As filed with the Securities and Exchange Commission on November 24, 2004
Registration No. 333-43628/811-06465
================================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ Post-Effective Amendment No___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
THE TRAVELERS SERIES TRUST
Area Code and Telephone Number:
(860) 308-1000
Address of Principal Executive Offices:
One Cityplace, Hartford, Connecticut 06103-3415
Name and Address of Agent for Service:
Ernest J. Wright
Assistant Secretary to the Board of Trustees
The Travelers Series Trust
One Cityplace
Hartford, CT 06103-3415
Copies to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Ave., NW
Washington, DC 20004
================================================================================
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on December __, 2004
pursuant to Rule 488 under the Securities Act of 1933.
Title of securities being registered: Shares of beneficial interest in the
Registrant's MFS Mid Cap Growth Portfolio
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933: NO FILING FEE
IS REQUIRED IN RELIANCE ON SECTION 24(F) UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED.
[FORM OF SUPPLEMENTAL SOLICITATION LETTER]
THE TRAVELERS LIFE AND ANNUITY COMPANY
THE TRAVELERS INSURANCE COMPANY
CITICORP LIFE INSURANCE COMPANY
FIRST CITICORP LIFE INSURANCE COMPANY
The Travelers Series Trust
MFS Emerging Growth Portfolio
One Cityplace, Hartford, Connecticut 06103
December __, 2004
Dear Variable Annuity Contract or
Variable Life Insurance Policy Owner:
Shares of MFS Emerging Growth Portfolio (the "Emerging Growth
Portfolio") of The Travelers Series Trust (the "Trust") have been purchased at
your direction by The Travelers Life and Annuity Company, The Travelers
Insurance Company, Citicorp Life Insurance Company or First Citicorp Life
Insurance Company (collectively, "TL&A") through one or more of its separate
accounts to fund benefits payable under your variable annuity contract or
variable life insurance policy (collectively, the "variable contracts"). TL&A,
as the shareholder of record and legal owner of those separate accounts, has
been asked to approve an Agreement and Plan of Reorganization (the "Plan")
whereby Emerging Growth Portfolio will be merged with and into MFS Mid Cap
Growth Portfolio, a series in the Trust, (the "Mid Cap Portfolio" and together
with Emerging Growth Portfolio, the "Portfolios") in a tax-free reorganization.
As an owner of a variable contract with an interest in one or more of those
separate accounts, TL&A is asking you for instructions as to how to vote the
shares of Emerging Growth Portfolio that are attributable to your variable
contract.
If the Plan is approved and consummated, the separate account(s) in
which you have an interest will own shares of Mid Cap Portfolio instead of
shares of Emerging Growth Portfolio. Each separate account will receive shares
of Mid Cap Portfolio with an aggregate net asset value equal to the aggregate
net asset value of the shares of Emerging Growth Portfolio owned by the separate
account before the reorganization.
Here are some facts about the reorganization and Mid Cap Portfolio that
will be useful to you as you vote on this reorganization:
1. Following the reorganization, Mid Cap Portfolio is expected to
have an aggregate operating expense ratio that is comparable to
that of the Emerging Growth Portfolio currently.
YOUR VOTE IS IMPORTANT!
2. You may transfer all or a part of your interest in Mid Cap
Portfolio as provided in your contract to another available
investment option on each day the Mid Cap Portfolio is open for
business at the then current net asset value per share.
Travelers Asset Management International Company LLC ("TAMIC") is the
investment adviser for the Portfolios. TAMIC is a subsidiary of Citigroup Inc.
Management has proposed the reorganization (1) to eliminate a Portfolio that has
had disappointing performance, and (2) to combine that Portfolio into another
that is currently managed by essentially the same team of portfolio managers in
order to generate economies of scale (and thereby lower expense ratios in the
future) and to attempt to take best advantage of the portfolio management team's
expertise.
After carefully considering the merits of the proposal, the Trust's
Board of Trustees (the "Board") has determined that the reorganization is in the
best interests of each Portfolio's shareholders, and indirectly the underlying
contract owners of the Portfolios, and that the shareholders' interests will not
be diluted as a result of the reorganization.
Mid Cap Portfolio, which is available to your variable contract as an
investment option, offers a portfolio with investment objectives and policies
that are similar to those of the Emerging Growth Portfolio, although there are
some important differences. The Board anticipates that combining the assets of
the Portfolios should result in more efficient mutual fund operations due to the
larger assets, which, in turn, should result in economies of scale that benefit
investors.
The Board recommends that you read the enclosed materials carefully and
then instruct The Travelers to vote FOR the proposal. PLEASE TAKE A MOMENT NOW
TO SIGN AND RETURN THE VOTING INSTRUCTION FORM(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. For more information, please call TL&A at 1-800-842-9368.
Respectfully,
The Travelers Life and Annuity Company The Travelers Insurance Company
Citicorp Life Insurance Company First Citicorp Life Insurance Company
WE URGE YOU TO SIGN AND RETURN THE VOTING INSTRUCTION FORM(S) IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THE TRAVELERS SERIES TRUST
MFS EMERGING GROWTH PORTFOLIO
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103
_________ 2004
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
MFS Emerging Growth Portfolio:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of MFS
Emerging Growth Portfolio (the "Emerging Growth Portfolio"), a series of The
Travelers Series Trust (the "Trust"), will be held at One Cityplace, Hartford,
Connecticut 06103, on February __, 2005 at 9:00 a.m., (Eastern time) for the
following purposes:
ITEM 1. To approve or disapprove a Plan of Reorganization (the "Plan")
whereby Emerging Growth Portfolio will be merged with and into
MFS Mid Cap Growth Portfolio, a series of the Trust (the "Mid
Cap Portfolio"). The Plan contemplates (a) the sale of
substantially all of the assets of Emerging Growth Portfolio to
Mid Cap Portfolio in exchange for shares of Mid Cap Portfolio,
and (b) the distribution of such shares of Mid Cap Portfolio to
the shareholders of Emerging Growth Portfolio in connection with
the liquidation of Emerging Growth Portfolio.
ITEM 2. To transact such other business as may properly come before the
Special Meeting or any adjournment(s) thereof.
THE BOARD OF TRUSTEES OF THE TRAVELERS SERIES TRUST UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF ITEM 1.
The attached Combined Prospectus/Proxy Statement describes the proposal.
A copy of the Reorganization Plan is attached as Appendix A to the Combined
Prospectus/Proxy Statement.
Shareholders of record as of the close of business on November __, 2004
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF
TRUSTEES OF THE TRAVELERS SERIES TRUST. PROXIES MAY BE REVOKED AT ANY TIME
BEFORE THEY ARE EXERCISED BY SUBMITTING A WRITTEN NOTICE OF REVOCATION OR
SUBSEQUENTLY EXECUTED VOTING INSTRUCTIONS OR BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON.
-1-
By Order of the Board of Trustees
-------------------------------------
Ernest J. Wright, Assistant Secretary
December __, 2004
Hartford, Connecticut
-2-
PART A
COMBINED PROSPECTUS/PROXY STATEMENT
DATED DECEMBER __, 2004
THE TRAVELERS SERIES TRUST
MFS EMERGING GROWTH PORTFOLIO
MFS MID CAP GROWTH PORTFOLIO
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103
(800) 842-9368
This Combined Prospectus/Proxy Statement relates to a special meeting of
shareholders of MFS Emerging Growth Portfolio (the "Emerging Growth Portfolio")
of The Travelers Series Trust (the "Trust") scheduled for February __, 2005 at
9:00 a.m. (Eastern time), and any adjournments thereof, at the offices of the
Trust at the address set forth above on this Statement (the "Meeting"). At the
Meeting, shareholders of Emerging Growth Portfolio will be asked to consider and
approve the proposed transfer of substantially all of the assets and all of the
liabilities of Emerging Growth Portfolio to MFS Mid Cap Growth Portfolio (the
"Mid Cap Portfolio" and, together with Emerging Growth Portfolio, the "Funds" or
the "Portfolios," and each a "Fund" or a "Portfolio"), a series of the Trust, in
exchange for shares of Mid Cap Portfolio (the "Reorganization").
If the Reorganization is approved, each shareholder of Emerging Growth
Portfolio will receive the number of shares of Mid Cap Portfolio that is equal
in value on the closing date of the Reorganization to the value of such
shareholder's shares of Emerging Growth Portfolio.
This Combined Prospectus/Proxy Statement and the Plan of Reorganization
(the "Reorganization Plan") of the Trust on behalf of the Portfolios describes
more fully the terms and conditions of the Reorganization. A copy of the
Reorganization Plan is included as Appendix A of this Combined Prospectus/Proxy
Statement.
Shares of Emerging Growth Portfolio are not offered directly to the
public but are sold only to insurance companies and their separate accounts as
the underlying investment medium for owners of variable annuity contracts and
variable life insurance policies (collectively, the "variable contracts"). As of
the record date for the Meeting, The Travelers Insurance Company, The Travelers
Life and Annuity Company, and their affiliates (collectively, "TL&A"), on behalf
of separate accounts registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), unregistered separate accounts, and related
subaccounts (collectively, the "separate accounts"), are the legal owners of
100% of the shares of Emerging Growth Portfolio.
TL&A shall vote all shares of Emerging Growth Portfolio with respect to
the Reorganization Plan (for, against or abstain from voting) in the same
proportion as the timely instructions received from owners of variable contracts
that had contract values allocated on the record date to a separate account
investing in shares of Emerging Growth Portfolio (collectively, the "contract
owners"). Accordingly, TL&A is furnishing this Combined Prospectus/Proxy
Statement to contract owners in connection with the solicitation of voting
instructions from the contract owners regarding the proposal to approve the
Reorganization Plan.
-1-
This Combined Prospectus/Proxy Statement, which you should retain for
future reference, sets forth concisely the information about the Trust, Emerging
Growth Portfolio, and Mid Cap Portfolio that a shareholder or contract owner
should know in considering the Reorganization. The current prospectuses of the
Portfolios and the statement of additional information for the Trust are
incorporated herein by reference, and the prospectus for the Mid Cap Portfolio
is included as Appendix B of this Combined Prospectus/Proxy Statement. The
prospectus of Emerging Growth Portfolio and the Trust's statement of additional
information are available without charge by writing to the Trust at its address
noted above or by calling (800) 842-9368. In addition, a statement of additional
information relating to and dated the same date as this Combined
Prospectus/Proxy Statement (the "Statement of Additional Information") and
containing additional information about the Trust has been filed with the
Commission and is incorporated by reference into this Combined Prospectus/Proxy
Statement. You may obtain a copy of such Statement of Additional Information
without charge by writing to the Trust at its address noted above or by calling
(800) 842-9368. The SEC maintains a website (http://www.sec.gov) that contains
the material incorporated by reference, together with other information
regarding the Trust. Copies of such material may also be obtained for a fee from
the Public Reference Section, Securities and Exchange Commission, Washington,
D.C. 20549-0102, or by electronic request at the following email address:
publicinfo@sec.gov.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN MID CAP PORTFOLIO, AS WITH ANY MUTUAL FUND, ARE SUBJECT TO
RISK--INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES IN MID CAP PORTFOLIO ARE
NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND
ARE NOT FEDERALLY INSURED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
-2-
TABLE OF CONTENTS
PAGE
Introduction............................................................... 4
Summary.................................................................... 4
Comparative Fee and Expense Table.......................................... 8
Risk Factors............................................................... 9
Information Relating to the Proposed Reorganization........................ 10
Federal Income Tax Consequences............................................ 12
Capitalization............................................................. 14
Comparison of Investment Objective and Policies............................ 14
Mid Cap Portfolio Performance Update....................................... 15
Mid Cap Portfolio Financial Highlights..................................... 18
Summary of Information about the Trust Generally........................... 19
Voting Information......................................................... 20
Additional Information about the Trust..................................... 22
Other Business............................................................. 22
Litigation................................................................. 22
Shareholder Inquiries...................................................... 23
Appendix A - Plan of Reorganization........................................ A-1
Appendix B - MFS Mid Cap Growth Prospectus dated May 3, 2004,
as supplemented.......................................................... B-1
-3-
INTRODUCTION
This Combined Prospectus/Proxy Statement is being furnished to solicit
the voting instructions of variable contract owners whose variable contracts are
funded by TL&A's separate accounts that invest in Emerging Growth Portfolio, a
series of the Trust. Such voting instructions will be followed by TL&A, as the
record owner of all of the Emerging Growth Portfolio's shares, at the Meeting,
to be held on February __, 2005 at 9:00 a.m. (Eastern time) at the Trust's
offices at One Cityplace, Hartford, Connecticut 06103. It is expected that this
Combined Prospectus/Proxy Statement will be mailed on or about December __,
2004.
