | Senior Notes, 6.500% due 3/15/08 | | | 575,700 | |
|
|
|
| | | | | | Total Commercial Services & Supplies | | | 10,509,540 | |
|
|
|
| | Communications Equipment — 1.4% | | | | |
| | 3,275,000 | | B | | Lucent Technologies Inc., Debentures, 6.450% due 3/15/29 | | | 2,816,500 | |
| | 750,000 | | B- | | Nortel Networks Corp., Notes, 6.875% due 9/1/23 | | | 690,000 | |
| | 375,000 | | B- | | Nortel Networks Ltd., Notes, 6.125% due 2/15/06 | | | 375,937 | |
|
|
|
| | | | | | Total Communications Equipment | | | 3,882,437 | |
|
|
|
| | Computers & Peripherals — 0.1% | | | | |
| | 400,000 | | B- | | SunGard Data Systems Inc., Senior Notes, 9.125% due 8/15/13 (c) | | | 408,000 | |
|
|
|
| | Containers & Packaging — 3.3% | | | | |
| | 1,225,000 | | NR | | Anchor Glass Container Corp., Senior Secured Notes,
11.000% due 2/15/13 (a) | | | 784,000 | |
| | 725,000 | | B- | | Berry Plastics Corp., Senior Subordinated Notes, 10.750% due 7/15/12 | | | 750,375 | |
| | 450,000 | | B- | | Graphic Packaging International Corp., Senior Subordinated Notes, 9.500% due 8/15/13 | | | 406,125 | |
| | 1,000,000 | | B- | | JSG Funding PLC, Senior Notes, 9.625% due 10/1/12 | | | 965,000 | |
| | 1,220,000 | | BB- | | Owens-Brockway Glass Container Inc., Senior Secured Notes,
8.875% due 2/15/09 | | | 1,281,000 | |
| | 1,020,000 | | B+ | | Plastipak Holdings Inc., Senior Notes, 10.750% due 9/1/11 | | | 1,122,000 | |
| | | | | | Pliant Corp.: | | | | |
| | 230,000 | | CCC- | | Senior Secured Second Lien Notes, 11.125% due 9/1/09 | | | 188,600 | |
| | 80,000 | | CCC- | | Senior Subordinated Notes, 13.000% due 6/1/10 | | | 12,000 | |
| | 600,000 | | CCC- | | Radnor Holdings Corp., Senior Notes, 11.000% due 3/15/10 | | | 471,000 | |
| | 345,000 | | BBB | | Sealed Air Corp., Notes, 6.950% due 5/15/09 (c) | | | 362,041 | |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 29
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Containers & Packaging — 3.3% (continued) | | | | |
| | | | | | Smurfit-Stone Container Enterprises Inc., Senior Notes: | | | | |
| $ | 600,000 | | B | | 9.750% due 2/1/11 | | $ | 603,000 | |
| | 675,000 | | B | | 8.375% due 7/1/12 | | | 648,000 | |
| | 1,275,000 | | B | | Stone Container Finance Co. of Canada II, Senior Notes,
7.375% due 7/15/14 | | | 1,137,937 | |
| | | | | | Tekni-Plex Inc.: | | | | |
| | 650,000 | | C | | Senior Secured Notes, 8.750% due 11/15/13 (c) | | | 555,750 | |
| | 495,000 | | C | | Senior Subordinated Notes, Series B, 12.750% due 6/15/10 | | | 222,750 | |
|
|
|
| | | | | | Total Containers & Packaging | | | 9,509,578 | |
|
|
|
| | Diversified Financial Services — 3.8% | | | | |
| | | | | | Alamosa Delaware Inc.: | | | | |
| | 363,000 | | CCC+ | | Senior Discount Notes, step bond to yield 11.437% due 7/31/09 | | | 399,300 | |
| | 650,000 | | CCC+ | | Senior Notes, 11.000% due 7/31/10 | | | 723,125 | |
| | 160,000 | | BB- | | Case Credit Corp., Notes, 6.750% due 10/21/07 | | | 160,800 | |
| | | | | | Ford Motor Credit Co.: | | | | |
| | | | | | Notes: | | | | |
| | 775,000 | | BB+ | | 7.875% due 6/15/10 | | | 746,702 | |
| | 375,000 | | BB+ | | 7.000% due 10/1/13 | | | 343,729 | |
| | 1,250,000 | | BB+ | | Senior Notes, 7.250% due 10/25/11 | | | 1,166,355 | |
| | | | | | General Motors Acceptance Corp.: | | | | |
| | 2,375,000 | | BB | | Bonds, 8.000% due 11/1/31 | | | 2,458,621 | |
| | | | | | Notes: | | | | |
| | 25,000 | | BB | | 7.250% due 3/2/11 | | | 24,617 | |
| | 450,000 | | BB | | 6.875% due 8/28/12 | | | 434,064 | |
| | 1,950,000 | | BB | | 6.750% due 12/1/14 | | | 1,867,753 | |
| | 812,000 | | B- | | Global Cash Access LLC/Global Cash Finance Corp., Senior Subordinated Notes, 8.750% due 3/15/12 | | | 867,825 | |
| | 725,000 | | B- | | Nell AF SARL, Senior Notes, 8.375% due 8/15/15 (c) | | | 699,625 | |
| | 1,075,000 | | B- | | Sensus Metering Systems Inc., Senior Subordinated Notes,
8.625% due 12/15/13 | | | 983,625 | |
|
|
|
| | | | | | Total Diversified Financial Services | | | 10,876,141 | |
|
|
|
| | Diversified Telecommunication Services — 3.7% | | | | |
| | | | | | AT&T Corp., Senior Notes: | | | | |
| | 350,000 | | BB+ | | 7.300% due 11/15/11 | | | 388,500 | |
| | 1,800,000 | | BB+ | | 9.750% due 11/15/31 | | | 2,200,500 | |
| | 695,000 | | NR | | GT Group Telecom Inc., Senior Discount Notes, step bond to yield 15.232% due 2/1/10 (a)(d)(e) | | | 0 | |
| | 375,000 | | B | | Insight Midwest LP/Insight Capital Inc., Senior Notes,
10.500% due 11/1/10 | | | 395,625 | |
| | 500,000 | | B+ | | Intelsat Bermuda Ltd., Senior Notes, 8.695% due 1/15/12 (c)(f) | | | 508,750 | |
| | 825,000 | | B | | Intelsat Ltd., Senior Discount Notes, step bond to yield
9.253% due 2/1/15 (c) | | | 546,563 | |
| | 125,000 | | B+ | | MCI Inc., Senior Notes, 8.735% due 5/1/14 | | | 138,750 | |
| | 305,000 | | B- | | Northern Telecom Capital Corp., Notes, 7.875% due 6/15/26 | | | 300,425 | |
| | 200,000 | | B- | | NTL Cable PLC, Senior Notes, 8.750% due 4/15/14 | | | 210,500 | |
See Notes to Financial Statements.
30 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Diversified Telecommunication Services — 3.7% (continued) | | | | |
| $ | 406,000 | | B+ | | PanAmSat Corp., Senior Notes, 9.000% due 8/15/14 | | $ | 429,345 | |
| | 1,445,000 | | BB | | Qwest Corp., Notes, 8.875% due 3/15/12 | | | 1,593,112 | |
| | | | | | Qwest Services Corp., Senior Secured Notes: | | | | |
| | 2,840,000 | | B | | 13.500% due 12/15/10 | | | 3,258,900 | |
| | 596,000 | | B | | 14.000% due 12/15/14 | | | 724,885 | |
|
|
|
| | | | | | Total Diversified Telecommunication Services | | | 10,695,855 | |
|
|
|
| | Electric Utilities — 3.0% | | | | |
| | | | | | Edison Mission Energy, Senior Notes: | | | | |
| | 640,000 | | B+ | | 10.000% due 8/15/08 | | | 705,600 | |
| | 325,000 | | B+ | | 7.730% due 6/15/09 | | | 338,812 | |
| | 1,525,000 | | B+ | | 9.875% due 4/15/11 | | | 1,784,250 | |
| | | | | | Mirant Americas Generation LLC, Senior Notes: | | | | |
| | 475,000 | | NR | | 7.625% due 5/1/06 (a) | | | 572,375 | |
| | 900,000 | | NR | | 9.125% due 5/1/31 (a) | | | 1,181,250 | |
| | 1,165,000 | | B | | Orion Power Holdings Inc., Senior Notes, 12.000% due 5/1/10 | | | 1,374,700 | |
| | | | | | Reliant Energy Inc., Senior Secured Notes: | | | | |
| | 800,000 | | B+ | | 9.250% due 7/15/10 | | | 844,000 | |
| | 1,650,000 | | B+ | | 9.500% due 7/15/13 | | | 1,765,500 | |
|
|
|
| | | | | | Total Electric Utilities | | | 8,566,487 | |
|
|
|
| | Electrical Equipment — 0.2% | | | | |
| | 690,000 | | BBB- | | Thomas & Betts Corp., Medium-Term Notes, 6.625% due 5/7/08 | | | 709,369 | |
|
|
|
| | Electronic Equipment & Instruments — 0.3% | | | | |
| | | | | | Muzak LLC/Muzak Finance Corp.: | | | | |
| | 750,000 | | CCC- | | Senior Notes, 10.000% due 2/15/09 | | | 645,000 | |
| | 275,000 | | CCC- | | Senior Subordinated Notes, 9.875% due 3/15/09 | | | 136,125 | |
|
|
|
| | | | | | Total Electronic Equipment & Instruments | | | 781,125 | |
|
|
|
| | Energy Equipment & Services — 0.9% | | | | |
| | 286,000 | | B- | | Dresser-Rand Group Inc., Senior Subordinated Notes,
7.375% due 11/1/14 (c) | | | 294,580 | |
| | | | | | Hanover Compressor Co.: | | | | |
| | 1,000,000 | | B | | Senior Notes, 8.625% due 12/15/10 | | | 1,065,000 | |
| | 900,000 | | B- | | Subordinated Notes, zero coupon bond to yield
11.312% due 3/31/07 | | | 798,750 | |
| | 415,000 | | B- | | Key Energy Services Inc., Senior Notes, Series C, 8.375% due 3/1/08 | | | 432,638 | |
|
|
|
| | | | | | Total Energy Equipment & Services | | | 2,590,968 | |
|
|
|
| | Food & Staples Retailing — 0.9% | | | | |
| | 1,400,000 | | B- | | Jean Coutu Group Inc., Senior Subordinated Notes, 8.500% due 8/1/14 | | | 1,305,500 | |
| | | | | | Rite Aid Corp., Notes: | | | | |
| | 1,305,000 | | B- | | 7.125% due 1/15/07 | | | 1,311,525 | |
| | 50,000 | | B- | | 6.125% due 12/15/08 (c) | | | 46,750 | |
|
|
|
| | | | | | Total Food & Staples Retailing | | | 2,663,775 | |
|
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 31
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Food Products — 2.9% | | | | |
| $ | 175,000 | | BB | | Ahold Finance USA Inc., Notes, 8.250% due 7/15/10 | | $ | 189,000 | |
| | | | | | Ahold Lease USA Inc., Pass-Through Certificates: | | | | |
| | 675,559 | | BB+ | | Series 2001 A-1, 7.820% due 1/2/20 | | | 726,649 | |
| | 400,000 | | BB+ | | Series 2001 A-2, 8.620% due 1/2/25 | | | 446,250 | |
| | 335,000 | | BB- | | Dean Foods Co., Senior Notes, 6.900% due 10/15/17 | | | 340,025 | |
| | 975,000 | | B | | Del Monte Corp., Senior Subordinated Notes, 8.625% due 12/15/12 | | | 1,043,250 | |
| | | | | | Doane Pet Care Co.: | | | | |
| | 1,000,000 | | CCC+ | | Senior Notes, 10.750% due 3/1/10 | | | 1,082,500 | |
| | 65,000 | | CCC+ | | Senior Subordinated Notes, 9.750% due 5/15/07 | | | 65,081 | |
| | | | | | Dole Food Co. Inc.: | | | | |
| | 1,000,000 | | B+ | | Debentures, 8.750% due 7/15/13 | | | 1,047,500 | |
| | 44,000 | | B+ | | Senior Notes, 8.875% due 3/15/11 | | | 45,760 | |
| | 1,525,000 | | B- | | Pinnacle Foods Holding Corp., Senior Subordinated Notes,
8.250% due 12/1/13 | | | 1,418,250 | |
| | 725,000 | | B+ | | Swift & Co., Senior Notes, 10.125% due 10/1/09 | | | 768,500 | |
| | 1,152,000 | | B | | United Agri Products Inc., Senior Notes, 8.250% due 12/15/11 | | | 1,215,360 | |
|
|
|
| | | | | | Total Food Products | | | 8,388,125 | |
|
|
|
| | Health Care Equipment & Supplies — 0.5% | | | | |
| | 1,275,000 | | B- | | Accellent Corp., Senior Subordinated Notes, Series B,
10.000% due 7/15/12 | | | 1,498,125 | |
|
|
|
| | Health Care Providers & Services — 4.8% | | | | |
| | 1,150,000 | | B- | | AmeriPath Inc., Senior Subordinated Notes, 10.500% due 4/1/13 | | | 1,201,750 | |
| | 725,000 | | B | | Community Health Systems Inc., Senior Subordinated Notes,
6.500% due 12/15/12 | | | 721,375 | |
| | | | | | DaVita Inc.: | | | | |
| | 650,000 | | B | | Senior Notes, 6.625% due 3/15/13 | | | 661,375 | |
| | 775,000 | | B | | Senior Subordinated Notes, 7.250% due 3/15/15 | | | 786,625 | |
| | 270,000 | | B | | Extendicare Health Services Inc., Senior Subordinated Notes,
9.500% due 7/1/10 | | | 288,900 | |
| | 2,925,000 | | BB+ | | HCA Inc., Notes, 6.375% due 1/15/15 | | | 2,884,758 | |
| | 1,875,000 | | B- | | IASIS Healthcare LLC/IASIS Capital Corp., Senior Subordinated Notes, 8.750% due 6/15/14 | | | 1,931,250 | |
| | 675,000 | | CCC+ | | InSight Health Services Corp., Senior Subordinated Notes, Series B, 9.875% due 11/1/11 | | | 511,312 | |
| | 700,000 | | B- | | National Mentor Inc., Senior Subordinated Notes,
9.625% due 12/1/12 (c) | | | 724,500 | |
| | 583,000 | | B- | | Psychiatric Solutions Inc., Senior Subordinated Notes,
10.625% due 6/15/13 | | | 664,620 | |
| | | | | | Tenet Healthcare Corp., Senior Notes: | | | | |
| | 1,325,000 | | B | | 6.500% due 6/1/12 | | | 1,159,375 | |
| | 650,000 | | B | | 7.375% due 2/1/13 | | | 580,125 | |
| | 25,000 | | B | | 9.875% due 7/1/14 | | | 24,313 | |
| | 325,000 | | B | | 6.875% due 11/15/31 | | | 250,250 | |
| | 1,425,000 | | B+ | | Triad Hospitals Inc., Senior Subordinated Notes, 7.000% due 11/15/13 | | | 1,432,125 | |
|
|
|
| | | | | | Total Health Care Providers & Services | | | 13,822,653 | |
|
|
|
See Notes to Financial Statements.