At the Meeting, shareholders will consider and approve or disapprove the
Reorganization Plan of the Trust on behalf of its series Emerging Growth
Portfolio and Mid Cap Portfolio. If the Reorganization Plan is approved,
Emerging Growth Portfolio's shareholders will become shareholders of Mid Cap
Portfolio and will receive shares of Mid Cap Portfolio equal in value to their
holdings in Emerging Growth Portfolio on the date of the Reorganization.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE REORGANIZATION PLAN.
SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization, the parties thereto, and the transactions contemplated
thereby. This disclosure is qualified by reference to the more complete
information contained elsewhere in this Combined Prospectus/Proxy Statement, the
Reorganization Plan attached to this Combined Prospectus/Proxy Statement as
Appendix A, the Mid Cap Portfolio Prospectus attached as Appendix B, and the
Emerging Growth Portfolio Prospectus and Statement of Additional Information for
the Trust.
Pursuant to the proposed Reorganization Plan, Emerging Growth Portfolio
will transfer substantially all of its assets and all of its liabilities to Mid
Cap Portfolio in exchange for shares of Mid Cap Portfolio, a series of the
Trust.
The proposed Reorganization is expected to be effective upon the opening
of business on February __, 2005 or such later date as the parties may agree
(the "effective date"). Under the proposed Reorganization, each shareholder of
Emerging Growth Portfolio will receive the number of Mid Cap Portfolio's shares
with an aggregate net asset value equal on the effective date to the aggregate
net asset value of the shareholder's shares in Emerging Growth Portfolio.
Thereafter, following the proposed Reorganization, shareholders of Emerging
Growth Portfolio will be shareholders of Mid Cap Portfolio. No shareholder of
Emerging Growth Portfolio will pay a sales or other charge or expense in
connection with the Reorganization. See "Information Relating to the Proposed
Reorganization."
Following the Reorganization, Mid Cap Portfolio will have substantially
similar purchase, redemption and dividend policies as Emerging Growth Portfolio.
-4-
REASONS FOR THE REORGANIZATION
The Board, including a majority of the Board's members who are not
"interested persons" within the meaning of the 1940 Act (the "disinterested
Board members"), has determined that the proposed Reorganization is in the best
interests of the applicable Fund's respective shareholders and the underlying
contract owners and that the interests of the shareholders and contract owners
will not be diluted as a result of Reorganization. In connection with making
these determinations, the Board was provided with information regarding the
historical performance of the Emerging Growth Portfolio, which could make it
difficult for the Portfolio to continue to attract contract owner assets. The
Board was also provided with information on the similarities in the management
of the Emerging Growth Portfolio and Mid Cap Portfolio, including similarities
in investment style and policies, management team, and fund expenses. In the
view of fund management and in light of the above factors, there is no
substantial need to maintain the Portfolios as two separate investment
portfolios, and the combination of the Portfolios would enable the surviving
Portfolio to operate more efficiently and achieve certain economies of scale
that accompany a larger fund.
FEDERAL INCOME TAX CONSEQUENCES
Sutherland Asbill & Brennan LLP, counsel to the Trust, will issue an
opinion (based on certain assumptions) as of the effective date of the
Reorganization to the effect that the transaction will not give rise to the
recognition of income, gain or loss for federal income tax purposes to Emerging
Growth Portfolio, Mid Cap Portfolio or their respective shareholders. The
holding period and tax basis of shares will be the same as the holding period
and tax basis of the shareholders' shares of Emerging Growth Portfolio. In
addition, the holding period and tax basis of assets that are transferred to Mid
Cap Portfolio will be identical in the hands of Mid Cap Portfolio to the holding
period and tax basis in the hands of Emerging Growth Portfolio immediately prior
to the Reorganization. See "Information Relating to the Proposed Reorganization
- - Federal Income Tax Consequences" below.
INVESTMENT ADVISERS
The investment adviser for the Portfolios is Travelers Asset Management
International Company LLC ("TAMIC"), an indirect wholly-owned subsidiary of
Citigroup. Currently, Massachusetts Financial Services ("MFS") provides
subadvisory services to both Portfolios. After the Reorganization, the same
portfolio management team that currently is responsible for the Mid Cap
Portfolio, each member of which is also part of management team responsible for
the Emerging Growth Portfolio, will continue to make the day-to-day investment
decisions for Mid Cap Portfolio.
INVESTMENT OBJECTIVES AND APPROACHES
Emerging Growth Portfolio and Mid Cap Portfolio each has an investment
objective of seeking long-term growth of capital. While the approaches each
Portfolio uses to seek to achieve this objective are similar, there are certain
important differences in these approaches that should be considered. The
following table sets forth the investment objective and principal investment
approach of Emerging Growth Portfolio and Mid Cap Portfolio.
-5-
INVESTMENT OBJECTIVE AND APPROACH
EMERGING GROWTH PORTFOLIO Long-term growth of capital by investing at least
65% of net assets in common stock and related
securities such as preferred stock, convertible
securities, and depositary receipts of "emerging
growth companies." Emerging growth companies are
those that MFS believes are either early in their
life cycle but have the potential to become major
enterprises, or are major enterprises whose rates
of earnings growth are expected to accelerate.
MID CAP PORTFOLIO Long-term growth of capital by investing at least
80% of net assets in securities of medium-sized
companies. For purposes of the Portfolio,
medium-sized companies are those with market
capitalizations of at least $250 million but not
exceeding the top range of the Russell Midcap(TM)
Growth Index.
INVESTMENT POLICIES AND RESTRICTIONS
In addition to the similarities and differences between the investment
objectives and principal investment approach of Mid Cap Portfolio and Emerging
Growth Portfolio, there are certain similarities and differences in the other
investment policies and investment restrictions of the Portfolios, which are
discussed below under "Comparison of Investment Objectives and Policies."
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS
ADVISORY SERVICES
TAMIC is the investment adviser for both Mid Cap Portfolio and Emerging
Growth Portfolio. TAMIC provides investment advice and, in general, supervises
the management and investment program for each of the Funds. As compensation for
its services, TAMIC receives a management fee from Mid Cap Portfolio at the
annual rate of 0.80% of the average daily net assets of the Mid Cap Portfolio
not exceeding $600,000,000, 0.775% of net assets over $600,000,000 but not
exceeding $900,000,000, 0.75% of net assets over $900,000,000 but not exceeding
1.5 billion, 0.725% of net assets over $1.5 billion but not exceeding 2.5
billion, and 0.675% of net assets over $2.5 billion. As compensation for its
services, TAMIC receives a management fee from Emerging Growth Portfolio at the
annual rate of 0.75% of the average daily net assets of the Emerging Growth
Portfolio not exceeding $600,000,000, 0.725% of net assets over $600,000,000 but
not exceeding $900,000,000, 0.70% of net assets over $900,000,000 but not
exceeding 1.5 billion, 0.675% of net assets over $1.5 billion but not exceeding
2.5 billion, and 0.625% of net assets over $2.5 billion. (Prior to September 1,
2004, TAMIC received a management fee from Mid Cap Portfolio at an annual rate
of 0.80% of all of the average daily net assets of Mid Cap Portfolio, and a
management fee from Emerging Growth Portfolio at an annual rate of 0.75% of all
of the average daily net assets of Emerging Growth Portfolio.) TAMIC employs MFS
as a subadviser to manage each Fund's daily investment operations, subject to
the supervision of the Board of Trustees and TAMIC.
-6-
The Trust's Board of Trustees has approved a new management fee schedule
and method for calculation of the fee that will take effect upon closing of the
Reorganization (or on February __, 2005 if the Reorganization is not
consummated) and will effectively reduce the advisory fees paid by the
Portfolios. The new fee schedule will be as follows:
COMBINED ASSETS FEE RATE
(AS DESCRIBED BELOW)
Up to $600,000,000 0.7775%
$600,000,000 to $900,000,000 0.7525%
$900,000,000 to $1.5 billion 0.7275%
$1.5 billion to $2.5 billion 0.7025%
Over $2.5 billion 0.6525%
Under this new fee schedule, a Portfolio's effective fee rate will be determined
based on the combined assets of a number of TL&A funds subadvised by MFS. More
specifically, for purposes of meeting the various breakpoints set forth in the
table above and thereby determining an effective fee rate, the Trust and TAMIC
will take into account the combined average daily net assets of (1) the Mid Cap
Portfolio, (2) if the Reorganization is not consummated, the Emerging Growth
Portfolio, (3) another portfolio of the Trust sub-advised by MFS, and (4) a
portfolio of another investment company for which an affiliate of TAMIC is
investment adviser and MFS is sub-adviser. Therefore, as a result of the revised
fee schedule and the use of combined assets in the fee calculation, the Mid Cap
Portfolio will pay management fees at a rate that is only slightly higher than
the fee rate currently paid by the Emerging Growth Portfolio, notwithstanding
that management fees for the Mid Cap Portfolio are currently 0.05% higher at
each asset level than for the Emerging Growth Portfolio.
Emerging Growth Portfolio has a voluntary expense cap of 0.95%, and Mid
Cap Portfolio has a voluntary expense cap of 1.00%. As the total expenses of
each Portfolio are currently under such caps, and the total expenses of Mid Cap
Portfolio are expected to be under its cap if the Reorganization is consummated,
no expense reimbursements to the Portfolios are currently expected.
OTHER SERVICES
After the Reorganization, shares of Mid Cap Portfolio will continue to
be offered to the separate accounts of The Travelers that originally held shares
in Emerging Growth Portfolio.
After the Reorganization, the service providers for Mid Cap Portfolio
will remain the same. Citicorp Trust Bank, a subsidiary of Citigroup, will serve
as the transfer agent and will continue its sub-transfer agency agreement with
PFPC Inc., who will serve as Mid Cap Portfolio's sub-transfer agent and perform
certain recordkeeping and accounting services. The Travelers Insurance Company
("TIC") will serve as the administrator and will continue is sub-administrative
agreement with Smith Barney Fund Management LLC ("SBFM"), an indirect
wholly-owned subsidiary of Citigroup, to perform pricing and bookkeeping
services. After the Reorganization, State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02110 will continue as the custodian for Mid Cap
Portfolio.
-7-
COMPARATIVE FEE AND EXPENSE TABLES
The tables below show (1) information regarding the fees and expenses
paid by each of Emerging Growth Portfolio and Mid Cap Portfolio for the six
months ended June 30, 2004, and (2) estimated fees and expenses on a pro forma
basis for Mid Cap Portfolio after giving effect to the proposed Reorganization
with Emerging Growth Portfolio.
EMERGING
GROWTH MID CAP
PORTFOLIO PORTFOLIO
--------- ---------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) N/A N/A
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees* 0.75%*** 0.80%***
Distribution (12b-1) Fees NONE NONE
Other Expenses** 0.16%*** 0.13%***
Total Annual Fund Operating Expenses 0.91%*** 0.93%***
* During the six months ended June 30, 2004, Emerging Growth Portfolio
paid TAMIC a management fee at the annual rate of 0.75% of average daily net
assets, and Mid Cap Portfolio paid TAMIC a management fee at the annual rate of
0.80% of average daily net assets. As described above under Advisory Services,
as of September 1, 2004, breakpoints in the management fee were introduced that
would reduce the management fee rate paid at higher asset levels. Because
neither Portfolio has, or had as of June 30, 2004, asset levels that cause such
breakpoints to become applicable, the effective management fee rates for
purposes of the table above remain 0.75% and 0.80% respectively.
** Other expenses include a 0.06% administrative service fee each
Portfolio pays to The Travelers Insurance Company.
*** Annualized.
- --------------------------------------------------------------------------------
MID CAP PORTFOLIO (PRO FORMA WITH EMERGING GROWTH PORTFOLIO)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) N/A
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management Fees* 0.75%
Distribution (12b-1) Fees NONE
Other Expenses** 0.12%
Total Annual Fund Operating Expenses 0.87%
-8-
* Reflects the revised fee schedule for Mid Cap Portfolio, and the
determination of breakpoint eligibility based on combined assets of the Mid Cap
Portfolio and certain other funds, as described above under Advisory Services.
** Other expenses include a 0.06% administrative service fee the Portfolio
pays to The Travelers Insurance Company.
EXAMPLE: This example helps investors compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds. The example
assumes:
o you invest $10,000;
o you sell all of your shares at the end of the period;
o your investment has a 5% return each year; and
o each Portfolio's operating expenses remain the same as shown above.
Although actual costs may be higher or lower, based upon these assumptions your
costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
EMERGING GROWTH PORTFOLIO............................... $93 $290 $504 $1,120
MID CAP PORTFOLIO....................................... $95 $296 $515 $1,143
PRO FORMA OF MID CAP PORTFOLIO WITH EMERGING GROWTH
PORTFOLIO............................................... $89 $278 $482 $1,073
The fees and charges reflected in the tables above and in the example do not
include fees and charges imposed by the variable contracts issued by TL&A and
their separate accounts with interests in the Portfolios.
RISK FACTORS
The following discussion highlights the principal risk factors associated
with an investment in Mid Cap Portfolio and compares those risks with those of
an investment in Emerging Growth Portfolio. Further information relating to
these and other risks is set forth in "Comparison of Investment Objectives and
Policies" below. This discussion is qualified in its entirety by the more
extensive discussion of risk factors set forth in the prospectus and statement
of additional information of Mid Cap Portfolio.
Mid Cap Portfolio is most subject to equities risk, where market values may
change abruptly, sometimes unpredictably, and mid-cap companies risk, where
market values may be more erratic and stocks more thinly traded than the general
market, and where companies may have limited product lines, history, or
resources. As such, investment in Mid Cap Portfolio entails risks similar to
those involved in investing in Emerging Growth Portfolio. However, the
-9-
overall risk level of Emerging Growth Portfolio may fluctuate relative to that
of Mid Cap Portfolio depending on the size of the companies that Emerging Growth
Portfolio is invested in at a particular time. In addition, the "emerging
growth" securities that are the focus of Emerging Growth Portfolio generally may
be somewhat riskier than the securities of the growth companies that are the
focus of Mid Cap Portfolio.
Investors could lose money on their investment in Mid Cap Portfolio, or Mid
Cap Portfolio may not perform as well as other investments if any of the
following occurs:
o U.S. stock markets decline;
o An adverse event, such as an unfavorable earnings report, negatively
affects the stock price of a company in which Mid Cap Portfolio invests;
o Mid capitalization stocks fall out of favor with investors; or
o The manager's judgment about the attractiveness, growth prospects or
potential appreciation of a particular stock proves to be incorrect.
Additionally, Emerging Growth Portfolio is a "diversified" fund, while Mid
Cap Portfolio is not, meaning that Mid Cap Portfolio can invest a higher
percentage of its assets in a limited number of companies. Therefore, the
performance of each holding may have a greater impact on Mid Cap Portfolio's
value, and the share price of Mid Cap Portfolio may as a result be more volatile
than that of Emerging Growth Portfolio.
To a limited extent, Mid Cap Portfolio is subject to short sales risk,
where it may suffer a loss if it sells a security short and the value of the
security rises rather than falls. The Portfolio is subject to foreign and
emerging markets securities risks, where market values may be impacted by
limited trading, currency exchange, political or economic instability, and other
factors. The Portfolio is also subject to fixed-income securities risk, where
market values move in the opposite direction of interest rates, and
lower-quality fixed-income risk, where market values are subject to credit risks
of issuers who may default or fail to make timely payments.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
GENERAL
The Reorganization Plan sets forth the terms and conditions under which the
Reorganization would be consummated. Significant provisions of the
Reorganization Plan are summarized below; however, this summary is qualified in
its entirety by reference to the copy of the Reorganization Plan attached as
Appendix A to this Combined Prospectus/Proxy Statement and is incorporated
herein by reference.
DESCRIPTION OF THE REORGANIZATION PLAN
The Reorganization Plan provides that at the closing substantially all
(other than cash in an amount necessary to pay dividends and distributions as
provided in the Reorganization Plan) of the assets and all of the liabilities of
Emerging Growth Portfolio will be transferred to and assumed by Mid Cap
Portfolio. In exchange for the transfer of the assets and the assumption of the
liabilities, The Trust will issue at the closing full and fractional shares of
Mid Cap Portfolio
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equal in aggregate dollar value to the aggregate net asset value of full and
fractional outstanding shares of Emerging Growth Portfolio as determined at the
valuation time specified in the Reorganization Plan. The Reorganization Plan
provides that Emerging Growth Portfolio will declare a dividend or dividends
and/or other distributions on or as soon as practicable prior to the Closing
Date (as defined in the Reorganization Plan) which will have the effect of
distributing to shareholders all of its investment company taxable income
(computed without regard to any deduction for dividends paid) and realized net
capital gain, if any, for the current taxable year through the Closing Date.
Following the transfer of assets to, and the assumption of the liabilities
of, Emerging Growth Portfolio by Mid Cap Portfolio, Emerging Growth Portfolio
will distribute Mid Cap Portfolio shares in liquidation of Emerging Growth
Portfolio. Each Emerging Growth Portfolio shareholder at the Closing Date will
receive an amount of shares with a total net asset value equal to the net asset
value of their Emerging Growth Portfolio shares plus the right to receive any
dividends or distributions that were declared before the Closing Date but that
remained unpaid at that time with respect to Emerging Growth Portfolio shares.
After the Reorganization, all of the issued and outstanding shares of
Emerging Growth Portfolio shall be canceled on the books of the Fund and the
transfer books of Emerging Growth Portfolio will be permanently closed.
The Reorganization is subject to a number of conditions, including, without
limitation: approval of the Reorganization Plan and the transactions
contemplated thereby described in this Combined Prospectus/Proxy Statement by
the Emerging Growth Portfolio shareholders; the receipt of a legal opinion from
counsel to the Trust with respect to certain tax issues, as more fully described
in "Federal Income Tax Consequences" below; and, the parties' performance of
their respective agreements and undertakings in the Reorganization Plan.
Assuming satisfaction of the conditions in the Reorganization Plan, the Closing
Date will be February __, 2005 or such other date as is agreed to by the
parties.
Mid Cap Portfolio will bear the costs and expenses associated with the
Reorganization, including costs of soliciting proxies.
BOARD CONSIDERATIONS
In approving the Reorganization at a meeting held on July 23, 2004, the
Board considered the proposed Reorganization from the perspective of both of the
Portfolios. In light of discussions of the Board regarding the Emerging Growth
Portfolio at prior meetings and after renewed consideration at the July, 2004
meeting, the Board, including a majority of the disinterested Trustees,
unanimously decided to approve the Reorganization and to recommend its approval
to shareholders.
From the perspective of Emerging Growth Portfolio, the Board considered the
disappointing historical performance of the Portfolio, and the conclusion of
Trust management that the Portfolio's prospects for attracting substantial
additional amounts of policy owner assets were limited. It also considered the
historical performance of the Mid Cap Portfolio, which was above average
relative to similar funds (according to Lipper, Inc. data for Mid Cap Growth
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funds) for the two-year period ending June 30, 2004, when the current portfolio
managers of the Mid Cap Portfolio began managing the Portfolio.
The Board also considered the similarities between the Emerging Growth
Portfolio and Mid Cap Portfolio. It considered that the Portfolios have
identical investment objectives and similar investment policies. It also
considered that each member of Mid Cap Portfolio's portfolio management team
currently is also a member of the management team of Emerging Growth Portfolio,
and the view of Trust management that the expertise of such management team is
best suited for the management of a mid cap fund. It considered that the
management fee for the Mid Cap Portfolio after the Reorganization would not
differ materially from the current management fee for the Emerging Growth
Portfolio, and that merger of the Emerging Growth Portfolio into Mid Cap
Portfolio would enable the combined Portfolio to operate more efficiently and
achieve certain economies of scale that accompany a larger fund, resulting in
lower operating expenses as compared to the existing Emerging Growth Portfolio.
The Board also considered the terms of the Reorganization Plan, and the
fact that the Reorganization would constitute a tax-free reorganization.
From the perspective of Mid Cap Portfolio, the Board considered, among
other things: the terms of the Reorganization Plan; the opportunity to combine
the Funds in an effort to realize operational and administrative efficiencies;
the terms of the Reorganization Plan; and the fact that the Reorganization would
constitute a tax-free reorganization.
After considering the foregoing factors, together with such information as
they believed to be relevant, the Board determined that the proposed
Reorganization is in the best interests of each Portfolio, and that the
interests of each Portfolio's shareholders and, indirectly, the contract owners,
would not be diluted as a result of the Reorganization. The Board then approved
the Reorganization Plan and directed that the Reorganization Plan be submitted
to Emerging Growth Portfolio shareholders for approval.
Therefore, the Trust's Board of Trustees unanimously recommends that
Shareholders vote "For" the Proposal.
The Board has not determined what action Emerging Growth Portfolio would
take in the event shareholders fail to approve the Reorganization Plan or for
any reason the Reorganization is not consummated. In any such event, the
Emerging Growth Portfolio will, at least for a period of time, continue
operations as a separate series of the Trust, and the Board of Trustees may
consider alternatives to the Reorganization in the best interests of
shareholders.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the
Trust receive an opinion of Sutherland Asbill & Brennan LLP, counsel to the
Trust, to the effect that for federal income tax purposes:
1. the transfer to Mid Cap Portfolio of all or substantially all of
the assets of Emerging Growth Portfolio in exchange solely for
shares of Mid Cap Portfolio and the assumption by Mid Cap
Portfolio of all of the liabilities of Emerging Growth Portfolio,
followed by the distribution of Mid Cap Portfolio Shares to the
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holders of shares of Emerging Growth Portfolio in exchange for
their shares of Emerging Growth Portfolio in complete liquidation
of Emerging Growth Portfolio, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and Mid Cap
Portfolio and Emerging Growth Portfolio will each be "a party to
a reorganization" within the meaning of Section 368(b) of the
Code;
2. no gain or loss will be recognized by Emerging Growth Portfolio
upon the transfer of Emerging Growth Portfolio's assets to Mid
Cap Portfolio solely in exchange for Mid Cap Portfolio Shares and
the assumption by Mid Cap Portfolio of liabilities of Emerging
Growth Portfolio or upon the distribution (whether actual or
constructive) of Mid Cap Portfolio Shares to the shareholders of
Emerging Growth Portfolio in exchange for their shares of
Emerging Growth Portfolio;
3. the basis of the assets of Emerging Growth Portfolio in the hands
of Mid Cap Portfolio will be the same as the basis of such assets
in the hands of Emerging Growth Portfolio immediately prior to
the transfer;
4. the holding period of the assets of Emerging Growth Portfolio in
the hands of Mid Cap Portfolio will include the period during
which such assets were held by Emerging Growth Portfolio;
5. no gain or loss will be recognized by Mid Cap Portfolio upon the
receipt of the assets of Emerging Growth Portfolio solely in
exchange for shares of Mid Cap Portfolio and the assumption by
Mid Cap Portfolio of all of the liabilities of Emerging Growth
Portfolio;
6. no gain or loss will be recognized by the shareholders of
Emerging Growth Portfolio upon the receipt of shares of Mid Cap
Portfolio solely in exchange for their shares of Emerging Growth
Portfolio as part of the transaction;
7. the basis of Mid Cap Portfolio shares received by Emerging Growth
Portfolio's shareholders will be, in the aggregate, the same as
the basis, in the aggregate, of the shares of Emerging Growth
Portfolio exchanged therefor; and
8. the holding period of shares of Mid Cap Portfolio received by the
shareholders of Emerging Growth Portfolio will include the
holding period during which the shares of Emerging Growth
Portfolio exchanged therefor were held, provided that at the time
of the exchange the shares of Emerging Growth Portfolio were held
as capital assets in the hands of the shareholders of Emerging
Growth Portfolio.
The Trust has not sought a tax ruling from the Internal Revenue Service
(the "IRS"), but is acting in reliance upon the opinion of counsel discussed in
the previous paragraph. That opinion is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Shareholders should consult
their own tax advisors concerning their potential tax consequences, including
state and local income taxes.