32 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Hotels, Restaurants & Leisure — 9.1% | | | | |
| $ | 338,000 | | CCC+ | | AMC Entertainment Inc., Senior Subordinated Notes,
9.500% due 2/1/11 | | $ | 321,945 | |
| | 1,015,000 | | B+ | | Ameristar Casinos Inc., Senior Subordinated Notes,
10.750% due 2/15/09 | | | 1,086,050 | |
| | 1,300,000 | | B+ | | Boyd Gaming Corp., Senior Subordinated Notes, 6.750% due 4/15/14 | | | 1,288,625 | |
| | | | | | Caesars Entertainment Inc., Senior Subordinated Notes: | | | | |
| | 450,000 | | BB+ | | 8.875% due 9/15/08 | | | 484,875 | |
| | 1,400,000 | | BB+ | | 8.125% due 5/15/11 | | | 1,536,500 | |
| | 1,925,000 | | B- | | Cinemark Inc., Senior Discount Notes, step bond to yield
9.338% due 3/15/14 | | | 1,371,562 | |
| | 1,200,000 | | B- | | Equinox Holdings Inc., Senior Notes, 9.000% due 12/15/09 | | | 1,230,000 | |
| | 625,000 | | B- | | Friendly Ice Cream Corp., Senior Notes, 8.375% due 6/15/12 | | | 578,125 | |
| | 1,425,000 | | B- | | Gaylord Entertainment Co., Senior Notes, 6.750% due 11/15/14 | | | 1,382,250 | |
| | 1,300,000 | | B- | | Herbst Gaming Inc., Senior Subordinated Notes, 8.125% due 6/1/12 | | | 1,348,750 | |
| | | | | | Hilton Hotels Corp.: | | | | |
| | 250,000 | | BBB- | | Notes, 7.625% due 12/1/12 | | | 265,613 | |
| | 510,000 | | BBB- | | Senior Notes, 7.950% due 4/15/07 | | | 526,935 | |
| | 25,000 | | B+ | | HMH Properties Inc., Senior Secured Notes, Series B,
7.875% due 8/1/08 | | | 25,406 | |
| | 600,000 | | CCC- | | Icon Health & Fitness Inc., Senior Subordinated Notes,
11.250% due 4/1/12 | | | 483,000 | |
| | 1,375,000 | | B | | Isle of Capri Casinos Inc., Senior Subordinated Notes,
7.000% due 3/1/14 | | | 1,306,250 | |
| | 1,125,000 | | B | | Kerzner International Ltd., Senior Subordinated Notes,
6.750% due 10/1/15 (c) | | | 1,074,375 | |
| | 1,150,000 | | B | | Las Vegas Sands Corp., Senior Notes, 6.375% due 2/15/15 | | | 1,095,375 | |
| | 725,000 | | B- | | Leslie’s Poolmart, Senior Notes, 7.750% due 2/1/13 | | | 728,625 | |
| | 125,000 | | CCC+ | | Loews Cineplex Entertainment Corp., Senior Subordinated Notes,
9.000% due 8/1/14 | | | 120,938 | |
| | | | | | MGM MIRAGE Inc.: | | | | |
| | 1,275,000 | | BB | | Senior Notes, 6.750% due 9/1/12 | | | 1,275,000 | |
| | 260,000 | | B+ | | Senior Subordinated Debentures, 7.625% due 7/15/13 | | | 268,450 | |
| | | | | | Senior Subordinated Notes: | | | | |
| | 325,000 | | B+ | | 9.750% due 6/1/07 | | | 342,875 | |
| | 900,000 | | B+ | | 8.375% due 2/1/11 | | | 956,250 | |
| | 585,000 | | B+ | | Series B, 10.250% due 8/1/07 | | | 625,950 | |
| | 750,000 | | B+ | | Mohegan Tribal Gaming Authority, Senior Subordinated Notes,
6.875% due 2/15/15 | | | 753,750 | |
| | 750,000 | | B- | | Riddell Bell Holdings Inc., Senior Subordinated Notes,
8.375% due 10/1/12 | | | 720,000 | |
| | 1,225,000 | | BB- | | Seneca Gaming Corp., Senior Notes, 7.250% due 5/1/12 | | | 1,257,156 | |
| | | | | | Six Flags Inc., Senior Notes: | | | | |
| | 75,000 | | CCC | | 9.750% due 4/15/13 | | | 75,000 | |
| | 700,000 | | CCC | | 9.625% due 6/1/14 | | | 696,500 | |
| | 1,225,000 | | BB+ | | Starwood Hotels & Resorts Worldwide Inc., Senior Notes,
7.875% due 5/1/12 | | | 1,326,062 | |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 33
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Hotels, Restaurants & Leisure — 9.1% (continued) | | | | |
| $ | 1,225,000 | | B+ | | Station Casinos Inc., Senior Subordinated Notes, 6.875% due 3/1/16 | | $ | 1,240,313 | |
| | 275,000 | | B+ | | Turning Stone Casino Resort Enterprise, Senior Notes,
9.125% due 12/15/10 (c) | | | 284,625 | |
|
|
|
| | | | | | Total Hotels, Restaurants & Leisure | | | 26,077,130 | |
|
|
|
| | Household Durables — 1.7% | | | | |
| | | | | | D.R. Horton Inc.: | | | | |
| | 320,000 | | BB+ | | Senior Notes, 8.000% due 2/1/09 | | | 342,018 | |
| | 340,000 | | BB- | | Senior Subordinated Notes, 9.375% due 3/15/11 | | | 360,725 | |
| | 1,000,000 | | CC | | Home Interiors & Gifts Inc., Senior Subordinated Notes,
10.125% due 6/1/08 | | | 635,000 | |
| | 900,000 | | B- | | Interface Inc., Senior Notes, 10.375% due 2/1/10 | | | 974,250 | |
| | 480,000 | | BB- | | KB HOME, Senior Subordinated Notes, 9.500% due 2/15/11 | | | 508,675 | |
| | 570,000 | | BB- | | Schuler Homes Inc., Senior Subordinated Notes, 10.500% due 7/15/11 | | | 618,450 | |
| | 1,200,000 | | B- | | Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14 | | | 1,224,000 | |
| | 325,000 | | B+ | | Standard Pacific Corp., Senior Subordinated Notes,
9.250% due 4/15/12 | | | 336,375 | |
|
|
|
| | | | | | Total Household Durables | | | 4,999,493 | |
|
|
|
| | Independent Power Producers & Energy Traders — 3.6% | | | | |
| | | | | | AES Corp., Senior Notes: | | | | |
| | 1,470,000 | | B- | | 9.500% due 6/1/09 | | | 1,587,600 | |
| | 1,125,000 | | B- | | 7.750% due 3/1/14 | | | 1,172,812 | |
| | | | | | Calpine Corp.: | | | | |
| | 2,285,000 | | B- | | Second Priority Senior Secured Notes, 8.500% due 7/15/10 (c) | | | 1,610,925 | |
| | 85,000 | | CCC | | Senior Notes, 8.625% due 8/15/10 | | | 39,100 | |
| | 645,000 | | B- | | Senior Secured Notes, 8.750% due 7/15/13 (c) | | | 449,888 | |
| | | | | | Dynegy Holdings Inc.: | | | | |
| | | | | | Debentures: | | | | |
| | 1,300,000 | | CCC+ | | 7.125% due 5/15/18 | | | 1,150,500 | |
| | 1,250,000 | | CCC+ | | 7.625% due 10/15/26 | | | 1,106,250 | |
| | 1,375,000 | | B- | | Second Priority Senior Secured Notes, 10.650% due 7/15/08 (c)(f) | | | 1,460,937 | |
| | 1,616,000 | | B | | NRG Energy Inc., Second Priority Senior Secured Notes,
8.000% due 12/15/13 | | | 1,769,520 | |
|
|
|
| | | | | | Total Independent Power Producers & Energy Traders | | | 10,347,532 | |
|
|
|
| | Industrial Conglomerates — 0.3% | | | | |
| | 445,000 | | NR | | Aqua-Chem Inc., Senior Subordinated Notes,
11.250% due 7/1/08 (d) | | | 378,250 | |
| | 575,000 | | B | | Blount Inc., Senior Subordinated Notes, 8.875% due 8/1/12 | | | 608,063 | |
|
|
|
| | | | | | Total Industrial Conglomerates | | | 986,313 | |
|
|
|
| | Insurance — 0.2% | | | | |
| | 555,000 | | BB | | Markel Capital Trust I, Capital Securities, Series B,
8.710% due 1/1/46 | | | 592,179 | |
|
|
|
| | Internet Software & Services — 0.4% | | | | |
| | 1,264,000 | | B- | | FTD Inc., Senior Subordinated Notes, 7.750% due 2/15/14 | | | 1,257,680 | |
|
|
|
See Notes to Financial Statements.