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CAPITALIZATION
Because the two Portfolios will be combined if the Reorganization is
consummated, the total capitalization of Mid Cap Portfolio after the
Reorganization is expected to be greater than the current capitalization of each
Portfolio separately. The following table sets forth as of June 30, 2004: (1)
the capitalization of Emerging Growth Portfolio; (2) the capitalization of Mid
Cap Portfolio; and (3) the pro forma capitalization of Mid Cap Portfolio as
adjusted to give effect to the proposed Reorganization. The assets and
outstanding shares of Mid Cap Portfolio and Emerging Growth Portfolio are likely
to be different on the Closing Date than was the case on June 30, 2004 as a
result of fluctuations in the value of portfolio securities of each Portfolio
and daily share purchase and redemption activity in each Portfolio.
EMERGING GROWTH PRO FORMA MID CAP
PORTFOLIO MID CAP PORTFOLIO PORTFOLIO
---------------------- -------------------- -------------------
Total Net Assets $166,244,486 $207,629,564 $373,874,050
Shares Outstanding 16,925,739 27,928,811 50,299,034
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion summarizes some of the investment policies of Mid
Cap Portfolio, together with the primary differences, if any, from those of
Emerging Growth Portfolio.
INVESTMENT OBJECTIVE
The investment objective of Mid Cap Portfolio is to seek long-term growth
of capital. Emerging Growth Portfolio has the same objective.
INVESTMENT POLICIES AND RESTRICTIONS
While the investment policies and restrictions of Mid Cap Portfolio and
Emerging Growth Portfolio are similar, there are certain important differences
that should be considered.
Mid Cap Portfolio normally invests at least 80% of its net assets in
securities of medium-sized companies. Medium-sized market capitalization
companies are those with market capitalizations of at least $250 million but not
exceeding the top range of the Russell Midcap(TM) Growth Index ($17.0 billion as
of December 31, 2003) at the time of investment. Mid Cap Portfolio normally
invests primarily in common stock and related securities, such as preferred
stock, convertible securities, and depositary receipts, of companies with
above-average growth potential. By comparison, Emerging Growth Portfolio
normally invests at least 65% of its net assets in common stock and related
securities such as preferred stock, convertible securities and depositary
receipts of emerging growth companies. Emerging growth companies are those that
the sub-adviser believes either are early in their life cycle, but have the
potential to become major enterprises, or are major enterprises whose rates of
earnings growth are expected to accelerate. Emerging growth companies can be of
any size and represent all industries.
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As previously noted, Emerging Growth Portfolio is diversified, while Mid
Cap Portfolio is non-diversified, which could result in the Mid Cap Portfolio
being more volatile than the Emerging Growth Portfolio.
Both Portfolios' investments may include securities traded in the
over-the-counter markets. Mid Cap Portfolio may invest up to 20% of its net
assets in foreign securities, whereas Emerging Growth Portfolio may invest up to
20% of its net assets in foreign and emerging market securities.
Mid Cap Portfolio may also invest in fixed-income securities, including up
to 10% in lower-quality fixed-income securities and comparable unrated
securities (commonly called "junk bonds"). Emerging Growth Portfolio is
permitted to invest in these securities without being subject to any specific
percentage limitation, but will not do so as a principal investment strategy.
Mid Cap Portfolio may establish short positions of up to 15% of its net assets
in specific securities or stock indices. Emerging Growth Portfolio may also
establish such positions, but does not expect to do so to any significant
extent.
Mid Cap Portfolio may engage in reverse repurchase agreements, whereas
Emerging Growth Portfolio may not. Neither Portfolio's investment objective is
fundamental. The investment objective and investment policies of either Fund as
described above may be changed by the Board without approval of shareholders or
holders of variable annuity and variable life insurance contracts. A change in a
Fund's investment objective or policies may result in the Fund having a
different investment objective or policies from those that a policy owner
selected as appropriate at the time of investment. Policy owners with assets
allocated to Mid Cap Portfolio will be given at least 60 days prior notice of
any change in Mid Cap Portfolio's policy of investing at least 80% of its net
assets in medium-sized companies. The fundamental investment restrictions of
each Portfolio, which are set forth in the Trust's Statement of Additional
Information, are identical except for the restriction requiring the Emerging
Growth Portfolio to meet the definition of a "diversified" company in the 1940
Act.
MID CAP PORTFOLIO PERFORMANCE UPDATE
The following provides an overview on the performance of the Mid Cap
Portfolio for the one-year period that ended December 31, 2003.*
During its fiscal year ended December 31, 2003, the fund returned 37.05%.
In comparison, the fund underperformed both of its benchmarks, the Russell
Midcap Growth Index,i which returned 42.71% as well as the Russell 2000 Indexii,
which returned 47.25% for the same period. However, the fund outperformed its
Lipper mid-cap growth variable funds category average, which was 36.34% for the
same period.
MARKET ENVIRONMENT
In the early months of 2003, investors were battered by economic and
geopolitical uncertainty. By year-end, however, they were upbeat as 2003 was the
first positive year for most global markets in four years. The turnaround in
global stock markets began in March and April,
-15-
when it became apparent that the U.S.- and British-led coalition was on the
verge of military success in Iraq. Increasingly positive economic numbers,
particularly corporate earnings, prompted an ensuing market rally. Additionally,
as the year progressed, investor focus on negative factors such as the Iraq
situation, a short-lived SARS epidemic, and corporate misdeeds decreased.
In the equity markets, the big surprise of 2003 was investors' appetite for
risk. After a brutal three-year market decline, many observers believed
investors would avoid risky investments. Instead, the markets experienced an
equity rally led by relatively low-quality, higher-risk stocks--stocks of
companies with substantial debt on their balance sheets, low profit margins,
and/or second- and third-tier competitive positioning. Investors seemed to favor
the stocks that had fallen the hardest, rather than bidding up industry leaders
that had weathered the global downturn relatively well.
PERFORMANCE CONTRIBUTORS
Wireless tower rental companies CROWN CASTLE INTERNATIONAL CORP. and
AMERICAN TOWER CORPORATION, in the utilities and communication sector, were the
fund's best performing stocks. Cash flow growth and improving fundamentals drove
these stocks higher. In addition, debt refinancing improved overall balance
sheets for these companies.
In the leisure sector, Internet travel firm EXPEDIA, INC. benefited from
market share gains in the online travel business and posted solid results.
Satellite TV operator ECHOSTAR COMMUNICATIONS CORPORATION posted strong gains as
the company expanded its subscriber base and generated strong growth in free
cash flows. Shares of NTL INCORPORATED, the largest broadband and cable operator
in the U.K. and Ireland, soared after the company emerged from bankruptcy and
continued to strengthen its balance sheet and drive cash flow growth.
Contributors in technology included data storage software supplier VERITAS
SOFTWARE CORPORATION, which benefited from a recovery in technology spending for
storage software. Semiconductor company ANALOG DEVICES, INC. contributed to
performance due to an upswing in semiconductor demand and market share gains for
its well-positioned products.
The fund's investments in healthcare also contributed to performance.
Biotechnology equipment vendor INVITROGEN CORPORATION, which sells life science
tools used in research and drug manufacturing, benefited from an industry
recovery and improved product offerings and efficiency gains under a new CEO.
GENENTECH, INC.'S stock soared after receiving FDA approval for Avastin, an
innovative new cancer drug. We sold Genentech during the period and took some
profits. GUIDANT CORPORATION posted strong gains after an earlier sell-off,
based on the company's leading position in cardiac rhythm management and future
possibilities in drug-coated stents.
DETRACTORS FROM PERFORMANCE
Despite solid gains from select stocks, the returns from the fund's overall
technology position trailed the benchmark's. NETWORK ASSOCIATES, INC. lagged as
sales of the company's industry leading anti-spam and anti-virus software were
slow to accelerate and were unable to meet or exceed our expectations. Software
developer PEOPLESOFT, INC. detracted from
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performance as demand for the company's release of its product upgrade was not
as robust as anticipated. We sold Peoplesoft prior to the end of the period.
Media holding WESTWOOD ONE, INC. detracted from performance as the pickup
in advertising, which is tied to the economic recovery, proved slower than
expected. Weight loss services company WEIGHT WATCHERS INTERNATIONAL, INC.'S
stock price declined as fundamentals weakened in the face of competing diet
programs. We sold Weight Watchers during the period as our fundamental thesis
was not playing out as anticipated. Adult education provider CAREER EDUCATION
CORPORATION'S stock retreated late in the year amid allegations that employees
falsified accreditation documents, charges which management vigorously denies.
The fund was also negatively impacted by not owning two stocks in the Russell
Midcap Growth Index that performed well: AMAZON.COM, INC., which we avoided
based on valuation; and NEXTEL COMMUNICATIONS, INC., which the fund did not own
based on concerns about the competitive dynamic among wireless carriers.
The portfolio's cash position also detracted from relative performance. As
with nearly all annuity subaccounts, the fund holds some cash to buy new
holdings and to cover investor exchanges or redemptions. In a period when equity
markets rose sharply, the fund's cash holdings hurt performance against the
Russell Midcap Growth Index, which has no cash position.
* The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. The opinions expressed are
current only through the end of the period of this report as stated on the cover
and are subject to change at any time based on market or other conditions. Views
expressed may differ from those of the firm as a whole. Fund performance
reflects fund expenses, but does not reflect any charges or expenses imposed by
your variable contract. Index performance does not reflect any deduction for
fees or expenses. An investor may not invest directly in an index.
i The Russell Midcap Growth Index measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher 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.)
ii 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.
-17-
MID CAP PORTFOLIO FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
The following financial highlights tables are intended to help you understand
the Mid Cap Portfolio's financial performance. Financial highlights for each of
the Portfolio's last five fiscal years are included in the Prospectus for the
Mid Cap Portfolio enclosed with this Combined Prospectus/Proxy Statement. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in a Fund (assuming reinvestment of all
dividends and distributions). The financial highlights for 2003 have been
audited by KPMG LLP, whose report, along with each Fund's financial statements,
are included in the annual report, which is available upon request. The
financial highlights for the six months ended June 30, 2004 are unaudited.
MFS MID CAP GROWTH PORTFOLIO 2004 (1) 2003
------------------------------------------------------------ ----------------------- ----------------
Net Asset Value, Beginning of Period.................... $6.88 $5.02
------------------------------------------------------------ ----------------------- ----------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (2) ............................. (0.03) (0.03)
Net realized and unrealized gain .................... 0.58 1.89
------------------------------------------------------------ ----------------------- ----------------
Total Income From Operations............................ 0.55 1.86
------------------------------------------------------------ ----------------------- ----------------
LESS DISTRIBUTIONS FROM:
Net realized gains................................... - -
------------------------------------------------------------ ----------------------- ----------------
Total Distributions..................................... - -
------------------------------------------------------------ ----------------------- ----------------
NET ASSET VALUE, END OF PERIOD.......................... $7.43 $6.88
------------------------------------------------------------ ----------------------- ----------------
TOTAL RETURN(3)......................................... 7.99%* 37.05%
------------------------------------------------------------ ----------------------- ----------------
NET ASSETS, END OF PERIOD (000'S)....................... $207,630 $192,608
------------------------------------------------------------ ----------------------- ----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)(4)...................................... 0.93%** 0.92%
Net investment loss.................................. (0.69)** (0.49)
------------------------------------------------------------ ----------------------- ----------------
PORTFOLIO TURNOVER RATE................................. 49% 98%
------------------------------------------------------------ ----------------------- ----------------
(1) For the six months ended June 30, 2004 (unaudited)
(2) The Travelers Insurance Company has agreed to reimburse the Fund for
expenses in the amount of $27,304 for the year ended December 31, 1999. If
such expenses were not reimbursed, the per share increase to net investment
loss and actual expense ratio would have been $0.01 and 1.07%,
respectively.
(3) Total returns do not reflect expenses associated with your variable
contract such as administrative fees, account charges and surrender
charges, which if reflected, would reduce the total returns for all periods
shown. Performance figures may reflect fee waivers and/or expense
reimbursements. Past performance is no guarantee of future results. In the
absence of fee waivers and/or expense reimbursements, the total return
would be reduced.
(4) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.00%.
* Total return is not annualized, as it may not be representative of the total
return for the year.