34 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Machinery — 1.4% | | | | |
| $ | 175,000 | | BB- | | Case New Holland Inc., Senior Notes, 9.250% due 8/1/11 | | $ | 185,062 | |
| | 575,000 | | B- | | Invensys PLC, Senior Notes, 9.875% due 3/15/11 (c) | | | 554,875 | |
| | 1,200,000 | | B- | | Mueller Group Inc., Senior Subordinated Notes,
10.000% due 5/1/12 | | | 1,266,000 | |
| | 260,000 | | B+ | | NMHG Holding Co., Senior Notes, 10.000% due 5/15/09 | | | 278,850 | |
| | | | | | Terex Corp., Senior Subordinated Notes: | |
| | 650,000 | | B | | 9.250% due 7/15/11 | | | 697,125 | |
| | 500,000 | | B | | Series B, 10.375% due 4/1/11 | | | 536,250 | |
| | 560,000 | | CCC+ | | Wolverine Tube Inc., Senior Notes, 7.375% due 8/1/08 (c) | | | 484,400 | |
|
|
|
| | | | | | Total Machinery | | | 4,002,562 | |
|
|
|
| | Marine — 0.2% | | | | |
| | 650,000 | | B+ | | General Maritime Corp., Senior Notes, 10.000% due 3/15/13 | | | 718,250 | |
|
|
|
| | Media — 11.2% | | | | |
| | 1,375,000 | | B | | Cadmus Communications Corp., Senior Subordinated Notes,
8.375% due 6/15/14 | | | 1,412,812 | |
| | 1,589,557 | | B- | | CanWest Media Inc., Senior Subordinated Notes,
8.000% due 9/15/12 | | | 1,673,009 | |
| | | | | | CCH I Holdings LLC: | |
| | 3,511,000 | | CCC- | | 11.000% due 10/1/15 (c) | | | 3,195,010 | |
| | | | | | Senior Notes: | |
| | 1,035,000 | | CCC- | | step bond to yield 17.231% due 1/15/14 (c) | | | 786,600 | |
| | 1,535,000 | | CCC- | | step bond to yield 18.099% due 5/15/14 (c) | | | 982,400 | |
| | 400,000 | | BB- | | Chukchansi Economic Development Authority, Senior Notes,
8.000% due 11/15/13 (c) | | | 400,000 | |
| | | | | | CSC Holdings Inc.: | | | | |
| | 1,350,000 | | BB- | | Senior Debentures, 7.625% due 7/15/18 | | | 1,296,000 | |
| | | | | | Senior Notes, Series B: | | | | |
| | 300,000 | | BB- | | 8.125% due 7/15/09 | | | 308,250 | |
| | 260,000 | | BB- | | 7.625% due 4/1/11 | | | 261,950 | |
| | 910,000 | | B+ | | Senior Subordinated Debentures, 10.500% due 5/15/16 | | | 980,525 | |
| | 504,000 | | B | | Dex Media East LLC/Dex Media East Finance Co., Senior Notes,
Series B, 12.125% due 11/15/12 | | | 590,940 | |
| | 1,300,000 | | B | | Dex Media Inc., Discount Notes, step bond to yield
9.015% due 11/15/13 | | | 1,014,000 | |
| | 1,001,000 | | B | | Dex Media West LLC/Dex Media Finance Co., Senior Subordinated Notes, Series B, 9.875% due 8/15/13 | | | 1,108,607 | |
| | 2,275,000 | | BB- | | DIRECTV Holdings LLC, Senior Notes, 6.375% due 6/15/15 | | | 2,243,719 | |
| | 569,000 | | BB- | | DirecTV Holdings LLC/DirecTV Financing Co. Inc., Senior Notes,
8.375% due 3/15/13 | | | 618,788 | |
| | | | | | EchoStar DBS Corp., Senior Notes: | | | | |
| | 748,000 | | BB- | | 9.125% due 1/15/09 | | | 787,270 | |
| | 1,850,000 | | BB- | | 6.625% due 10/1/14 | | | 1,803,750 | |
| | 650,000 | | B- | | Emmis Communications Corp., Senior Notes,
9.745% due 6/15/12 (f) | | | 654,875 | |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 35
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Media — 11.2% (continued) | | | | |
| $ | 1,100,000 | | B- | | Houghton Mifflin Co., Senior Discount Notes, step bond to yield 10.515% due 10/15/13 | | $ | 803,000 | |
| | 1,065,000 | | CCC+ | | Insight Communications Co. Inc., Senior Discount Notes, step bond to yield 14.115% due 2/15/11 | | | 1,099,612 | |
| | 1,125,000 | | B- | | LodgeNet Entertainment Corp., Senior Subordinated Debentures, 9.500% due 6/15/13 | | | 1,223,437 | |
| | 325,000 | | B | | Mediacom Broadband LLC, Senior Notes, 11.000% due 7/15/13 | | | 349,375 | |
| | 1,150,000 | | B | | Mediacom LLC/Mediacom Capital Corp., Senior Notes,
9.500% due 1/15/13 | | | 1,129,875 | |
| | 1,000,000 | | CCC+ | | Nexstar Finance Inc., Senior Subordinated Notes, 7.000% due 1/15/14 | | | 890,000 | |
| | 1,075,000 | | CCC+ | | NextMedia Operating Inc., Senior Subordinated Notes,
10.750% due 7/1/11 | | | 1,173,094 | |
| | 175,000 | | B+ | | R.H. Donnelley Finance Corp. I, Senior Subordinated Notes,
10.875% due 12/15/12 (c) | | | 196,875 | |
| | 400,000 | | B+ | | R.H. Donnelley Inc., Senior Subordinated Notes, 10.875% due 12/15/12 | | | 450,000 | |
| | 550,000 | | B | | Radio One Inc., Senior Subordinated Notes, Series B,
8.875% due 7/1/11 | | | 583,688 | |
| | 450,000 | | B+ | | Rainbow National Services LLC, Senior Subordinated Debentures, 10.375% due 9/1/14 (c) | | | 497,250 | |
| | 1,670,000 | | B+ | | Rogers Cablesystems Ltd., Senior Subordinated Debentures,
11.000% due 12/1/15 | | | 1,770,200 | |
| | 1,350,000 | | B | | Sinclair Broadcast Group Inc., Senior Subordinated Notes,
8.750% due 12/15/11 | | | 1,424,250 | |
| | 275,000 | | CCC | | Vertis Inc., Secured Notes, 9.750% due 4/1/09 | | | 280,500 | |
| | 211,000 | | B+ | | Yell Finance BV, Senior Discount Notes, step bond to yield
12.262% due 8/1/11 | | | 216,275 | |
|
|
|
| | | | | | Total Media | | | 32,205,936 | |
|
|
|
| | Metals & Mining — 0.3% | | | | |
| | 450,000 | | B | | Novelis Inc., Senior Notes, 7.250% due 2/15/15 (c) | | | 412,875 | |
| | 380,000 | | BBB | | Phelps Dodge Corp., Senior Notes, 8.750% due 6/1/11 | | | 438,640 | |
|
|
|
| | | | | | Total Metals & Mining | | | 851,515 | |
|
|
|
| | Multi-Utilities — 0.1% | | | | |
| | 180,000 | | BB+ | | Avista Corp., Senior Notes, 9.750% due 6/1/08 | | | 198,323 | |
|
|
|
| | Multi-line Retail — 1.1% | | | | |
| | | | | | J.C. Penney Co. Inc., Notes: | | | | |
| | 950,000 | | BB+ | | 8.000% due 3/1/10 | | | 1,031,094 | |
| | 705,000 | | BB+ | | 9.000% due 8/1/12 | | | 808,411 | |
| | 500,000 | | B- | | Neiman Marcus Group Inc., Senior Subordinated Notes,
10.375% due 10/15/15 (c) | | | 485,000 | |
| | 667,000 | | B+ | | Saks Inc., Notes, 9.875% due 10/1/11 | | | 730,365 | |
|
|
|
| | | | | | Total Multi-line Retail | | | 3,054,870 | |
|
|
|
See Notes to Financial Statements.
36 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Oil, Gas & Consumable Fuels — 6.1% | | | | |
| | | | | | Chesapeake Energy Corp., Senior Notes: | | | | |
| $ | 2,325,000 | | BB | | 6.375% due 6/15/15 | | $ | 2,295,937 | |
| | 550,000 | | BB | | 6.250% due 1/15/18 | | | 536,250 | |
| | 842,000 | | B+ | | Cimarex Energy Co., Senior Notes, 9.600% due 3/15/12 | | | 913,570 | |
| | | | | | El Paso Corp., Medium-Term Notes: | | | | |
| | 2,125,000 | | B- | | 7.750% due 1/15/32 | | | 2,119,687 | |
| | 915,000 | | B- | | 7.800% due 8/1/31 | | | 912,713 | |
| | 1,300,000 | | B | | EXCO Resources Inc., Senior Notes, 7.250% due 1/15/11 | | | 1,319,500 | |
| | 480,000 | | BB | | Luscar Coal Ltd., Senior Notes, 9.750% due 10/15/11 | | | 519,600 | |
| | 309,000 | | Aa3(b) | | Pennzoil-Quaker State Co., Senior Notes, 10.000% due 11/1/08 | | | 324,457 | |
| | 955,000 | | B+ | | Plains Exploration & Production Co., Senior Subordinated Notes,
Series B, 8.750% due 7/1/12 | | | 1,024,237 | |
| | 195,000 | | B+ | | Pogo Producing Co., Senior Subordinated Notes, Series B,
8.250% due 4/15/11 | | | 205,238 | |
| | 320,000 | | BB- | | SESI LLC, Senior Notes, 8.875% due 5/15/11 | | | 336,800 | |
| | 1,450,000 | | B | | Stone Energy Corp., Senior Subordinated Notes,
6.750% due 12/15/14 | | | 1,384,750 | |
| | 1,185,000 | | B | | Swift Energy Co., Senior Subordinated Notes, 9.375% due 5/1/12 | | | 1,273,875 | |
| | | | | | Vintage Petroleum Inc.: | | | | |
| | 455,000 | | BB- | | Senior Notes, 8.250% due 5/1/12 | | | 492,538 | |
| | 125,000 | | B | | Senior Subordinated Notes, 7.875% due 5/15/11 | | | 131,563 | |
| | | | | | Williams Cos. Inc.: | | | | |
| | | | | | Notes: | | | | |
| | 1,275,000 | | B+ | | 7.875% due 9/1/21 | | | 1,381,781 | |
| | 1,375,000 | | B+ | | 8.750% due 3/15/32 | | | 1,593,281 | |
| | 600,000 | | B+ | | Senior Notes, 7.625% due 7/15/19 | | | 639,000 | |
|
|
|
| | | | | | Total Oil, Gas & Consumable Fuels | | | 17,404,777 | |
|
|
|
| | Paper & Forest Products — 2.2% | | | | |
| | | | | | Abitibi-Consolidated Inc.: | | | | |
| | 645,000 | | BB- | | Debentures, 8.850% due 8/1/30 | | | 541,800 | |
| | 500,000 | | BB- | | Notes, 8.550% due 8/1/10 | | | 491,250 | |
| | 1,250,000 | | B+ | | Appleton Papers Inc., Senior Subordinated Notes, Series B,
9.750% due 6/15/14 | | | 1,181,250 | |
| | 750,000 | | B- | | Blue Ridge Paper Products Inc., Secured Notes,
9.500% due 12/15/08 | | | 693,750 | |
| | | | | | Bowater Inc.: | | | | |
| | 550,000 | | BB | | Debentures, 9.500% due 10/15/12 | | | 555,500 | |
| | 750,000 | | BB | | Notes, 6.500% due 6/15/13 | | | 663,750 | |
| | | | | | Buckeye Technologies Inc., Senior Subordinated Notes: | | | | |
| | 205,000 | | B | | 9.250% due 9/15/08 | | | 206,025 | |
| | 1,190,000 | | B | | 8.000% due 10/15/10 | | | 1,130,500 | |
| | 525,000 | | BB+ | | Domtar Inc., Notes, 7.125% due 8/15/15 | | | 446,250 | |
| | 600,000 | | BB- | | Norske Skog Canada Ltd., Senior Notes, 7.375% due 3/1/14 | | | 537,000 | |
|
|
|
| | | | | | Total Paper & Forest Products | | | 6,447,075 | |
|
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 37
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Personal Products — 0.7% | | | | |
| $ | 1,025,000 | | Caa2(b) | | DEL Laboratories Inc., Senior Subordinated Notes, 8.000% due 2/1/12 | | $ | 773,875 | |
| | | | | | Playtex Products Inc.: | | | | |
| | 900,000 | | B | | Senior Secured Notes, 8.000% due 3/1/11 | | | 943,875 | |
| | 150,000 | | CCC+ | | Senior Subordinated Notes, 9.375% due 6/1/11 | | | 156,000 | |
|
|
|
| | | | | | Total Personal Products | | | 1,873,750 | |
|
|
|
| | Real Estate — 1.4% | | | | |
| | | | | | Host Marriott LP, Senior Notes: | | | | |
| | 625,000 | | B+ | | 7.125% due 11/1/13 | | | 636,719 | |
| | 1,020,000 | | B+ | | Series I, 9.500% due 1/15/07 | | | 1,069,725 | |
| | 1,125,000 | | B+ | | Series O, 6.375% due 3/15/15 | | | 1,096,875 | |
| | | | | | MeriStar Hospitality Corp., Senior Notes: | | | | |
| | 225,000 | | CCC+ | | 9.000% due 1/15/08 | | | 233,719 | |
| | 50,000 | | CCC+ | | 9.125% due 1/15/11 | | | 53,562 | |
| | 925,000 | | CCC+ | | MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp., Senior Notes, 10.500% due 6/15/09 | | | 981,656 | |
|
|
|
| | | | | | Total Real Estate | | | 4,072,256 | |
|
|
|
| | Road & Rail — 0.2% | | | | |
| | 550,000 | | CCC+ | | Horizon Lines, LLC/Horizon Lines Holding Co., Senior Notes,
9.000% due 11/1/12 | | | 586,438 | |
|
|
|
| | Semiconductors & Semiconductor Equipment — 0.5% | | | | |
| | | | | | Amkor Technology Inc.: | | | | |
| | 325,000 | | B- | | Senior Notes, 9.250% due 2/15/08 | | | 312,000 | |
| | 1,290,000 | | CCC | | Senior Subordinated Notes, 10.500% due 5/1/09 | | | 1,109,400 | |
|
|
|
| | | | | | Total Semiconductors & Semiconductor Equipment | | | 1,421,400 | |
|
|
|
| | Specialty Retail — 1.7% | | | | |
| | 725,000 | | B- | | Carrols Corp., Senior Subordinated Notes, 9.000% due 1/15/13 (c) | | | 721,375 | |
| | 1,025,000 | | B- | | CSK Auto Inc., Notes, 7.000% due 1/15/14 | | | 963,500 | |
| | 300,000 | | B | | Finlay Fine Jewelry Corp., Senior Notes, 8.375% due 6/1/12 | | | 256,500 | |
| | 725,000 | | BBB- | | Gap Inc., Notes, 9.550% due 12/15/08 | | | 809,459 | |
| | 1,325,000 | | CCC+ | | General Nutrition Centers Inc., Senior Subordinated Notes,
8.500% due 12/1/10 | | | 1,116,312 | |
| | 668,000 | | B- | | Jafra Cosmetics International Inc., Senior Subordinated Notes,
10.750% due 5/15/11 | | | 736,470 | |
| | 425,000 | | CCC | | Toys “R” Us Inc., Senior Notes, 7.375% due 10/15/18 | | | 303,875 | |
|
|
|
| | | | | | Total Specialty Retail | | | 4,907,491 | |
|
|
|
| | Textiles, Apparel & Luxury Goods — 0.8% | | | | |
| | | | | | Levi Strauss & Co., Senior Notes: | | | | |
| | 325,000 | | B- | | 8.804% due 4/1/12 (f) | | | 324,187 | |
| | 255,000 | | B- | | 12.250% due 12/15/12 | | | 281,138 | |
| | 975,000 | | B- | | 9.750% due 1/15/15 | | | 989,625 | |
| | 600,000 | | B | | Oxford Industries Inc., Senior Notes, 8.875% due 6/1/11 | | | 618,000 | |
|
|
|
| | | | | | Total Textiles, Apparel & Luxury Goods | | | 2,212,950 | |
|
|
|
See Notes to Financial Statements.
38 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | | |
| | | |
Face
Amount | | Rating‡ | | Security | | Value | |
| | | | | | | | | | |
| | Thrifts & Mortgage Finance — 0.4% | | | | |
| $ | 1,075,000 | | CCC- | | Ocwen Capital Trust I, Capital Securities, 10.875% due 8/1/27 | | $ | 1,134,125 | |
|
|
|
| | Wireless Telecommunication Services — 4.2% | | | | |
| | 439,900 | | CCC | | AirGate PCS Inc., Senior Secured Subordinated Notes,
9.375% due 9/1/09 | | | 461,895 | |
| | 360,000 | | BB- | | American Tower Escrow Corp., Discount Notes, zero coupon bond to yield 14.432% due 8/1/08 | | | 279,450 | |
| | 3,550,000 | | A | | New Cingular Wireless Services Inc., Senior Notes, 8.750% due 3/1/31 | | | 4,643,091 | |
| | | | | | Nextel Communications Inc.: | | | | |
| | 1,775,000 | | A- | | Senior Notes, Series E, 6.875% due 10/31/13 | | | 1,858,388 | |
| | 1,650,000 | | A- | | Senior Serial Redeemable Notes, Series D, 7.375% due 8/1/15 | | | 1,747,878 | |
| | 373,000 | | BB- | | Nextel Partners Inc., Senior Notes, 12.500% due 11/15/09 | | | 400,043 | |
| | | | | | Sprint Capital Corp.: | | | | |
| | 1,350,000 | | A- | | Notes, 8.750% due 3/15/32 | | | 1,751,366 | |
| | 775,000 | | A- | | Senior Notes, 6.875% due 11/15/28 | | | 828,759 | |
|
|
|
| | | | | | Total Wireless Telecommunication Services | | | 11,970,870 | |
|
|
|
| | | | | | TOTAL CORPORATE BONDS & NOTES
(Cost — $252,169,444) | | | 255,438,585 | |
|
|
|
|
|
|
| | ASSET-BACKED SECURITIES — 0.0% | | | | |
| | Credit Card — 0.0% | | | | |
| | 56,695 | | B | | First Consumers Master Trust, Series 2001-A, Class A,
4.280% due 9/15/08 (f) | | | 56,374 | |
|
|
|
| | Diversified Financial Services — 0.0% | | | | |
| | 1,402,534 | | D | | Airplanes Pass-Through Trust, Series 1, Class D,
10.875% due 3/15/12 (a)(d)(e) | | | 0 | |
|
|
|
| | | | | | TOTAL ASSET-BACKED SECURITIES
(Cost — $1,614,956) | | | 56,374 | |
|
|
|
|
|
|
| | LOAN PARTICIPATIONS — 1.4% | | | | |
| | United States — 1.4% | | | | |
| | 997,500 | | | | Delphi Corp., Term Loan, Tranche B, 10.300% due 6/14/11
(JPMorgan Chase & Co.) | | | 1,039,716 | |
| | 3,000,000 | | | | UPC Broadband Inc. Term Loan, Tranche H2, 6.554% due 3/15/12 (Bank of America) | | | 3,029,218 | |
|
|
|
| | | | | | TOTAL LOAN PARTICIPATIONS
(Cost — $4,021,191) | | | 4,068,934 | |
|
|
|
|
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 39
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | | |
| | | |
| Shares | | | | Security | | Value | |
| | | | | | | | | |
| COMMON STOCKS — 0.7% | | | | |
| CONSUMER STAPLES — 0.0% | | | | |
| Food Products — 0.0% | | | | |
| 23,465 | | | | Aurora Foods Inc. (d)(e)* | | $ | 0 | |
|
|
| FINANCIALS — 0.0% | | | | |
| Diversified Financial Services — 0.0% | | | | |
| 1,619 | | | | Outsourcing Solutions Inc. (e)* | | | 6,882 | |
|
|
| INDUSTRIALS — 0.0% | | | | |
| Aerospace & Defense — 0.0% | | | | |
| 1,150 | | | | Northrop Grumman Corp. | | | 61,698 | |
|
|
| INFORMATION TECHNOLOGY — 0.0% | | | | |
| Communications Equipment — 0.0% | | | | |
| 4,335 | | | | Motorola Inc. | | | 96,063 | |
|
|
| Semiconductors & Semiconductor Equipment — 0.0% | | | | |
| 478 | | | | Freescale Semiconductor Inc., Class B Shares* | | | 11,415 | |
|
|
| | | | | TOTAL INFORMATION TECHNOLOGY | | | 107,478 | |
|
|
|
|
| MATERIALS — 0.1% | | | | |
| Chemicals — 0.1% | | | | |
| 17,316 | | | | Applied Extrusion Technologies Inc., Class A Shares* | | | 147,186 | |
|
|
| TELECOMMUNICATION SERVICES — 0.6% | | | | |
| Diversified Telecommunication Services — 0.2% | | | | |
| 870 | | | | McLeodUSA Inc., Class A Shares* | | | 21 | |
| 27,795 | | | | Telewest Global Inc.* | | | 634,004 | |
|
|
| | | | | Total Diversified Telecommunication Services | | | 634,025 | |
|
|
| Wireless Telecommunication Services — 0.4% | | | | |
| 52,153 | | | | Alamosa Holdings Inc.* | | | 771,864 | |
| 13,152 | | | | Crown Castle International Corp.* | | | 322,487 | |
|
|
| | | | | Total Wireless Telecommunication Services | | | 1,094,351 | |
|
|
| | | | | TOTAL TELECOMMUNICATION SERVICES | | | 1,728,376 | |
|
|
| | | | | TOTAL COMMON STOCKS
(Cost — $2,658,202) | | | 2,051,620 | |
|
|
|
|
| CONVERTIBLE PREFERRED STOCKS — 0.7% | | | | |
| TELECOMMUNICATION SERVICES — 0.7% | | | | |
| Wireless Telecommunication Services — 0.7% | | | | |
| 1,457 | | | | Alamosa Holdings Inc., Cumulative Convertible, Series B, 7.500% due 7/31/13 | | | 1,607,800 | |
| 7,000 | | | | Crown Castle International Corp., 6.250% due 8/15/12 | | | 360,500 | |
|
|
| | | | | TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost — $639,775) | | | 1,968,300 | |
|
|
See Notes to Financial Statements.
40 Travelers Series Fund Inc. 2005 Annual Report
Schedules of Investments (October 31, 2005) (continued)
| | | | | | | |
| | |
| Warrant | | Security | | Value | |
| | | | | | | | |
| | WARRANTS* — 0.1% | | | | |
| | 360 | | American Tower Corp., Class A Shares, Expires 8/1/08(c) | | $ | 121,506 | |
| | 430 | | Cybernet Internet Services International Inc., Expires 7/1/09(c)(d)(e) | | | 0 | |
| | 695 | | GT Group Telecom Inc., Class B Shares, Expires 2/1/10(c)(d)(e) | | | 0 | |
| | 350 | | Horizon PCS Inc., Expires 10/1/10(c)(d)(e) | | | 0 | |
| | 375 | | IWO Holdings Inc., Expires 1/15/11(c)(d)(e) | | | 0 | |
| | 165 | | Jazztel PLC, Expires 5/1/09(e) | | | 0 | |
| | 435 | | Merrill Corp., Class B Shares, Expires 5/1/09(c)(d)(e) | | | 0 | |
| | 80 | | Pliant Corp., Expires 6/1/10(c)(d)(e) | | | 1 | |
| | 700 | | RSL Communications Ltd., Class A Shares, Expires 11/15/06(c)(d)(e) | | | 0 | |
|
|
|
| | | | TOTAL WARRANTS
(Cost — $211,209) | | | 121,507 | |
|
|
|
| | | | TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost — $261,314,777) | | | 263,705,320 | |
|
|
|
| | |
Face
Amount | | | | | |
| | SHORT-TERM INVESTMENTS — 7.5% | | | | |
| | Repurchase Agreements — 7.5% | | | | |
| $ | 11,614,000 | | Interest in $164,777,000 joint tri-party repurchase agreement dated 10/31/05 with Barclays Capital Inc., 3.930% due 11/1/05; Proceeds at maturity — $11,615,268; (Fully collateralized by various U.S. Treasury Strips, 0.000% due 2/15/11 to 2/15/19; Market value — $11,962,453) | | | 11,614,000 | |
| | 10,000,000 | | Interest in $689,187,000 joint tri-party repurchase agreement dated 10/31/05 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.000% due 11/1/05; Proceeds at maturity — $10,001,111; (Fully collateralized by U.S. Treasury obligations, 0.000% to 3.750% due 11/03/05 to 5/15/08; Market value — $10,200,023) | | | 10,000,000 | |
|
|
|
| | | | TOTAL SHORT-TERM INVESTMENTS
(Cost — $21,614,000) | | | 21,614,000 | |
|
|
|
| | | | TOTAL INVESTMENTS — 99.3% (Cost — $282,928,777#) | | | 285,319,320 | |
| | | | Other Assets in Excess of Liabilities — 0.7% | | | 2,151,144 | |
|
|
|
| | | | TOTAL NET ASSETS — 100.0% | | $ | 287,470,464 | |
|
|
|
| * | | Non-income producing security. |
| ‡ | | All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. All ratings are unaudited. |
| (a) | | Security is currently in default. |
| (b) | | Rating by Moody’s Investors Service. All ratings are unaudited. |
| (c) | | 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. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted. |
| (e) | | Securities are fair valued at October 31, 2005 in accordance with the policies adopted by the Board of Directors (see Note 1). |
| (f) | | Variable rate securities. Coupon rates disclosed are those which are in effect at October 31, 2005. |
| # | | Aggregate cost for federal income tax purposes is $283,788,669. |
See pages 42 and 43 for definitions of ratings.