** Annualized.
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SUMMARY OF INFORMATION ABOUT THE TRUST GENERALLY
PURCHASES AND REDEMPTIONS
Shares in the Trust, including shares of Emerging Growth Portfolio and
shares of Mid Cap Portfolio, are offered continuously, without any sales charge,
at prices equal to the applicable Portfolio's net asset value next determined
after the Portfolio's custodian receives payment. Depending upon the net asset
value at that time, the amount paid upon redemption may be more or less than the
amount paid at the time of purchase. Payment for shares redeemed is normally
wired or mailed either the same day as a redemption request in proper form is
received, or on the next business day, but in any event within seven days after
receipt of the request.
The net asset value of a Portfolio's shares is the value of its assets
minus its liabilities, divided by the number of shares outstanding. Each
Portfolio calculates its net asset value every day the New York Stock Exchange
("NYSE") is open, as of the close of regular trading on the NYSE (normally 4:00
p.m., Eastern time).
A Portfolio's assets are valued primarily based on market value. In cases
where market quotations are not readily available or, for foreign securities, if
the values have been materially impacted by events occurring after the closing
of a foreign market, an asset is valued at fair value as determined in good
faith in accordance with procedures adopted by the Board.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio intends to make distributions of income and capital gains in
order to qualify each year as a regulated investment company under Subchapter M
of the Internal Revenue Code. As a result of qualifying as a regulated
investment company, a Portfolio will not be subject to federal income tax to the
extent that the Portfolio distributes its net investment income and net capital
gains. All income and capital gain distributions are automatically reinvested in
additional shares of the Portfolio at net asset value without a sales charge.
ORGANIZATIONAL STRUCTURE
Each Fund is a series of the Trust, a Massachusetts business trust, and is,
therefore, governed by the Trust's Agreement and Declaration of Trust, as
amended from time to time ("Declaration of Trust"), Bylaws, and by Massachusetts
law. Thus, the following discussion is applicable to each Fund. Additionally,
the Trust and each Fund are, and will continue to be, governed by the 1940 Act.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Declaration of Trust disclaims shareholder liability for acts or obligations
of the Trust, and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or its
trustees. Moreover, the Declaration of Trust provides for indemnification out of
the Trust's property for all losses and expenses of any shareholder held
personally liable for the Trust's obligations. Thus, the Trust considers the
risk of a shareholder's incurring financial loss on account of shareholder
liability to be remote, since it is limited to circumstances in which the
-19-
disclaimer is inoperative, inadequate insurance existed (e.g., fidelity bonding
and errors and omissions insurance), and the Trust itself is unable to meet its
obligations.
The Trust has an unlimited number of authorized shares of beneficial
interest, par value $.001 per share, which may be divided into series and
classes. The Declaration of Trust authorizes the issuance of shares in different
series, and authorizes the Board, without further shareholder action, to
establish and create additional series and to designate the rights and
preferences of the shareholders of each of the respective series. Each Trust
portfolio is a separate series with a separate portfolio of securities, and the
shares of each series are preferred over all other series with respect to assets
allocated to that series. Each share of a series of the Trust represents an
equal proportionate interest in that series with each other share of that
series. Each series currently has only one class of shares, but may in the
future issue multiple classes of shares.
In addition to Emerging Growth Portfolio and Mid Cap Portfolio, the Trust
currently offers 14 other portfolios: Convertible Securities, Disciplined Mid
Cap Stock, Equity Income, Federated High Yield, Federated Stock, Large Cap,
Lazard International Stock, MFS Value, Merrill Lynch Large Cap Core, Pioneer
Fund, Social Awareness Stock, Travelers Quality Bond, U.S. Government
Securities, and Zero Coupon Bond (Series 2005) Portfolios. The Trust's
prospectuses and statement of additional information include detailed
descriptions of each Trust portfolio. The Trust may add or subtract additional
portfolios from time to time in the future.
The foregoing is only a summary of certain organizational and governing
documents and Massachusetts business trust law. It is not a complete
description. Shareholders should refer to the provisions of these documents and
state law directly for a more thorough description. Copies of the Declaration of
Trust and Bylaws of the Trust are available without charge upon written request.
VOTING INFORMATION
TL&A is the record owner of all of the shares of Emerging Growth Portfolio.
TL&A will vote Emerging Growth Portfolio's shares at the Meeting in accordance
with the timely instructions received from persons entitled to give voting
instructions under the variable contracts. Contract owners and certain
annuitants and/or beneficiaries have the right to instruct TL&A as to the number
of shares (and fractional shares) attributable to their variable contract's
value on the record date allocated to the separate account that holds shares of
Emerging Growth Portfolio.
TL&A will vote shares attributable to variable contracts as to which no
voting instructions are received in the same proportion (for, against, or
abstain) to those for which timely instructions are received. In other words,
TL&A is entitled to vote shares for which no instructions are received, but will
do so in the same proportion as shares for which instructions have been received
from contract owners. If a Voting Instruction Form is received that does not
provide any instructions, TL&A will consider its timely receipt as an
instruction to vote in favor of the proposal. In certain circumstances, TL&A has
the right to disregard voting instructions from certain owners. TL&A does not
believe that these circumstances exist with respect to matters currently before
shareholders and contract owners. Contract owners may revoke previously
submitted voting instructions given to TL&A by notifying TL&A in writing at any
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time before 5:00 p.m. (Eastern time) on February __, 2005 or by attending and
voting in person at the Meeting. The Emerging Growth Portfolio will bear all of
the expenses of soliciting voting instructions. The solicitation will be made
primarily by mail, but TL&A and its affiliates may make telephone, electronic,
or oral communications to contract owners. [INFO ON SOLICITATION FIRM? - ITEM 4
OF SCHEDULE 14A]
A majority of the outstanding shares of Emerging Growth Portfolio
represented in person or by proxy must be present at the Meeting to constitute a
quorum. As the record owner of all of the shares of Emerging Growth Portfolio,
TL&A's presence at the Meeting will be sufficient to constitute a quorum. If a
quorum is not present at the Meeting, or if a quorum is present but, at the
Meeting, sufficient votes to approve the Reorganization are not received, the
persons with proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any adjournment will require the
affirmative vote of a majority of the shares represented at the Meeting in
person or by proxy. Based on voting instructions received, proxies will vote in
favor of such adjournment those instructions that are in favor of the
Reorganization, will vote against any adjournments those instructions that are
against the Reorganization, and will abstain from voting with respect to any
adjournment those instructions that are marked to abstain in connection with the
Reorganization.
Approval of the Reorganization Plan by Emerging Growth Portfolio
shareholders requires the affirmative vote of the holders of the lesser of (a)
67% or more of the voting securities present at the Meeting or represented by
proxy if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy or (b) more than 50% of the outstanding voting
securities of the Emerging Growth Portfolio. Shareholders of record are entitled
to one vote for each full share owned, with a fractional vote for each
fractional share. The Reorganization does not require the approval of the
shareholders of the Mid Cap Portfolio.
The Board has fixed December __, 2004 as the record date for determining
shareholders entitled to receive notice of and to vote at the Meeting. To be
counted, TL&A must receive an owner's properly executed Voting Instruction Form
at the Trust's office by 5:00 p.m. Eastern time on February __, 2005.
The name, address and percentage ownership of the persons who owned
beneficially more than 5% of a Portfolio through any separate accounts of TL&A
invested in Emerging Growth Portfolio, the percentage of such ownership, and the
percentage that would be owned by such persons upon consummation of the
Reorganization based upon their holdings and the net asset values of the
Portfolios as of the record date are as follows:
Percentage of Portfolio Percentage of Mid Cap Portfolio
Name and Address Portfolio Owned on Record Date Ownership Upon Consummation
------------------ ----------- ------------------------- ---------------------------------
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The Trustees and Officers of the Trust beneficially owned in the aggregate
less than 1% of each Portfolio. As of the record date, TL&A owned OF RECORD 100%
of the outstanding shares of Mid Cap Portfolio.
ADDITIONAL INFORMATION ABOUT THE TRUST
Information about the Mid Cap Portfolio is included in its Prospectus dated
May 3, 2004, which is incorporated herein by reference and enclosed with this
Combined Proxy Statement/Prospectus as Appendix B. Information about the
Emerging Growth Portfolio is included in its Prospectus dated May 3, 2004, and
additional information about the Funds is included in the Trust's Statement of
Additional Information dated May 3, 2004, which have been filed with the SEC and
are incorporated herein by reference. Copies of the Emerging Growth Portfolio's
Prospectus and the Statement of Additional Information may be obtained without
charge by calling 1-800-842-9368. The Trust is subject to the requirements of
the 1940 Act and, in accordance with such requirements, files reports and other
information with the SEC under the 1940 Act and the Securities Exchange Act of
1934. These materials can be inspected and copied at the Public Reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such material can also be obtained for a fee by written request
to the Public Reference Branch, Securities and Exchange Commission, Washington,
D.C. 20549-0102 or by electronic request to publicinfo@sec.gov, and is also
available on the SEC's web site at http://www.sec.gov.
The financial statements of Emerging Growth Portfolio and Mid Cap Portfolio
contained in each Portfolio's annual report to shareholders for the fiscal year
ended December 31, 2003 have been audited by KPMG LLP, independent registered
public accounting firm for the Trust. These annual reports, as well as most
recent semi-annual reports of the Emerging Growth Portfolio and Mid Cap
Portfolio, which contain unaudited financial statements of the Portfolios for
the six months ended June 30, 2004, may be obtained without charge by calling
1-800-842-9368. The discussion of the performance of the Mid Cap Portfolio from
the Trust's most recent annual report is included in the Mid Cap Portfolio
Performance Update section.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters come before the Meeting, it is the Board's
intention that, except where contract owners' Instruction Forms contain specific
restrictions to the contrary, proxies will vote on such matters in accordance
with the judgment of the proxy.
LITIGATION
The Trust is not involved in any litigation that would have any material
adverse effect upon either Emerging Growth Portfolio or Mid Cap Portfolio.
-22-
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the
address on the cover page of this Combined Prospectus/Proxy Statement or by
telephoning 1-800-842-9368.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED VOTING INSTRUCTIONS FORMS AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-23-
APPENDIX A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Plan") is made as of this __ day of
________, 2004 by The Travelers Series Trust, a Massachusetts business trust
with its principal place of business at One Cityplace, Hartford, Connecticut
06103 ("the Trust"), on behalf of its series, MFS Emerging Growth Portfolio
("Emerging Growth Portfolio" or, at times, the "Merging Fund") and MFS Mid Cap
Growth Portfolio ("Mid Cap Growth Portfolio" or, at times, the "Acquiring Fund,"
and together with the Merging Fund, the "Funds").
This Plan is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), with respect to each of the Merging Fund and the
Acquiring Fund, with which the Merging Fund will reorganize, as provided herein.
The reorganization will consist of: (1) the transfer of substantially all of the
Merging Fund's assets to the Acquiring Fund, in exchange solely for shares of
beneficial interest (no par value) of the Acquiring Fund (the "Acquiring Fund
Shares"); (2) the assumption by the Acquiring Fund of all of the Merging Fund's
liabilities; and (3) the distribution of the Acquiring Fund Shares to the
shareholders of the Merging Fund in complete liquidation of such Merging Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Plan (the "Reorganization").
In order to consummate the Plan, the following actions shall be taken by
the Trust on behalf of the Merging Fund and the Acquiring Fund:
1. THE REORGANIZATION
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Trust, on behalf of
the Merging Fund, agrees to transfer to the Acquiring Fund substantially all of
the Merging Fund's assets as set forth in Section 1.2, and the Acquiring Fund
agrees in exchange therefor:
(i) to issue and deliver to the Merging Fund the number of full and
fractional Acquiring Fund Shares determined by dividing the portion of the
net value of the assets (such net value computed as set forth in Section
2.1 hereof and referred to as the "Merging Fund Value") attributable to the
Merging Fund Shares by the net asset value ("NAV") of an Acquiring Fund
Share (computed as set forth in Section 2.2); and
(ii) to assume all of the liabilities of the Merging Fund, as set
forth in Section 1.3.
Such transactions shall take place at the closing provided for in Section 3.1
(the "Closing").