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 41
Bond Ratings (unaudited)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor’s Ratings Service (“Standard and 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,
CCC, CC and C | — Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents the lowest degree of speculation and “C” 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. |
D | — Bonds rated “D” are in default, and payment of interest and/or repayment of principal is in arrears. |
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa,” 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 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 and Ca | — Bonds rated “Caa” and “Ca” are of poor standing. Such issues may be in default or present elements of danger with respect to principal or interest. |
C | — Bonds rated “C” are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. |
42 Travelers Series Fund Inc. 2005 Annual Report
Bond Ratings (unaudited) (continued)
Fitch Ratings (“Fitch’’) — Ratings from “AAA” to “CCC” may be modified by the additional of a plus (+) or a minus (-) sign to show relative standings with the major ratings categories.
AA | — Bonds rated “AA” are considered to be investment-grade and of very high credit quality. The obligator’s ability to pay interest and/or dividends and repay principal is very strong. |
A | — Bonds rated “A” are considered to have a low expectation of credit risk. The capacity for timely payment of financial commitments is considered to be strong, but may be more vulnerable to changes in economic conditions and circumstances than bonds with higher ratings. |
BBB | — Bonds rated “BBB” currently have a low expectation of credit risk. The capacity for timely payment of financial commitments is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to impair this capacity. This is the lowest investment grade category assigned by Fitch. |
BB | — Bonds rated “BB” indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business of financial alternatives may be available to allow financial commitments to be met. |
B | — Bonds rated “B” indicate that significant credit risk is present, but a limited margin of safety remains. Financial Commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. |
CCC, CC and C | — Bonds rated “CCC”, “CC” and “C” carry the real possibility of defaulting. The capacity to meet financial commitments depends solely on a sustained, favorable business and economic environment. Default of some kind on bonds rated “CC” appears probable, a “C” rating indicates imminent default. |
NR | — Indicates that the bond is not rated by Standard & Poor’s, Moody’s or Fitch. |
Travelers Series Fund Inc. 2005 Annual Report 43
Statements of Assets and Liabilities (October 31, 2005)
| | | | | | | | |
| | |
| | | SB Adjustable
Rate Income
Portfolio | | | Smith Barney
High Income
Portfolio | |
| ASSETS: | | | | | | | | |
Investments, at cost | | $ | 39,164,149 | | | $ | 282,928,777 | |
|
|
Investments, at value | | | 38,958,675 | | | | 285,319,320 | |
Cash | | | 252 | | | | 142 | |
Dividends and interest receivable | | | 146,251 | | | | 6,045,580 | |
Receivable for securities sold | | | — | | | | 291,470 | |
Receivable for Fund shares sold | | | 34,910 | | | | 75,759 | |
Deposits with brokers for futures contracts | | | 7,200 | | | | — | |
Receivable from broker — variation margin on open futures contracts | | | 281 | | | | — | |
Prepaid expenses | | | — | | | | 66,438 | |
|
|
Total Assets | | | 39,147,569 | | | | 291,798,709 | |
|
|
| LIABILITIES: | | | | | | | | |
Payable for securities purchased | | | 764,626 | | | | 4,109,728 | |
Management fee payable | | | 19,482 | | | | 144,810 | |
Payable for Fund shares repurchased | | | 5,349 | | | | 3,878 | |
Transfer agent fees payable | | | 1,251 | | | | 1,152 | |
Distribution plan fees payable | | | 1,157 | | | | — | |
Directors’ fees payable | | | 613 | | | | — | |
Accrued expenses | | | 39,967 | | | | 68,677 | |
|
|
Total Liabilities | | | 832,445 | | | | 4,328,245 | |
|
|
Total Net Assets | | $ | 38,315,124 | | | $ | 287,470,464 | |
|
|
| NET ASSETS: | | | | | | | | |
Par value (Note 4) | | $ | 38 | | | $ | 378 | |
Paid-in capital in excess of par value | | | 37,823,509 | | | | 365,277,378 | |
Undistributed net investment income | | | 816,291 | | | | 17,947,071 | |
Accumulated net realized loss on investments, futures contracts and foreign currency transactions | | | (153,487 | ) | | | (98,144,906 | ) |
Net unrealized appreciation (depreciation) on investments and futures contracts | | | (171,227 | ) | | | 2,390,543 | |
|
|
Total Net Assets | | $ | 38,315,124 | | | $ | 287,470,464 | |
|
|
Shares Outstanding | | | 3,762,839 | | | | 37,762,165 | |
|
|
Net Asset Value | | | $10.18 | | | | $7.61 | |
|
|
See Notes to Financial Statements.
44 Travelers Series Fund Inc. 2005 Annual Report
Statements of Operations (For the year ended October 31, 2005)
| | | | | | | | |
| | |
| | | SB Adjustable
Rate Income
Portfolio | | | Smith Barney
High Income
Portfolio | |
| INVESTMENT INCOME: | | | | | | | | |
Interest | | $ | 1,138,895 | | | $ | 22,911,965 | |
Dividends | | | — | | | | 59,110 | |
|
|
Total Investment Income | | | 1,138,895 | | | | 22,971,075 | |
|
|
| EXPENSES: | | | | | | | | |
Management fee (Note 2) | | | 196,871 | | | | 1,728,486 | |
Distribution fees (Notes 2) | | | 82,029 | | | | — | |
Custody fees | | | 26,217 | | | | 62,730 | |
Audit and tax | | | 22,000 | | | | 24,425 | |
Shareholder reports | | | 16,468 | | | | 40,934 | |
Legal fees | | | 14,896 | | | | 20,888 | |
Directors’ fees | | | 5,326 | | | | 10,711 | |
Transfer agent fees (Note 2) | | | 5,004 | | | | 4,356 | |
Insurance | | | 576 | | | | 9,823 | |
Miscellaneous expenses | | | 1,780 | | | | 3,226 | |
|
|
Total Expenses | | | 371,167 | | | | 1,905,579 | |
Less: Distribution fee waivers (Note 2) | | | (49,217 | ) | | | — | |
|
|
Net Expenses | | | 321,950 | | | | 1,905,579 | |
|
|
Net Investment Income | | | 816,945 | | | | 21,065,496 | |
|
|
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3): | | | | | | | | |
Net Realized Gain (Loss) From: | | | | | | | | |
Investments | | | 3,518 | | | | 2,568,566 | |
Futures contracts | | | (20,230 | ) | | | — | |
Foreign currency transactions | | | — | | | | (10,900 | ) |
|
|
Net Realized Gain (Loss) | | | (16,712 | ) | | | 2,557,666 | |
|
|
Change in Net Unrealized Appreciation/Depreciation From: | | | | | | | | |
Investments | | | (210,187 | ) | | | (14,885,829 | ) |
Futures contracts | | | 34,247 | | | | — | |
|
|
Change in Net Unrealized Appreciation/Depreciation | | | (175,940 | ) | | | (14,885,829 | ) |
|
|
Increase from Payment by Affiliate | | | — | | | | 92,400 | |
|
|
Net Loss on Investments, Futures Contracts and
Foreign Currency Transactions | | | (192,652 | ) | | | (12,235,763 | ) |
|
|
Increase in Net Assets From Operations | | $ | 624,293 | | | $ | 8,829,733 | |
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 45
Statements of Changes in Net Assets (For the Years Ended October 31,)
| | | | | | | | |
| | |
| SB Adjustable Rate Income Portfolio | | 2005 | | | 2004 | |
| OPERATIONS: | | | | | | | | |
Net investment income | | $ | 816,945 | | | $ | 184,033 | |
Net realized gain (loss) | | | (16,712 | ) | | | 6,619 | |
Change in net unrealized appreciation/depreciation | | | (175,940 | ) | | | 3,186 | |
|
|
Increase in Net Assets From Operations | | | 624,293 | | | | 193,838 | |
|
|
| DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | | | | | | | | |
Net investment income | | | (300,185 | ) | | | (39,951 | ) |
|
|
Decrease in Net Assets From
Distributions to Shareholders | | | (300,185 | ) | | | (39,951 | ) |
|
|
| FUND SHARE TRANSACTIONS (NOTE 4): | | | | | | | | |
Net proceeds from sale of shares | | | 21,156,364 | | | | 26,201,711 | |
Reinvestment of distributions | | | 300,185 | | | | 39,951 | |
Cost of shares repurchased | | | (7,217,375 | ) | | | (13,165,700 | ) |
|
|
Increase in Net Assets From Fund Share Transactions | | | 14,239,174 | | | | 13,075,962 | |
|
|
Increase in Net Assets | | | 14,563,282 | | | | 13,229,849 | |
| NET ASSETS: | | | | | | | | |
Beginning of year | | | 23,751,842 | | | | 10,521,993 | |
|
|
End of year* | | $ | 38,315,124 | | | $ | 23,751,842 | |
|
|
* Includes undistributed net investment income of: | | | $816,291 | | | | $204,400 | |
|
|
See Notes to Financial Statements.
46 Travelers Series Fund Inc. 2005 Annual Report
Statements of Changes in Net Assets (For the years ended October 31,) (continued)
| | | | | | | | |
| | |
| Smith Barney High Income Portfolio | | 2005 | | | 2004 | |
| OPERATIONS: | | | | | | | | |
Net investment income | | $ | 21,065,496 | | | $ | 20,792,898 | |
Net realized gain | | | 2,557,666 | | | | 4,139,124 | |
Change in net unrealized appreciation/depreciation | | | (14,885,829 | ) | | | 5,544,059 | |
Increase from Payment by Affiliate | | | 92,400 | | | | — | |
|
|
Increase in Net Assets From Operations | | | 8,829,733 | | | | 30,476,081 | |
|
|
| DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | | | | | | | | |
Net investment income | | | (23,581,997 | ) | | | (17,859,204 | ) |
|
|
Decrease in Net Assets From
Distributions to Shareholders | | | (23,581,997 | ) | | | (17,859,204 | ) |
|
|
| FUND SHARE TRANSACTIONS (NOTE 4): | | | | | | | | |
Net proceeds from sale of shares | | | 37,541,706 | | | | 41,540,000 | |
Reinvestment of distributions | | | 23,581,997 | | | | 17,859,204 | |
Cost of shares repurchased | | | (38,385,269 | ) | | | (29,126,715 | ) |
|
|
Increase in Net Assets From Fund Share Transactions | | | 22,738,434 | | | | 30,272,489 | |
|
|
Increase in Net Assets | | | 7,986,170 | | | | 42,889,366 | |
| NET ASSETS: | | | | | | | | |
Beginning of year | | | 279,484,294 | | | | 236,594,928 | |
|
|
End of year* | | $ | 287,470,464 | | | $ | 279,484,294 | |
|
|
* Includes undistributed net investment income of: | | | $17,947,071 | | | | $19,311,445 | |
|
|
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 47
Financial Highlights
For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:
| | | | | | | | | | | | |
| | | |
| SB Adjustable Rate Income Portfolio | | 2005 | | | 2004 | | | 2003(1) | |
Net Asset Value, Beginning of Year | | $ | 10.10 | | | $ | 10.01 | | | $ | 10.00 | |
|
|
Income (Loss) From Operations: | | | | | | | | | | | | |
Net investment income | | | 0.24 | | | | 0.09 | | | | 0.01 | |
Net realized and unrealized gain (loss) | | | (0.05 | ) | | | 0.03 | | | | — | |
|
|
Total Income From Operations | | | 0.19 | | | | 0.12 | | | | 0.01 | |
|
|
Less Distributions From: | | | | | | | | | | | | |
Net investment income | | | (0.11 | ) | | | (0.03 | ) | | | — | |
|
|
Total Distributions | | | (0.11 | ) | | | (0.03 | ) | | | — | |
|
|
Net Asset Value, End of Year | | $ | 10.18 | | | $ | 10.10 | | | $ | 10.01 | |
|
|
Total Return(2) | | | 1.87 | % | | | 1.24 | % | | | 0.10 | % |
|
|
Net Assets, End of Year (millions) | | | $38 | | | | $24 | | | | $11 | |
|
|
Ratios to Average Net Assets: | | | | | | | | | | | | |
Gross expenses | | | 1.13 | % | | | 1.31 | % | | | 4.72 | %(3) |
Net expenses(4) | | | 0.98 | | | | 1.00 | | | | 1.00 | (3) |
Net investment income | | | 2.49 | | | | 1.19 | | | | 0.87 | (3) |
|
|
Portfolio Turnover Rate | | | 12 | % | | | 68 | % | | | 3 | % |
|
|
| (1) | | For the period September 12, 2003 (commencement of operations) to October 31, 2003. |
| (2) | | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
| (4) | | Citigroup Global Markets Inc. (“the Distributor”) has voluntarily waived 0.15% of 12b-1 distribution plan fees for the years ended October 31, 2005 and 2004 and the period ended October 31, 2003. This waiver is voluntary and may be discontinued at any time by the Distributor. In addition, Smith Barney Fund Management LLC (“the Manager”) has contractually agreed to an expense limitation of 1.00%. |
See Notes to Financial Statements.
48 Travelers Series Fund Inc. 2005 Annual Report
Financial Highlights (continued)
For a share of capital stock outstanding throughout each year ended October 31:
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Smith Barney High Income Portfolio | | 2005 | | | 2004 | | | 2003 | | | 2002 | | | 2001 | |
Net Asset Value, Beginning of Year | | $ | 8.02 | | | $ | 7.67 | | | $ | 6.65 | | | $ | 8.32 | | | $ | 10.29 | |
|
|
Income (Loss) From Operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.58 | | | | 0.58 | | | | 0.63 | | | | 0.82 | (1) | | | 1.02 | |
Net realized and unrealized gain (loss) | | | (0.33 | ) | | | 0.32 | | | | 1.28 | | | | (1.44 | )(1) | | | (1.80 | ) |
|
|
Total Income (Loss) From Operations | | | 0.25 | | | | 0.90 | | | | 1.91 | | | | (0.62 | ) | | | (0.78 | ) |
|
|
Less Distributions From: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.66 | ) | | | (0.55 | ) | | | (0.89 | ) | | | (1.05 | ) | | | (1.19 | ) |
|
|
Total Distributions | | | (0.66 | ) | | | (0.55 | ) | | | (0.89 | ) | | | (1.05 | ) | | | (1.19 | ) |
|
|
Net Asset Value, End of Year | | $ | 7.61 | | | $ | 8.02 | | | $ | 7.67 | | | $ | 6.65 | | | $ | 8.32 | |
|
|
Total Return(2) | | | 3.14 | %(3) | | | 12.33 | % | | | 31.70 | % | | | (7.39 | )% | | | (8.08 | )% |
|
|
Net Assets, End of Year (millions) | | | $287 | | | | $279 | | | | $237 | | | | $155 | | | | $176 | |
|
|
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 0.66 | % | | | 0.66 | %(4) | | | 0.69 | % | | | 0.69 | % | | | 0.67 | % |
Net investment income | | | 7.31 | | | | 7.93 | | | | 9.53 | | | | 10.39 | (1) | | | 11.52 | |
|
|
Portfolio Turnover Rate | | | 20 | % | | | 33 | % | | | 36 | % | | | 78 | % | | | 77 | % |
|
|
| (1) | | Effective November 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended October 31, 2002, the ratio of net investment income to average net assets would have been 10.48%. In addition, the impact of this change to net investment income and net unrealized loss was less than $0.01 per share. Per share information, ratios and supplemental data for the periods prior to November 1, 2001 have not been restated to reflect this change in presentation. |
| (2) | | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. |
| (3) | | The investment manager fully reimbursed the Fund for losses incurred resulting from an investment transaction error. The total return did not change due to this reimbursement. |
| (4) | | The investment manager voluntarily waived a portion of its fees. The actual expense ratio did not change due to this waiver. |
See Notes to Financial Statements.
Travelers Series Fund Inc. 2005 Annual Report 49
Notes to Financial Statements
| 1. | Organization and Significant Accounting Policies |
The SB Adjustable Rate Income Portfolio (“SBARIP”) and Smith Barney High Income Portfolio (“SBHI”) (“Funds”) are separate investment funds of the Travelers Series Fund Inc. (the “Company”). The Company, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.
The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). 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.
(a) Investment Valuation. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.
(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
(c) Financial Futures Contracts. The Funds may enter into financial futures contracts to hedge a portion of the portfolio to the extent permitted by its investment policies and objectives. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.
The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the
50 Travelers Series Fund Inc. 2005 Annual Report
Notes to Financial Statements (continued)
value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(d) Forward Foreign Currency Contracts. SBHI may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-US dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(e) Loan Participations. SBHI may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.
The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.
(f) Credit and Market Risk. SBHI invests in high yield instruments that are subject to certain credit and market risks. The yields of high yield obligations reflect, among other things, perceived credit risk. The Fund’s investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.
(g) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method.
Travelers Series Fund Inc. 2005 Annual Report 51
Notes to Financial Statements (continued)
(h) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(i) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(j) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of its taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(k) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications have been made:
| | | | | | | |
| | |
| Fund | | Undistributed Net
Investment Income | | Accumulated Net
Realized Losses | |
SB Adjustable Rate Income Portfolio(a) | | $ | 95,131 | | $ | (95,131 | ) |
|
|
Smith Barney High Income Portfolio(b) | | | 1,152,127 | | | (1,152,127 | ) |
|
|
| (a) | | Reclassification is primarily due to income from mortgage backed securities treated as capital gains for tax purposes. |
| (b) | | Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes, differences between book and tax amortization of premium on fixed income securities and book/tax differences in the treatment of various items. |
52 Travelers Series Fund Inc. 2005 Annual Report
Notes to Financial Statements (continued)
| 2. | Management Agreement and Other Transactions with Affiliates |
Smith Barney Fund Management LLC (“SBFM”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager of SBARIP and SBHI. SBARIP and SBHI pay SBFM a management fee calculated at the annual rate of 0.60% of the average daily net assets of SBARIP and SBHI, respectively. SBARIP has a contractual expense limitation in place of 1.00% for a period of sixteen months from October 31, 2004.
Effective November 1, 2005, SBARIP’s management fee will be calculated in accordance with the following breakpoint schedule:
| | | |
| |
| Average Daily Net Assets | | Fee Rate | |
First $1 billion | | 0.550 | % |
Next $1 billion | | 0.525 | |
Next $3 billion | | 0.500 | |
Next $5 billion | | 0.475 | |
Over $10 billion | | 0.450 | |
|
|
During the year ended October 31, 2005 SBFM reimbursed SBHI in the amount of $92,400 for losses incurred resulting from an investment transaction error.
Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Funds’ transfer agent and PFPC Inc. (“PFPC”) acts as the Funds’ sub-transfer agent. CTB receives account fees and asset-based fees that vary according to the size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by CTB. For the year ended October 31, 2005, each Fund paid transfer agent fees of $4,167 to CTB.
The Company, on behalf of SBARIP, has adopted a plan (“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Citigroup Global Markets Inc. (“CGM”) acts as the distributor for SBARIP. The Plan provides that SBARIP shall pay a fee in an amount not to exceed 0.25% of the average daily net assets of SBARIP. This fee is calculated daily and paid monthly. The Company has agreed to voluntarily waive 0.15% of the Rule 12b-1 distribution plan fees for SBARIP. For the year ended October 31, 2005, Rule 12b-1 distribution plan fees of $49,217 were waived for SBARIP.
During the year ended October 31, 2005, CGM, another indirect wholly-owned subsidiary of Citigroup, did not receive any brokerage commissions.
Certain officers and one Director of the Company are employees of Citigroup or its affiliates and do not receive compensation from the Company.
Travelers Series Fund Inc. 2005 Annual Report 53
Notes to Financial Statements (continued)
During the year ended October 31, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S Government & Agency Obligations were as follows:
| | | | | | | | | | | | |
| | |
| | | Investments
| | U.S. Government and
Agency Obligations
|
| | | Purchases | | Sales | | Purchases | | Sales |
SBARIP | | $ | 19,298,136 | | $ | 3,007,905 | | $ | 12,891,558 | | $ | 778,183 |
|
SBHI | | | 68,309,299 | | | 53,877,467 | | | — | | | — |
|
At October 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
| | | | | | | | | | | |
| | | |
| | | Gross
unrealized
appreciation | | Gross
unrealized
depreciation | | | Net unrealized
appreciation/
depreciation | |
SBARIP | | $ | 29,470 | | $ | (234,944 | ) | | $ | (205,474 | ) |
|
|
SBHI | | | 14,817,125 | | | (13,286,474 | ) | | | 1,530,651 | |
|
|
At October 31, 2005, SBARIP had the following open futures contracts:
| | | | | | | | | | | | | |
| | | | | |
| | | Number of
Contracts | | Expiration
Date | | Basis Value | | Market
Value | | Unrealized
Gain |
Contracts to Sell: | | | | | | | | | | | | | |
U.S. Treasury Notes 2 Year Futures | | 18 | | 12/05 | | $ | 3,727,903 | | $ | 3,693,656 | | $ | 34,247 |
|
At October 31, 2005, the Fund had deposited $7,200 with the broker as initial margin collateral.
At October 31, 2005, SBHI did not have any open futures contracts.
At October 31, 2005, the Company had six billion shares of capital stock authorized with a par value of $0.00001 per share. Each share of a Fund represents an equal proportionate interest in that Fund with each other share of the same Fund and has an equal entitlement to any dividends and distributions made by the Fund.
54 Travelers Series Fund Inc. 2005 Annual Report
Notes to Financial Statements (continued)
Transactions in shares of each Fund were as follows:
| | | | | | |
| | |
| | | Year Ended
October 31, 2005 | | | Year Ended
October 31, 2004 | |
SB Adjustable Rate Income Portfolio | | | | | | |
Shares sold | | 2,096,973 | | | 2,607,403 | |
Shares issued on reinvestment | | 29,989 | | | 3,999 | |
Shares repurchased | | (715,287 | ) | | (1,311,034 | ) |
|
|
Net Increase | | 1,411,675 | | | 1,300,368 | |
|
|
Smith Barney High Income Portfolio | | | | | | |
Shares sold | | 4,829,415 | | | 5,397,647 | |
Shares issued on reinvestment | | 3,127,586 | | | 2,406,900 | |
Shares repurchased | | (5,025,782 | ) | | (3,826,668 | ) |
|
|
Net Increase | | 2,931,219 | | | 3,977,879 | |
|
|
5. Income Tax Information and Distributions to Shareholders
The tax character of distributions paid during the fiscal year ended October 31, 2005 were as follows:
| | | | | | |
| | |
| | | SB Adjustable
Rate Income
Portfolio | | Smith Barney
High Income
Portfolio |
Distributions paid from: | | | | | | |
Ordinary income | | $ | 300,185 | | $ | 23,581,997 |
|
Total distributions paid | | $ | 300,185 | | $ | 23,581,997 |
|
The tax character of distributions paid during the fiscal year ended October 31, 2004 were as follows:
| | | | | | |
| | |
| | | SB Adjustable
Rate Income
Portfolio | | Smith Barney
High Income
Portfolio |
Distributions paid from: | | | | | | |
Ordinary income | | $ | 39,951 | | $ | 17,859,204 |
|
Total distributions paid | | $ | 39,951 | | $ | 17,859,204 |
|
As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows:
| | | | | | | | |
| | |
| | | SB Adjustable
Rate Income
Portfolio | | | Smith Barney
High Income
Portfolio | |
Undistributed ordinary income — net | | $ | 816,291 | | | $ | 18,017,009 | |
|
|
Capital loss carryforward* | | | (119,240 | ) | | | (97,285,014 | ) |
Other book/tax temporary differences | | | (34,247 | )(a) | | | (69,938 | )(b) |
Unrealized appreciation/(depreciation) | | | (171,227 | ) | | | 1,530,651 | (c) |
|
|
Total accumulated earnings/(losses) — net | | $ | 491,577 | | | $ | (77,807,292 | ) |
|
|
Travelers Series Fund Inc. 2005 Annual Report 55
Notes to Financial Statements (continued)
| (*) | During the taxable year ended October 31, 2005, Smith Barney High Income Portfolio utilized $2,046,530, of its capital loss carryover available from prior years. As of October 31, 2005, the Funds had the following net capital loss carryforward remaining: |
| | | | | | | | |
Year of Expiration
| | SB Adjustable
Rate Income
Portfolio
| | | Smith Barney
High Income
Portfolio
| |
10/31/2007 | | | — | | | $ | (9,630,515 | ) |
10/31/2008 | | | — | | | | (18,327,807 | ) |
10/31/2009 | | | — | | | | (42,940,350 | ) |
10/31/2010 | | | — | | | | (21,882,303 | ) |
10/31/2011 | | $ | (2,911 | ) | | | (4,504,039 | ) |
10/31/2012 | | | (38,733 | ) | | | — | |
10/31/2013 | | | (77,596 | ) | | | — | |
| | |
|
|
| |
|
|
|
| | | $ | (119,240 | ) | | $ | (97,285,014 | ) |
| | |
|
|
| |
|
|
|
These amounts will be available to offset any future taxable capital gains.
| (a) | | Other book/tax temporary differences are attributable primarily to the realization for tax purposes of unrealized losses on certain futures contracts. |
| (b) | | Other book/tax temporary differences are attributable primarily to the book/tax treatment of various items. |
| (c) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, the difference between book & tax amortization methods for premiums on fixed income securities and book/tax differences in the treatment of consent fees. |
6. Regulatory Matters
On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).
The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the Funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.
The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in
56 Travelers Series Fund Inc. 2005 Annual Report
Notes to Financial Statements (continued)
interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.