1.2. The assets of the Merging Fund to be transferred to the Acquiring Fund
(collectively, "Assets") shall consist of all property and assets of every kind
and nature of the Merging Fund, including, without limitation, all cash, cash
equivalents, securities, commodities, futures, claims (whether absolute or
contingent, known or unknown), receivables (including dividend, interest and
other receivables), good will and other intangible property, any deferred or
prepaid expenses, and all interests, rights, privileges and powers, other than
cash in an amount necessary to pay dividends and distributions as provided in
Section 1.4 hereof and the Merging Fund's rights under this Plan.
1.3. The Acquiring Fund shall assume all liabilities of the Merging Fund,
whether accrued or contingent, existing at the Valuation Time as defined in
Section 2.1. The Merging Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in Section 3.1,
other than those liabilities and obligations which would otherwise be discharged
at a later date in the ordinary course of business.
-A-1-
1.4. On or as soon as practicable prior to the Closing Date, the Merging
Fund will declare and pay to its shareholders of record one or more dividends
and/or other distributions so that it will have distributed substantially all of
its investment company taxable income (computed without regard to any deduction
for dividends paid) and realized net capital gain, if any, for the current
taxable year through the Closing Date.
1.5. Immediately after the transfer of its assets provided for in Section
1.1, the Merging Fund will distribute to its shareholders of record (the
"Merging Fund Shareholders"), determined as of the Valuation Time as defined in
Section 2.1, on a PRO RATA basis, the Acquiring Fund Shares received by the
Merging Fund pursuant to Section 1.1 and will completely liquidate. Merging Fund
Shareholders owning Merging Fund Shares shall receive Acquiring Fund Shares
therefor. Such distribution and liquidation will be accomplished by the transfer
of the Acquiring Fund Shares then credited to the account of the Merging Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Merging Fund Shareholders. The aggregate net
asset value of the Acquiring Fund Shares to be so credited to Merging Fund
Shareholders shall be equal to the aggregate net asset value of the Merging Fund
Shares owned by such shareholders as of the Valuation Time. All issued and
outstanding shares of the Merging Fund will simultaneously be cancelled on the
books of the Merging Fund. The Acquiring Fund will not issue certificates
representing Acquiring Fund Shares in connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the Acquiring
Fund's books. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Merging Fund, including, without
limitation, the responsibility for filing of regulatory reports, tax returns or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Merging Fund or the Trust on behalf of the Merging Fund.
1.8. All books and records of the Merging Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2. VALUATION
2.1. The value of the Assets and liabilities of the Merging Fund shall be
computed as of the close of regular trading on the New York Stock Exchange, Inc.
("NYSE") on the Closing Date (such time and date also being hereinafter called
the "Valuation Time"), after the declaration and payment of any dividends and/or
other distributions on that date, using the valuation procedures described in
the Acquiring Fund's then-current prospectus and statement of additional
information. The Merging Fund Value shall be determined by dividing the value of
the Assets of the Merging Fund less the value of the liabilities of the Merging
Fund as determined as provided herein.
2.2. The net asset value of Acquiring Fund Shares shall be computed as of
the Valuation Time using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus and statement of additional information.
2.3. All computations of value hereunder shall be made in accordance with
each Fund's regular practice as set forth in its prospectus and statement of
additional information and the requirements of the 1940 Act, and shall be
subject to confirmation by the Trust's Board of Trustees and the Trust's
independent auditors.
-A-2-
3. CLOSING AND CLOSING DATE
3.1. The Reorganization Closing contemplated by this Plan shall be February
__, 2005, or such earlier or later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 4:00 p.m., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
TL&A Funds, One Cityplace, Hartford, Connecticut 06103, or at such other place
and time as the parties may agree.
3.2. The Trust shall furnish to the Acquiring Fund a statement of the
Merging Fund's net assets, together with a list of portfolio holdings with
values as determined in Section 2.1, all as of the Valuation Time, certified by
the Trust's Treasurer.
3.3. The Trust, on behalf of the Merging Fund, shall have provided for
delivery, as of the Closing, of the Merging Fund's Assets to the account of the
Acquiring Fund at the Acquiring Fund's custodian, State Street Bank and Trust
(the Custodian"). The Merging Fund's securities and instruments deposited with a
securities depository, as defined in the applicable rules adopted under section
17(f), or a futures commission merchant, as defined in Rule 17f-6, each under
the 1940 Act, shall be delivered as of the Closing Date by book entry in
accordance with the customary practices of such depositories and futures
commission merchants and the Merging Fund's Custodian. The cash to be
transferred by the Merging Fund shall be transferred and delivered by the Funds
as of the Closing Date for the account of the Acquiring Fund.
3.4. The Trust shall instruct Citicorp Trust Bank, the transfer agent of
the Merging Fund, to deliver at the Closing its records containing the names and
addresses of the Merging Fund Shareholders and the number and percentage
ownership (to three decimal places) of outstanding Merging Fund Shares owned by
each such shareholder immediately prior to the Closing. The Trust on behalf of
the Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Merging Fund or
provide evidence satisfactory to the Merging Fund that such Acquiring Fund
Shares have been credited to the Merging Fund's accounts on the books of the
Acquiring Fund.
3.5. In the event that immediately prior to the Valuation Time: (a) the
NYSE or another primary trading market for portfolio securities of the Acquiring
Fund or the Merging Fund shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on the NYSE or
elsewhere shall be disrupted so that, in the judgment of the Board of Trustees
of the Trust, accurate appraisal of the value of the net assets with respect to
the Acquiring Fund Shares or the Merging Fund Shares is impracticable, the
Closing Date shall be postponed until the first business day after the day when
trading shall have been fully resumed and reporting shall have been restored.
3.6. At the Closing, each party shall deliver to the other such bills of
sale, checks, assumption agreements, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request to effect the transactions contemplated by this Plan.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Trust makes the following representations and warranties about the
Merging Fund:
(a) The Trust is a business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts with power
under its Agreement and Declaration of Trust to own all of its properties
and assets and to carry on its business as it is now being conducted. The
Merging Fund has been duly established as a series of the Trust.
(b) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Trust, on
behalf of the Merging Fund, of the transactions contemplated herein, except
such as may be required under the Securities Act of 1933, as amended (the
-A-3-
"1933 Act"), the Securities Exchange Act of 1934 (the "1934 Act"), the 1940
Act, and state securities laws.
(c) The Merging Fund is not, and the execution, delivery and
performance of this Plan by the Trust on behalf of the Merging Fund will
not result, in violation of Massachusetts law or of the Trust's Agreement
and Declaration of Trust or By-Laws, or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Trust or the
Merging Fund is a party or by which any of those entities is bound, nor
will the execution, delivery and performance of this Plan by the Trust on
behalf of the Merging Fund result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Merging Fund is a party or
by which it is bound.
(d) To the Trust's knowledge, there is no material litigation or
administrative proceeding or investigation of or before any court or
governmental body presently pending or threatened against the Merging Fund
or any properties or assets held by it. The Trust knows of no facts that
might form the basis for the institution of such proceedings or which would
materially and adversely affect its business, or the business of the
Merging Fund, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its or the Merging Fund's business or its
or the Merging Fund's ability to consummate the transactions herein
contemplated.
(e) The financial statements of the Merging Fund at and for the year
ended December 31, 2003, audited by KPMG LLP, independent registered public
accounting firm, and at and for the six months ended June 30, 2004, are in
accordance with U.S. generally accepted accounting principles ("GAAP")
consistently applied. All of such statements present fairly, in all
material respects, the financial position, results of operations, changes
in net assets and financial highlights of the Merging Fund as of the dates
thereof in accordance with GAAP, and there are no known actual or
contingent liabilities of the Merging Fund required to be reflected on a
statement of assets and liabilities (including the notes thereto) in
accordance with GAAP as of such dates not disclosed therein.
(f) Since June 30, 2004, there has not been any material adverse
change in the Merging Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Merging Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquiring Fund. For purposes of
this subsection (f), a decline in net asset value per share of the Merging
Fund due to declines in market values of securities in the Merging Fund's
portfolio, the discharge of Merging Fund liabilities, or the redemption of
Merging Fund Shares by Merging Fund Shareholders shall not constitute a
material adverse change.
(g) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Merging Fund required by law to have been
filed by such dates (including any extensions) have or shall have been
filed and are or will be correct in all material respects, and all federal
and other taxes shown as due or required to be shown as due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Trust's knowledge, no such return
is currently under audit and no assessment has been asserted with respect
to such returns or reports.
(h) For each taxable year of its operation (including the tax year
ending on the Closing Date), the Merging Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment
company and has elected to be treated as such, and has been eligible to and
has computed its federal income tax under Section 852 of the Code. At
Closing, the Merging Fund will have distributed all of its investment
company taxable income and net capital gain (as defined in the Code) that
has accrued up to the Closing Date. The authorized capital of the Trust
consists of an unlimited number of shares of beneficial interest, all
without par value, and divided into 16 series.
-A-4-
(i) All issued and outstanding shares of the Merging Fund: (1) have
been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, (2) are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable, and (3) will be held at the time of the Closing by the
persons and in the amounts set forth in the records of the Merging Fund's
transfer agent, as provided in Section 3.4. There are no outstanding
options, warrants or other rights to subscribe for or purchase any Merging
Fund Shares, nor is there outstanding any security convertible into any
Merging Fund Share.
(j) At the Closing Date, the Trust, on behalf of the Merging Fund,
will have good and marketable title to the Merging Fund's Assets and full
right, power and authority to sell, assign, transfer and deliver such
Assets hereunder free of any liens or other encumbrances, except those
liens or encumbrances as to which the Trust, on behalf of the Acquiring
Fund, has received notice at or prior to the Closing, and upon delivery and
payment for such Assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, except those restrictions as to which the Trust, on behalf of the
Acquiring Fund, has received notice and necessary documentation at or prior
to the Closing.
(k) The current prospectus and statement of additional information of
the Merging Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading.
(l) The Registration Statement referred to in Section 5.5, insofar as
it relates to the Merging Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements are made, not materially
misleading.
(m) As promptly as practicable, but in any case with sixty (60) days
after the Closing Date, the Merging Fund will furnish to the Acquiring
Fund, in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Merging Fund for federal
income tax purposes, as well as any net operating loss carryovers and
capital loss carryovers, that will be carried over by the Acquiring Fund as
a result of Section 381 of The Code, and which will be certified by the
Treasurer of the Merging Fund.
4.2. The Trust makes the following representations and warranties about the
Acquiring Fund:
(a) The Trust is a business trust duly established and validly
existing under the law of the Commonwealth of Massachusetts with power
under its Agreement and Declaration of Trust to own all of its properties
and assets and to carry on its business as it is now being conducted. The
Acquiring Fund has been duly established as a series of the Trust.
(b) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Trust, on
behalf of the Acquiring Fund, of the transactions contemplated herein,
except such as may be required under the 1933 Act, the 1934 Act, the 1940
Act, and state securities laws.
(c) The Acquiring Fund is not, and the execution, delivery and
performance of this Plan by the Trust on behalf of the Acquiring Fund will
not result, in violation of Massachusetts law or of the Trust's Agreement
and Declaration of Trust or By-Laws, or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring
Fund is a party or by which it is bound, nor will the execution, delivery
and performance of this Plan by the Trust on behalf of the Acquiring Fund
-A-5-
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the Acquiring Fund is a party or by which it is
bound.
(d) To the Trust's knowledge, there is no material litigation or
administrative proceeding or investigation of or before any court or
governmental body presently pending or threatened against the Acquiring
Fund or any properties or assets held by it. The Trust knows of no facts
which might form the basis for the institution of such proceedings or which
would materially and adversely affect its business or the business of the
Acquiring Fund, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its or the Acquiring Fund's business or
its or the Acquiring Fund's ability to consummate the transactions herein
contemplated.
(e) The financial statements of the Acquiring Fund at and for the year
ended December 31, 2003, audited by KPMG LLP, independent registered public
accounting firm, and at and for the six months ended June 30, 2004, are in
accordance with GAAP consistently applied. All such statements present
fairly, in all material respects, the financial position, results of
operations, changes in net assets and financial highlights of the Acquiring
Fund as of such date in accordance with GAAP, and there are no known actual
or contingent liabilities of the Acquiring Fund required to be reflected on
a statement of assets and liabilities (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein.
(f) Since June 30, 2004, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Merging Fund. For purposes of
this subsection (f), a decline in net asset value per share of the
Acquiring Fund due to declines in market values of securities in the
Acquiring Fund's portfolio, the discharge of Acquiring Fund liabilities, or
the redemption of Acquiring Fund Shares by Acquiring Fund shareholders
shall not constitute a material adverse change.