The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.
At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.
On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.
Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 6. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.
On October 5, 2005, a motion to consolidate the five actions and any subsequently filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.
As of the date of this report, the Funds’ investment manager believes that resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Funds or the ability of the Funds’ investment manager and its affiliates to continue to render services to the Funds under their respective contracts.
***
Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against Citigroup Global Markets Inc. (the “Distributor”) and a number of its
Travelers Series Fund Inc. 2005 Annual Report 57
Notes to Financial Statements (continued)
affiliates, including SBFM and SBAM (the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Fund (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Advisers caused the Funds to pay excessive brokerage commissions to CGM for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Funds by improperly charging Rule 12b-1 fees and by drawing on fund assets to make undisclosed payments of soft dollars and excessive brokerage commissions. The complaints also alleged that the Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Funds’ contracts with the Advisers, recovery of all fees paid to the Advisers pursuant to such contracts and an award of attorneys’ fees and litigation expenses.
On December 15, 2004, a consolidated amended complaint (the “Complaint”) was filed alleging substantially similar causes of action. While the lawsuit is in its earliest stages, to the extent that the Complaint purports to state causes of action against the Funds, the Funds’ investment manager believes the Funds have significant defenses to such allegations, which the Funds intend to vigorously assert in responding to the Complaint.
Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Defendants in the future.
As of the date of this report, the Funds’ investment manager and the Funds believe that the resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Funds or the ability of the Advisers and their affiliates to continue to render services to the Funds under their respective contracts.
The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.
The Funds have received information concerning SBFM as follows:
On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM for alleged violations of Sections 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection undertaken by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM.
Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Funds or SBFM’s ability to perform investment advisory services relating to the Funds.
58 Travelers Series Fund Inc. 2005 Annual Report
Notes to Financial Statements (continued)
On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused each Fund’s existing investment management contract to terminate. Each Fund’s shareholders previously approved a new investment management contract between the Funds and the Manager, which became effective on December 1, 2005.
Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 2, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $830 billion.
Each Fund’s Board has appointed the Funds’ current distributor, Citigroup Global Markets Inc. (“CGM”), and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of each Fund. The Board has also approved an amended and restated Rule 12b-1 Plan for the SB Adjustable Rate Income Portfolio. CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer fund shares will continue to make the Fund’s shares available to their clients. Additional Service Agents may offer fund shares in the future.
Effective December 1, 2005, with respect to those fund classes subject to a 12b-1 Plan, the Fund pays service and distribution fees to each of LMIS and CGM for the services they provide and expenses they bear under the Distribution Agreements. The expenses intended to be covered by the distribution fees include those of each co-distributor. The co-distributors will provide each applicable Fund’s Board with periodic reports of amounts expended under the Fund’s Rule 12b-1 Plan and the purposes for which such expenditures were made.
Effective December 1, 2005, CGM will no longer be an affiliated person of the Fund under the Investment Company Act of 1940, as amended. As a result, the Fund will be permitted to execute transactions with CGM or an affiliate of CGM as agent (but not as principal) without the restrictions applicable to transactions with affiliated persons. Similarly, the Fund generally will be permitted to purchase securities in underwritings in which CGM or an affiliate of CGM is a member without the restrictions imposed by certain rules of the Securities and Exchange Commission. The Manager’s use of CGM or affiliates of CGM as agent in portfolio transactions with the Fund will be governed by the fund’s policy of seeking the best overall terms available.
Certain officers and one Director of the Funds are employees of Legg Mason or its affiliates and do not receive compensation from the Funds.
The Funds’ Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Fund. The principal business office of PFPC is located at P.O. Box 9699, Providence, RI 02940-9699.
Travelers Series Fund Inc. 2005 Annual Report 59
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Travelers Series Fund Inc.:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Smith Barney High Income and SB Adjustable Rate Income Portfolios, each a series of Travelers Series Fund Inc., as of October 31, 2005, 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 five-year period then ended with respect to Smith Barney High Income Portfolio and the financial highlights for each of the years in the two-year period then ended and the period from September 12, 2003 (commencement of operations) through October 31, 2003 with respect to SB Adjustable Rate Income Portfolio. These financial statements and financial highlights are the responsibility of the Company’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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2005, by correspondence with the custodian and brokers or by 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 High Income and SB Adjustable Rate Income Portfolios as of October 31, 2005, and the results of their operations, the changes in their net assets and the financial highlights for the periods described above in conformity with U.S. generally accepted accounting principles.
New York, New York
December 16, 2005
60 Travelers Series Fund Inc. 2005 Annual Report
Board Approval of Management Agreements (unaudited)
At meetings of the Board of Travelers Series Fund Inc., on behalf of its series, SB Adjustable Rate Income Portfolio and Smith Barney High Income Portfolio (each series, a “Fund” and collectively, the “Funds”), including the Funds’ independent, or non-interested, Board members (the “Independent Board Members”), the Board received information from the Funds’ manager, Smith Barney Fund Management LLC (the “Manager”), to assist them in their consideration of the Funds’ management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager, and the Funds’ distributor, as well as the advisory and distribution arrangements for the Funds. In voting to approve each Management Agreement, the Board, including the Independent Board Members, considered whether the approval would be in the best interest of the Funds and their shareholders based upon several factors including those discussed below.
Nature, Extent and Quality of the Services under the Management
The Board received and considered information regarding the nature, extent and quality of services provided to the Funds by the Manager under the Management Agreement during the past year. The Board also received a description of the administrative and other services rendered to the Funds and their shareholders by the Manager. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager about the management of the Funds’ affairs and the Manager’s role in coordinating the activities of the Funds’ other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Funds’ expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the implementation to date of the Funds’ compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940.
The Board reviewed the qualifications, backgrounds and responsibilities of the Funds’ senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Funds. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the CAM fund complex. The Board noted that the Manager’s Office of the Chief Investment Officer, composed of the senior officers of the investment teams managing the funds in the CAM complex, participates in reporting to the Board on investment matters. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.
Travelers Series Fund Inc. 2005 Annual Report 61
Board Approval of Management Agreements (unaudited) (continued)
The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.
The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement were acceptable.
Fund Performance
The Board received and reviewed performance information for the Funds as well as for a group of comparable funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Funds with the funds included in the Performance Universe. The Board also was provided with information comparing the Funds’ performance to the Lipper category averages over various time periods. The Board members noted that they had also received and discussed with management information throughout the year at periodic intervals comparing each Fund’s performance against its benchmark index(es).
SB Adjustable Rate Income Portfolio
The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “short-intermediate investment grade debt funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1-year period was better than the median. Based on their review, which included careful consideration of all the factors noted above, the Board concluded that the Fund’s relative performance was acceptable.
Smith Barney High Income Portfolio
The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “high current yield funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1- and 3-year periods was better than the median, while the performance for the 5- and 10-year periods was lower than the median. The Board noted that in 2002 there had been a change in the portfolio management team managing the Fund’s portfolio and that they believe this has contributed to the Fund’s improved performance. As a result of this improvement and based on their review, which included careful consideration of all the factors noted above, the Board concluded that the Fund’s relative performance was acceptable.
62 Travelers Series Fund Inc. 2005 Annual Report
Board Approval of Management Agreements (unaudited) (continued)
Management Fees and Expense Ratios
The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Funds to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered whether fee waiver and/or expense reimbursement arrangements are currently in place and considered the actual fee rate (after taking any waivers and reimbursements into account) (the “Actual Management Fee”) and whether any fee waivers and reimbursements could be discontinued.
Additionally, the Board received and considered information comparing each Fund’s Contractual Management Fees and Actual Management Fee and each Fund’s overall expenses with those of funds in both the relevant expense group (“Expense Group”) and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees the Manager charged its other U.S. clients investing primarily in an asset class similar to that of the Funds including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Funds and to these other clients, noting that the Funds are provided with administrative services, office facilities, Fund officers (including the Funds’ chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Funds by other service providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.
Management also discussed with the Board the current distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Funds’ affiliated distributor and how the amount received by the distributor was expended.
SB Adjustable Rate Income Portfolio
The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 7 variable insurance portfolio funds (including the Fund) classified as “short-intermediate investment grade debt funds” and “intermediate investment grade debt funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group although the Contractual Management Fees were higher than the median while the Actual Management Fees were better than the median. The Board noted that the Fund’s actual total expense ratio was also higher than the median. After discussion with the Board, the Manager offered to reduce the Contractual Management Fee and institute fee breakpoints effective November 1, 2005; as the Fund’s assets grow the impact of the breakpoints will become effective.
Travelers Series Fund Inc. 2005 Annual Report 63
Board Approval of Management Agreements (unaudited) (continued)
Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Funds under the Management Agreement.
Smith Barney High Income Portfolio
The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 11 variable insurance portfolio funds (including the Fund) classified as “high current yield funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group and, indeed, were better than the median. The Board noted that the Fund’s actual total expense ratio was also better than the median and concluded that it was acceptable.
Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Board under the Management Agreement.
Manager Profitability
The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Funds. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing the profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Board determined that the Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Funds.
Economies of Scale
The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. The Board also considered whether alternative fee structures (such as with additional breakpoints at lower asset levels) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies. However, because of the nature of the Manager’s business, the Board could not reach definitive conclusions as to whether the Funds realize or might realize economies of scale or how great they may be.
The Board noted that the Funds had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board noted that the Funds’ Contractual Management Fee contains breakpoints or was now proposed to contain breakpoints and, accordingly, reflects the potential for sharing economies of scale with shareholders as the Funds grow. The Board considered whether the breakpoint fee
64 Travelers Series Fund Inc. 2005 Annual Report
Board Approval of Management Agreements (unaudited) (continued)
structure was a reasonable means of sharing economies of scale or other efficiencies that might accrue from increases in asset levels. The Board also noted that as the Funds’ assets have increased over time, it has realized other economies of scale, as certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets.
Other Benefits to the Manager
The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Funds, including soft dollar arrangements, receipt of brokerage commissions and the opportunity to offer additional products and services to the Funds shareholders.
In light of the costs of providing investment management and other services to the Funds and the Manager’s ongoing commitment to the Funds, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.
Based on their discussions and considerations, including those described above, the Board members approved the Management Agreements to continue for another year. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreements.
Additional Information
On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.
The consummation of the Transaction resulted in the automatic termination of the Funds’ current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Funds’ Board approved a new management agreement between the Funds and the Adviser (the “New Management Agreement”) and authorized the Funds’ officers to submit the New Management Agreement to shareholders for their approval.
On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.
At a meeting held on August 1, 2005, the Funds’ Board, including a majority of the Board Members who are not “interested persons” of the Funds or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To assist the Board in its consideration of the New Management Agreement,
Travelers Series Fund Inc. 2005 Annual Report 65
Board Approval of Management Agreements (unaudited) (continued)
Legg Mason provided materials and information about Legg Mason, including its financial condition, asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members of the Board also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.
In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:
(i) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;
(ii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;
(iii) that Legg Mason and its wholly-owned subsidiary, Western Asset Management Company and its affiliates (“Western Asset”), are experienced and respected asset management firms, and that Legg Mason has advised the Board Members that (a) it intends to combine the fixed income investment operations (including money market fund operations) of CAM with those of Western Asset and may also wish to combine other CAM operations with those of other Legg Mason subsidiaries; (b) after the closing of the Transaction, it will take steps to combine the investment management operations of Western Asset with the fixed income operations of the Adviser, which, among other things, may involve Western Asset and the Adviser sharing common systems and procedures, employees (including portfolio managers), investment and trading platforms, and other resources; (c) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board oversight and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (d) in the future, it may recommend that Western Asset or other Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;
(iv) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;
66 Travelers Series Fund Inc. 2005 Annual Report
Board Approval of Management Agreements (unaudited) (continued)
(v) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;
(vi) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;
(vii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any “undue burden” on Fund shareholders under applicable provisions of the 1940 Act;
(viii) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Funds as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;
(ix) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds;
(x) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;
(xi) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Fund after the closing of the Transaction;
(xii) the fact that the Funds’ total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;
(xiii) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;
(xiv) that the Funds would not bear the costs of obtaining shareholder approval of the New Management Agreement;
(xv) that the Funds would avail themselves of permissions granted under certain licensing arrangements between Citigroup and Legg Mason that would permit the Funds (including any share classes thereof) to maintain their current names, as well as all logos, trademarks and service marks, related to Citigroup or any of its affiliates for some agreed upon time period after the closing of the Transaction ; and
(xvi) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In that regard, the Board, in its deliberations concerning the New Management Agreement, considered the same factors regarding the nature, quality and extent of services provided, costs of services provided, profitability, fall out benefits, fees and economies of scale and investment performance as it did when it renewed the current management agreement, and reached substantially the same conclusions.
Travelers Series Fund Inc. 2005 Annual Report 67
Additional Information (unaudited)
Information about Directors and Officers
The business and affairs of the Travelers Series Fund Inc. (“Company”) are managed under the direction of the Company’s Board of Directors. Information pertaining to the Directors and Officers of the Company is set forth below. The Statement of Additional Information includes additional information about the Company’s Directors and is available, without charge, by calling 1-800-451-2010.
| | | | | | | | | | |
| | | | | |
Name, Address
and Birth Year | | Position(s)
Held with
Fund | | Term of
Office* and
Length
of Time
Served | | Principal
Occupation(s)
During Past
Five Years | | Number of
Portfolios
in Fund
Complex
Overseen by
Director | | Other Board
Memberships Held by Director |
| Non-Interested Directors: | | | | |
Robert A. Frankel 1961 Deergrass Way Carlsbad, CA 92009 Birth Year: 1927 | | Director | | Since
1999 | | Managing Partner of Robert A. Frankel Managing Consultants; Former Vice President of The Readers Digest Association, Inc. | | 18 | | None |
| | | | | |
Michael E. Gellert 122 East 42nd Street 47th Floor New York, NY 10168 Birth Year: 1931 | | Director | | Since
1999 | | General Partner of Windcrest Partners, a venture capital firm | | 11 | | Director of Dalet S.A. (a publicly held French company-media management operations); SEACOR Holdings, Inc. (Offshore marine services provider) and Six Flags, Inc. |
| | | | | |
Rainer Greeven 630 5th Avenue Suite 1960 New York, NY 10111 Birth Year: 1936 | | Director | | Since
1994 | | Attorney, Rainer Greeven PC | | 11 | | None |
| | | | | |
Susan M. Heilbron P.O. Box 557 Chilimark, MA 02535 Birth Year: 1945 | | Director | | Since
1994 | | Owner/Consultant of Lacey & Heilbron, a public relations firm | | 11 | | None |
68 Travelers Series Fund Inc. 2005 Annual Report
Additional Information (unaudited) (continued)
| | | | | | | | | | |
| | | | | |
Name, Address
and Birth Year | | Position(s)
Held with
Fund | | Term of
Office* and
Length
of Time
Served | | Principal
Occupation(s)
During Past
Five Years | | Number of
Portfolios
in Fund
Complex
Overseen by
Director | | Other Board
Memberships Held by Director |
| Interested Director: | | | | |
R. Jay Gerken, CFA** Citigroup Asset Management (“CAM”) 399 Park Avenue
Mezzanine New York, NY 10022 Birth Year: 1951 | | Chairman, President and Chief Executive Officer | | Since
2002 | | Managing Director of CAM; Chairman, President and Chief Executive Officer of Smith Barney Fund Management LLC (“SBFM”) and Citi Fund Management Inc. (“CFM”); President and Chief Executive Officer of certain mutual funds associated with CAM; Formerly, Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996 to 2001) and Smith Barney Growth and Income Fund (from 1996 to 2000); Chairman, President and Chief Executive Officer of Travelers Investment Advisor, Inc. (“TIA”) (from 2002-2005) | | 171 | | None |
Travelers Series Fund Inc. 2005 Annual Report 69
Additional Information (unaudited) (continued)
| | | | | | | | | | |
| | | | | |
Name, Address
and Birth Year | | Position(s)
Held with
Fund | | Term of
Office* and
Length
of Time
Served | | Principal
Occupation(s)
During Past
Five Years | | Number of
Portfolios
in Fund
Complex
Overseen by
Director | | Other Board
Memberships Held by Director |
| Officers: | | | | | | | | | | |
Andrew B. Shoup CAM 125 Broad Street 11th Floor New York, NY 10004 Birth Year: 1956 | | Senior Vice President and Chief Administrative Officer | | Since
2003 | | Director of CAM; Senior Vice President and Chief Administrative Officer of mutual funds associated with CAM; Treasurer of certain mutual funds associated with CAM; Head of International Funds Administration of CAM (from 2001 to 2003); Director of Global Funds Administration of CAM (from 2000 to 2001); Head of U.S. Citibank Funds Administration of CAM (from 1998 to 2000) | | N/A | | N/A |
| | | | | |
James M. Giallanza CAM 125 Broad Street 11th Floor New York, NY 10004 Birth Year: 1966 | | Chief Financial Officer and Treasurer | | Since
2004 | | Director of CAM; Chief Financial Officer and Treasurer of certain mutual funds associated with CAM; Director and Controller of the U.S. wholesale business at UBS Global Asset Management US, Inc. (from September 2001 to July 2004); Director of Global Funds Administration at CAM (from June 2000 to September 2001); Treasurer of the Lazard Funds (from June 1998 to June 2000) | | N/A | | N/A |
| | | | | |
Beth A. Semmel, CFA CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1960 | | Vice President and Investment Officer | | Since
2002 | | Managing Director of CAM | | N/A | | N/A |
70 Travelers Series Fund Inc. 2005 Annual Report
Additional Information (unaudited) (continued)
| | | | | | | | | | |
| | | | | |
Name, Address
and Birth Year | | Position(s)
Held with
Fund | | Term of
Office* and
Length
of Time
Served | | Principal
Occupation(s)
During Past
Five Years | | Number of
Portfolios
in Fund
Complex
Overseen by
Director | | Other Board
Memberships Held by Director |
| Officers: | | | | | | | | | | |
Peter J. Wilby, CFA CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1958 | | Vice President and Investment Officer | | Since
2000 | | Managing Director of CAM | | N/A | | N/A |
| | | | | |
David A. Torchia CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1959 | | Vice President and Investment Officer | | Since
2003 | | Managing Director of CAM | | N/A | | N/A |
| | | | | |
Theresa M. Veres CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1966 | | Vice President and Investment Officer | | Since
2003 | | Director of CAM | | N/A | | N/A |
| | | | | |
Andrew Beagley CAM 399 Park Avenue,
4th Floor New York, NY 10022 Birth Year: 1962 | | Chief Anti-Money Laundering Compliance Officer Chief Compliance Officer | | Since
2002 Since
2004 | | Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer of certain mutual funds associated with CAM; Managing Director of CAM; Director of CAM (from 2000-2005); Director of Compliance, North America, CAM (from 2000-2005); Formerly Chief Compliance Officer, TIA (from 2002 to 2005) | | N/A | | N/A |
Travelers Series Fund Inc. 2005 Annual Report 71
Additional Information (unaudited) (continued)
| | | | | | | | | | |
| | | | | |
Name, Address
and Birth Year | | Position(s)
Held with
Fund | | Term of
Office* and
Length
of Time
Served | | Principal
Occupation(s)
During Past
Five Years | | Number of
Portfolios
in Fund
Complex
Overseen by
Director | | Other Board
Memberships Held by Director |
| Officers: | | | | | | | | | | |
Robert I. Frenkel
CAM 300 First Stamford Place
4th Floor Stamford, CT 06902 Birth Year: 1954 | | Secretary and Chief Legal Officer | | Since
2003 | | Managing Director and General Counsel of Global Mutual Funds for CAM and its predecessor (since 1994); Secretary and Chief Legal Officer of mutual funds associated with CAM | | N/A | | N/A |
| * | | Each Director and Officer serves until his or her successor has been duly elected and qualified. |
| ** | | Mr. Gerken is an “interested person” of the Company as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates. |
72 Travelers Series Fund Inc. 2005 Annual Report
Important Tax Information (unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended October 31, 2005 for Smith Barney High Income Portfolio:
| | | |
|
|
Record Date: | | 12/27/2004 | |
Payable Date: | | 12/28/2004 | |
|
|
Dividends Qualifying for the Dividends Received Deduction for Corporations | | 0.38 | % |
|
|
Please retain this information for your records.
Travelers Series Fund Inc. 2005 Annual Report 73
Travelers Series Fund Inc.
SB Adjustable Rate Income Portfolio
Smith Barney High Income Portfolio
| | | | |
DIRECTORS Robert A. Frankel Michael E. Gellert R. Jay Gerken, CFA Chairman Rainer Greeven Susan M. Heilbron OFFICERS R. Jay Gerken, CFA President and Chief
Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer James M. Giallanza Chief Financial Officer and Treasurer Peter J. Wilby, CFA Vice President and Investment Officer Beth A. Semmel, CFA Vice President and Investment Officer David A. Torchia Vice President and Investment Officer Theresa M. Veres Vice President and Investment Officer Andrew Beagley Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer | | OFFICERS (continued) Robert I. Frenkel Secretary and
Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund Management LLC DISTRIBUTORS Legg Mason Investor Services, LLC Citigroup Global Markets Inc. CUSTODIAN State Street Bank and
Trust Company ANNUITY
ADMINISTRATION Travelers Annuity Investor Services One Cityplace Hartford, CT 06103-3415 TRANSFER AGENT PFPC Inc. P.O. Box 9699 Providence, Rhode Island 02940-9699 INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 345 Park Avenue New York, NY 10154 | | |
This report is submitted for the general information of the shareholders of Travelers Series Fund Inc. — SB Adjustable Rate Income and Smith Barney High Income Portfolios.
www.citigroupam.com
©2005 Legg Mason Investor Services, LLC
Member NASD, SIPC
Travelers Series Fund Inc.
SB Adjustable Rate Income Portfolio
Smith Barney High Income Portfolio
The Funds are separate investment funds of the Travelers Series Fund Inc., a Maryland corporation.
TRAVELERS SERIES FUND INC.
125 Broad Street
10th Floor, MF-2
New York, New York 10004
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information of Form N-Q from the Funds, shareholders can call 1-800-451-2010.
Information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Funds’ website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Board of Directors of the registrant has determined that Robert A. Frankel, the Chairman of the Board’s Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,” and has designated Mr. Frankel as the Audit Committee’s financial expert. Mr. Frankel is an “independent” Director pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
a) Audit Fees. The aggregate fees billed in the last two fiscal years ending October 31, 2004 and October 31, 2005 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $342,000 in 2004 and $177,500 in 2005.
b) Audit-Related Fees. There were no fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item 4.
In addition, there were no Audit-Related Fees billed in the Reporting Period for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Travelers Series Funds Inc. (“service affiliates”), that were reasonably related to the performance of the annual audit of the service affiliates. Accordingly, there were no such fees that required pre-approval by the Audit Committee for the Reporting Periods (prior to May 6, 2003 services provided by the Auditor were not required to be pre-approved).
(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $35,400 in 2004 and $37,500 in 2005. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.
There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.
d) All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item for the Travelers Series Funds Inc.
All Other Fees. There were no other non-audit services rendered by the Auditor to Smith Barney Fund Management LLC (“SBFM”), and any entity controlling, controlled by or under common control with SBFM that provided ongoing services to Travelers Series Funds Inc. requiring pre-approval by the Audit Committee in the Reporting Period.
(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by Smith Barney Fund Management LLC or Salomon Brothers Asset Management Inc. or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.
The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
(2) For the Travelers Series Funds Inc., the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for 2004 and 2005; Tax Fees were 100% and 100% for 2004 and 2005; and Other Fees were 100% and 100% for 2004 and 2005.
(f) N/A
(g) Non-audit fees billed by the Auditor for services rendered to Travelers Series Funds Inc. and CAM and any entity controlling, controlled by, or under common control with CAM that provides ongoing services to Travelers Series Funds Inc. during the reporting period were $0 in 2005 for fees related to the transfer agent matter as fully described in the notes the financial statements titled “additional information” and $75,000 for 2004.
(h) Yes. The Travelers Series Funds Inc.’ Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates which were not pre-approved (not requiring pre-approval) is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Travelers Series Funds Inc. or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Not applicable.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM 11. | CONTROLS AND PROCEDURES. |
| | (a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934. |
| | (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. |
| | (a) | Code of Ethics attached hereto. |
Exhibit 99.CODE ETH
| | |
| Exhibit 99.CERT | | Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| Exhibit 99.906CERT | | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.
| | |
| Travelers Series Fund Inc. |
| |
| By: | | /s/ R. JAY GERKEN |
| | | (R. Jay Gerken) |
| | | Chief Executive Officer of |
| | | Travelers Series Fund Inc. |
Date: January 9, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
| |
| By: | | /s/ R. JAY GERKEN |
| | | (R. Jay Gerken) |
| | | Chief Executive Officer of |
| | | Travelers Series Fund Inc. |
Date: January 9, 2006
| | |
| |
| By: | | /s/ JAMES M. GIALLANZA |
| | | (James M. Giallanza) |
| | | Chief Financial Officer of |
| | | Travelers Series Fund Inc. |
Date: January 9, 2006