(g) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquiring Fund required by law to have been
filed by such dates (including any extensions) have or shall have been
filed and are or will be correct in all material respects, and all federal
and other taxes shown as due or required to be shown as due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Trust's knowledge, no such return
is currently under audit and no assessment has been asserted with respect
to such returns or reports.
(h) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such, has
been eligible to and has computed its federal income tax under Section 852
of the Code, and intends to do so for the taxable year including the
Closing Date.
(i) All issued and outstanding shares of the Acquiring Fund: (1) have
been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, and (2) are, and on
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. There are no outstanding options, warrants or
other rights to subscribe for or purchase any Acquiring Fund Shares, nor is
there outstanding any security convertible into any Acquiring Fund Share.
The Acquiring Fund Shares to be issued and delivered to the Merging Fund
for the account of the Merging Fund Shareholders pursuant to the terms of
this Plan, at the Closing Date, will have been duly authorized and, when so
issued and delivered, will be duly and validly issued and outstanding
Acquiring Fund Shares, and will be fully paid and non-assessable.
-A-6-
(j) At the Closing Date, the Trust, on behalf of the Acquiring Fund,
will have good and marketable title to the Acquiring Fund's assets, free of
any liens or other encumbrances, except those liens or encumbrances as to
which the Trust, on behalf of the Merging Fund, has received notice at or
prior to the Closing.
(k) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading.
(l) The Registration Statement, insofar as it relates to the Acquiring
Fund, will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
4.3. The Trust makes the following representations and warranties about
itself:
(a) The Trust is duly registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is
in full force and effect.
(b) The execution, delivery and performance of this Plan have been
duly authorized by all necessary action on the part of the Trustees of the
Trust, and, subject to the approval of the shareholders of the Merging
Fund, this Plan constitutes a valid and binding obligation of the Trust,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general
principles of equity.
(c) The information to be furnished by the Trust for use in
applications for orders, registration statements or proxy materials or for
use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary or appropriate in
connection with the transactions contemplated hereby, shall be accurate and
complete and shall comply with federal securities and other laws and
regulations applicable thereto.
5. INTENTIONS
5.1. Each Fund intends to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that (a) such
ordinary course of business will include (i) the declaration and payment of
customary dividends and other distributions and (ii) such changes as are
contemplated by the Fund's normal operations; and (b) each Fund shall retain
exclusive control of the composition of its portfolio until the Closing Date.
5.2. The Trust and the Merging Fund intend to call a meeting of the
shareholders of the Merging Fund to consider and act upon this Plan and to take
all other reasonable action necessary to obtain approval of the transactions
contemplated herein.
5.3. The Trust and the Merging Fund intend that the Acquiring Fund Shares
to be issued hereunder will not be acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Plan.
-A-7-
5.4. Subject to the provisions of this Plan, the Trust intends to take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper, and/or advisable to consummate and make effective
the transactions contemplated by this Plan.
5.5. The Trust will file a Registration Statement on Form N-14 (the
"Registration Statement") under the 1933 Act, including the combined proxy
statement/prospectus contained therein, in connection with the meeting of
shareholders of the Merging Fund to consider approval of this Plan and the
transactions contemplated herein, with the Commission as promptly as
practicable.
5.6. Each of the Trust and the Merging Fund intends that it will, from time
to time, execute and deliver or cause to be executed and delivered all such
assignments and other instruments, and will take or cause to be taken such
further action, as the Trust may reasonably deem necessary or desirable in order
to vest in and confirm the Acquiring Fund's title to and possession of the
Assets and otherwise to carry out the intent and purpose of this Plan.
5.7. Each of the Trust and the Acquiring Fund intends that it will, from
time to time, execute and deliver or cause to be executed and delivered all such
assignments, assumption agreements, releases and other instruments, and will
take or cause to be taken such further action, as the Trust may reasonably deem
necessary or desirable in order to (i) vest and confirm the Trust's title to and
possession of all Acquiring Fund Shares to be transferred to the Merging Fund
pursuant to this Plan and (ii) assume the assumed liabilities of the Merging
Fund.
5.8. The Trust intends to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state securities laws as it deems appropriate in order to consummate the
transactions contemplated herein and, in the case of the Acquiring Fund, to
continue its operations after the Closing Date.
5.9. As soon as reasonably practicable after the Closing, the Merging Fund
shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.10. The Trust intends to use its reasonable best efforts to fulfill or
obtain the fulfillment of the conditions precedent to effect the transactions
contemplated by the Plan as promptly as practicable.
6. CONDITIONS PRECEDENT TO BE FULFILLED BY TRUST
The consummation of the transactions provided for herein shall be subject
to the following conditions, unless the appropriate officers of the Trust
determine that the waiver of any such condition on behalf of a Fund would be in
the best interests of that Fund and its shareholders:
6.1. All representations and warranties of the Trust, on behalf of itself,
the Merging Fund and the Acquiring Fund, contained in this Plan shall be true
and correct in all material respects as of the date hereof and as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date;
and there shall be (i) no pending or threatened litigation brought by any person
against the Trust, the Merging Fund, or the Acquiring Fund, or the advisers,
trustees, or officers of any of the foregoing, arising out of this Plan and (ii)
no facts are known to the Trust, the Merging Fund, or the Acquiring Fund, that
any of such persons reasonably believes might result in such litigation.
6.2. The Chairman of the Board, Chief Executive Officer of the Trust shall
execute certificate, dated as of the Closing Date, to the effect that the
representations and warranties of the Trust on behalf of itself, the Merging
Fund and the Acquiring Fund made in this Plan are true and correct on and as of
the Closing Date.
6.3. The Trust shall have received on the Closing Date an opinion of
Sutherland, Asbill & Brennan LLP, in a form reasonably satisfactory to the
Trust, and dated as of the Closing Date, to the effect that:
-A-8-
(a) the Trust is existing under the law of the Commonwealth of
Massachusetts as a voluntary association with transferable shares of
beneficial interest commonly referred to as a Massachusetts business trust,
and the Merging Fund and Acquiring Fund have been duly designated as series
of the Trust;
(b) the Trust, with respect to the Merging Fund and Acquiring Fund,
has the power as a Massachusetts business trust to carry on its business as
presently conducted in accordance with the description thereof in the
Trust's registration statement under the 1940 Act;
(c) the Plan has been duly authorized and executed, and constitutes a
valid and legally binding obligation of the Trust, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshaling, or other laws and rules
of law affecting the enforcement generally of creditors' rights and
remedies (including such as may deny giving effect to waivers of debtors'
or guarantors' rights), and considerations of public policy;
(d) the execution of the Plan did not, and the exchange of the Merging
Fund's Assets for Acquiring Fund Shares pursuant to the Plan will not,
violate the Trust's Agreement and Declaration of Trust or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Trust on behalf of the Merging Fund and Acquiring Fund under the federal
laws of the United States or the laws of the Commonwealth of Massachusetts
for the exchange of the Merging Fund's Assets for Acquiring Fund Shares
pursuant to the Plan have been obtained or made.
In giving the opinions set forth above, counsel may state that it is relying on
certificates of the officers of the Trust with regard to matters of fact. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby as the Trust may reasonably request.
6.4. The Trust and the Acquiring Fund shall have performed all of the
covenants and complied with all of the provisions required by this Plan to be
performed or complied with by them on or before the Closing Date.
6.5. The Trust, on behalf of the Acquiring Fund, shall have executed and
delivered an assumption agreement in form reasonably satisfactory to the Trust
pursuant to which the Trust, on behalf of the Acquiring Fund, will assume all of
the liabilities of the Merging Fund existing at the Valuation Time.
6.6. The Trust shall have delivered to the Acquiring Fund the statement of
net assets described in Section 3.2.
6.7. This Plan and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Merging Fund in accordance with the provisions of the Trust's Agreement and
Declaration of Trust and By-Laws. Notwithstanding anything herein to the
contrary, neither party may waive the condition set forth in this Section 6.7.
6.8. On the Closing Date, no action, suit or other proceeding shall be
pending or to either party's knowledge threatened before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
material damages or other relief in connection with, this Plan or the
transactions contemplated herein.
6.9. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
the Trust to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Merging Fund.
-A-9-
6.10. The Registration Statement shall have become effective under the 1933
Act, and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
6.11. The parties shall have received an opinion of Sutherland Asbill &
Brennan LLP addressed to the Trust, the Merging Fund, and the Acquiring Fund
substantially to the effect that, based upon certain facts, assumptions and
representations, for federal income tax purposes: (i) the transfer to the
Acquiring Fund of all or substantially all of the assets of the Merging Fund in
exchange solely for Acquiring Fund Shares and the assumption by the Acquiring
Fund of all of the liabilities of the Merging Fund, followed by the distribution
of the Acquiring Fund Shares to the holders of shares of the Merging Fund (the
"Shareholders") in exchange for their shares of the Merging Fund in complete
liquidation of the Merging Fund, will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Acquiring Fund and the Merging
Fund will each be "a party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized by the Merging Fund
upon the transfer of the Merging Fund's assets to the Acquiring Fund solely in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of liabilities of the Merging Fund or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to the Shareholders of the Merging
Fund in exchange for their shares of the Merging Fund; (iii) the basis of the
assets of the Merging Fund in the hands of the Acquiring Fund will be the same
as the basis of such assets in the hands of the Merging Fund immediately prior
to the transfer; (iv) the holding period of the assets of the Merging Fund in
the hands of the Acquiring Fund will include the period during which such assets
were held by the Merging Fund; (v) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Merging Fund solely in
exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of
all of the liabilities of the Merging Fund; (vi) no gain or loss will be
recognized by the Shareholders of the Merging Fund upon the receipt of Acquiring
Fund Shares solely in exchange for their shares of the Merging Fund as part of
the transaction; (vii) the basis of Acquiring Fund Shares received by the
Merging Fund's Shareholders will be, in the aggregate, the same as the basis, in
the aggregate, of the shares of the Merging Fund exchanged therefor; and (viii)
the holding period of Acquiring Fund Shares received by the Shareholders of the
Merging Fund will include the holding period during which the shares of the
Merging Fund exchanged therefor were held, provided that at the time of the
exchange the shares of the Merging Fund were held as capital assets in the hands
of the Shareholders of the Merging Fund. The delivery of such opinion is
conditioned upon receipt by Sutherland Asbill & Brennan LLP of representations
it shall request of each Fund. Notwithstanding anything herein to the contrary,
neither party may waive the condition set forth in this Section 6.11.
7. FEES AND EXPENSES
7.1. The Trust represents and warrants that it has no obligations to pay
any brokers or finders fees in connection with the transactions provided for
herein.
7.2. Expenses of the Reorganization will be borne by [the Merging Fund
shareholders].
8. ENTIRE PLAN; SURVIVAL OF WARRANTIES
8.1. This Plan embodies the entire plan of the Trust on behalf of the Funds
and there are no agreements, understandings, restrictions, or warranties between
the parties other than those set forth herein or herein provided for.
8.2 The representations, warranties and intentions contained in this Plan
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder.
-A-10-
9. TERMINATION
This Plan may be terminated and the transactions contemplated hereby may be
abandoned at any time (whether before or after approval thereof by the
shareholders of the Merging Fund) prior to the Closing or the Closing may be
postponed by the Trust on behalf of a Fund by resolution of the Board of
Trustees, if circumstances develop that, in the opinion of the Board, make
proceeding with the Plan inadvisable. This Plan shall automatically terminate if
the Closing shall not have occurred on or before _______, 2005, unless such date
is extended by the Trust on behalf of the Funds. In the event of any
termination, this Plan shall become void and have no further effect with respect
to the Merging Fund or Acquiring Fund, and neither the Trust, the Merging Fund,
the Acquiring Fund, nor the Trustees, officers, agents or shareholders of the
Trust shall have any liability in respect of this Plan.
10. AMENDMENTS
This Plan may be amended, modified or supplemented in writing in such
manner as may be determined appropriate by the authorized officers of the Trust;
provided, however, that following the meeting of shareholders of the Merging
Fund called by the Trust pursuant to Section 5.3 of this Plan, no such amendment
may have the effect of reducing the number of the Acquiring Fund Shares to be
issued to the shareholders of the Merging Fund under this Plan to the detriment
of such shareholders without their further approval.
11. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Plan shall be in writing and shall be deemed duly given if
delivered by hand (including by Federal Express or similar express courier) or
transmitted by facsimile or three days after being mailed by prepaid registered
or certified mail, return receipt requested, addressed to the Trust on behalf of
the Merging Fund or the Acquiring Fund, as the case may be, c/o the Chairman of
the Board and Chief Executive Officer, R. Jay Gerken, with a copy to the
Secretary of the Trust, Kathleen A. McGah, or to the Trust.
12. HEADINGS; GOVERNING LAW; LIMITATION OF LIABILITY
12.1. The Article and Section headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
12.2. This Plan shall be governed by, and construed and enforced in
accordance with, the laws of the Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
12.3. The Trust is a voluntary association organized under Massachusetts
law as a business trust and under an Agreement and Declaration of Trust, to
which reference is hereby made and a copy of which, with amendments, is on file
with the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law. The obligations of the Trust entered into in the name or on
behalf of the Trust by any of its trustees, officers, employees or agents are
not made individually, but in such capacities, that the Trust's obligations
under this Plan bind only that portion of the trust estate consisting of assets
of the Merging Fund or the Acquiring Fund, as the case may be, and not any
trustee, officer, employee, agent or shareholder individually, and that any
liability of the Trust under this Plan or in connection with the transactions
contemplated herein shall be discharged only out of the assets of the Merging
Fund or Acquiring Fund.
[Signatures follow]
-A-11-
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed by its
Chairman of the Board, Chief Executive Officer and attested by its Secretary or
Assistant Secretary.
Attest: The Travelers Series Trust on behalf of
MFS Emerging Growth Portfolio
By:
------------------------------------------
Name:
Title:
Attest: The Travelers Series Trust on behalf of
MFS Mid Cap Growth Portfolio
By:
------------------------------------------
Name:
Title:
-A-12-
APPENDIX B
THE TRAVELERS SERIES TRUST
MFS MID CAP GROWTH PORTFOLIO
GOAL -- LONG-TERM GROWTH OF CAPITAL
Fund shares are offered only to separate accounts of The Travelers Insurance
Company, The Travelers Life and Annuity Company or to separate accounts of
affiliated companies (together, "The Companies"). The Fund serves as a funding
option for certain variable annuity and variable life insurance contracts issued
by The Companies.
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103
TELEPHONE 1-800-842-9368
PROSPECTUS
May 3, 2004
TABLE OF CONTENTS
Goals and Investments..................................... B-2 Transfer Agent and Fund Administrator................. B-7
Fund Performance.......................................... B-3 Shareholder Transactions and Pricing.................. B-7
Fees and Expenses......................................... B-3 Tax Consequences of Dividends and
Investment Objective, Strategies and Related Risks........ B-4 Distributions...................................... B-8
Management................................................ B-6 Financial Highlights................................. B-9
Investment Adviser..................................... B-6 Appendix.............................................. B-10
The Subadviser and Portfolio Managers.................. B-6
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS NOT APPROVED THE FUND'S
SHARES AS AN INVESTMENT AND HAS NOT DETERMINED THAT THIS PROSPECTUS IS COMPLETE
OR ACCURATE. IT IS AGAINST THE LAW FOR ANYONE TO TELL YOU OTHERWISE. AN
INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
- --------------------------------------------------------------------------------
-B-1-
MFS MID CAP GROWTH PORTFOLIO
Goals and Investments
-----------------------------------------------------------
FUND'S OBJECTIVE: Long-term growth of capital INVESTMENT ADVISER: Travelers Asset Management
International Company LLC
("TAMIC")
KEY INVESTMENTS: Equity securities of companies with SUBADVISER: Massachusetts Financial
medium market capitalization Services ("MFS")
TEAM OF PORTFOLIO David E. Sette-Ducati
MANAGERS: Eric B. Fischman
-----------------------------------------------------------
SELECTION PROCESS: The Fund normally invests at least 80% of its net assets in
securities of medium-sized companies ("80% investment policy"). Medium-sized
market capitalization companies are those with market capitalizations of at
least $250 million but not exceeding the top range of the Russell Midcap(TM)
Growth Index ($17.0 billion as of December 31, 2003) at the time of investment.
The index is a widely recognized, unmanaged index of mid-cap common stock
prices. The Fund's subadviser normally invests primarily in common stock and
related securities, such as preferred stock, convertible securities, and
depositary receipts of companies with above-average growth potential.
The Fund's investments may include securities traded in the over-the-counter
markets, and it generally invests up to 20% of its net assets in foreign
securities. The Fund may also invest in fixed-income securities, including up to
10% in lower-quality fixed-income securities and comparable unrated securities
(commonly called, "junk bonds"). The Fund may establish short positions of up to
15% of its net assets in specific securities or stock indices.
The Fund's subadviser uses a bottom-up, as opposed to a top-down, investment
style in managing the Fund. This means that securities are selected based on
fundamental analysis (such as analysis of earnings, cash flows, competitive
position and management abilities) performed by the Fund's portfolio manager and
the subadviser's group of equity research analysts.
PRINCIPAL RISKS: The Fund is most subject to equities risk, where market values
may change abruptly, sometimes unpredictably, and mid-cap companies risk, where
market values may be more erratic and stocks more thinly traded than the general
market, and where companies may have limited product lines, history, or
resources. Additionally, because the Fund is "non-diversified" and can invest a
higher percentage of its assets in a limited number of companies, the
performance of each holding may have a greater impact on the Fund's value and
can add to the volatility of the Fund. The Fund is subject to short sales risk,
where it may suffer a loss if it sells a security short and the value of the
security rises rather than falls. The Fund is subject to foreign and emerging
markets securities risks, where market values may be impacted by limited
trading, currency exchange, political or economic instability, and other
factors. The Fund is also subject to fixed-income securities risk, where market
values move in the opposite direction of interest rates, and lower-quality
fixed-income risk, where market values are subject to credit risks of issuers
who may default or fail to make timely payments. For more information on the
Fund's investments and related risks, please see "Investment Objective,
Strategies and Related Risks," the Appendix to this prospectus and the SAI.
-B-2-
FUND PERFORMANCE
The chart and table below show how an investment in the Fund has varied over
time. The returns shown assume that any dividends and distributions have been
reinvested in the Fund. The returns are not reduced to reflect any variable
annuity or insurance contract charges or fees that may be assessed by The
Companies. The table compares the Fund's performance with the Russell 2000, the
Lipper Mid Cap Stock and the Russell Mid Cap Growth Indices. The Indices are
unmanaged and therefore do not incur the management and trading expenses that
the Fund does. An investor cannot invest directly in an index. Past performance
can give some indication of the Fund's risk, but does not guarantee future
results.
YEAR-BY-YEAR % TOTAL RETURNS AS OF 12/31
[GRAPHIC OMITTED]
- ---------------------------------------------------------------
Best Quarter: (4th '99) 42.25%
Worst Quarter: (2nd `02) -36.03%
- ---------------------------------------------------------------
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/2003
Life of
1 year 5-year Fund*
---------------------- -----------
MFS Mid Cap Growth 37.05% (0.79%) (0.60%)
Russell 2000 47.25% 7.13% 4.19%
Russell Mid Cap Growth 42.71% 2.01% 0.88%
* The fund commenced operations on March 23, 1998.
- -----------------------------------------------------------------
FEES AND EXPENSES
The fees and expenses in the tables below are what you may pay if you buy and
hold shares of the Fund, and are based on the Fund's latest fiscal year. These
fees and expenses do not reflect any of the fees that may be assessed under the
variable contract for which this Fund is an investment option. If such fees were
included, your costs would be higher. You should consult your contract
prospectus or disclosure document for information on contract fees.
SHAREHOLDER FEES
(paid directly from your investment)............ N/A
- ----------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses deducted from Fund assets)*
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Management Fees................................. 0.80%
Distribution and Service (12b-1) Fees........... None
Other Expenses**................................ 0.12%
-------------
-------------
Total Annual Fund Operating Expenses............ 0.92%*
- --------------
* The Fund has a voluntary expense cap of 1.00%. As Total Annual Fund
Operating Expenses are under that cap, no reimbursements are currently
expected.
** Other Expenses include a 0.06% administrative service fee the Fund pays The
Travelers Insurance Company.
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It is based on the Total
Annual Operating Expenses in the table above and assumes that you invest $10,000
in the Fund for the time periods indicated, the investment has a 5% return each
year and the Fund's operating expenses remain the same.
1 3 5 10
YEAR YEARS YEARS YEARS
----------- ---------- ----------- ----------
$94 $293 $509 $1,131
-B-3-
INVESTMENT OBJECTIVE, STRATEGIES AND RELATED RISKS
The Fund invests in various investment and other instruments subject to its
investment policy, as described on page 1 of this prospectus, and in the SAI.
The Fund may invest in various other types of securities and engage in other
investment techniques and strategies that are not the principal focus of the
Fund. Listed below is more information on the Fund's investments, its practices
and related risks. For a complete list of all investments available to the Fund,
please refer to the Appendix of this prospectus. For a free copy of the SAI, see
the back cover of this prospectus. The Fund does not guarantee that it will
reach its investment objective, and an investment in the Fund may lose money.
When you sell your shares they may be worth more or less than what you paid for
them.
INVESTMENT OBJECTIVE The Fund's investment objective is not fundamental, and its objective and
investment policies may be changed by the Trust's Board of Trustees
("Board") without approval of shareholders or holders of variable annuity
and variable life insurance contracts. A change in a Fund's investment
objective or policies may result in the Fund having a different investment
objective or policies from those that a policy owner selected as
appropriate at the time of investment.
80% INVESTMENT POLICY The Fund will notify shareholders at least 60 days' prior to changing its
80% investment policy.
EQUITIES Equity securities include common and preferred stock, warrants, rights,
depositary receipts and shares, trust certificates, and real estate
instruments.
Equities are subject to market risk. Many factors affect the stock market
prices and dividend payouts of equity investments. These factors include
general business conditions, investor confidence in the economy, and
current conditions in a particular industry or company. Each company
determines whether or not to pay dividends on common stock. Equity
securities are subject to financial risks relating to the issuer's earning
stability and overall financial soundness. Smaller and emerging growth
companies are particularly sensitive to these factors.
FIXED-INCOME INVESTMENTS Fixed-income securities include U.S. Government obligations, certificates
of deposit, and short-term money market instruments. Fixed-income
securities may have all types of interest rate payment and reset terms,
including fixed rate, adjustable rate, zero coupon, contingent, deferred,
payment in kind and auction rate features.
The value of debt securities varies inversely with interest rates. This
means generally that the value of these investments increases as interest
rates fall and decreases as interest rates rise. Yields from short-term
securities normally may be lower than yields from longer-term securities. A
bond's price is affected by the credit quality of its issuer. An issuer may
not always make payments on a fixed income security. Some fixed income
securities, such as mortgage-backed securities are subject to prepayment
risk, which occurs when an issuer can prepay the principal owed on a
security before its maturity.
If a security is issued by an agency, instrumentality or
government-sponsored enterprise and not guaranteed by the U.S. Government,
there is no assurance that the U.S. Government will support the credit of
that security.
-B-4-
LOWER-QUALITY FIXED-INCOME SECURITIES High-yield, high-risk securities, commonly called "junk bonds," are
considered speculative. While generally providing greater income than
investments in higher-quality securities, these lower-quality securities
will involve greater risk of principal and income than higher-quality
securities (including the possibility of default or bankruptcy of the
issuers of the security). Like other fixed-income securities, the value of
high-yield securities will also fluctuate as interest rates change.
FOREIGN SECURITIES INVESTMENTS An investment in foreign securities involves risk in addition to those of
U.S. securities, including possible political and economic instability and
the possible imposition of exchange controls or other restrictions on
investments. The Fund also bears "information" risk associated with the
different accounting, auditing, and financial reporting standards in many
foreign countries. If a Fund invests in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency rates
relative to the U.S. dollar will affect the U.S. dollar value of the Fund's
assets. Foreign securities may be less liquid than U.S. securities.
EMERGING MARKET INVESTMENTS Emerging markets offer the potential of significant gains but also involve
greater risks than investing in more developed countries. Political or
economic instability, lack of market liquidity and government actions, such
as currency controls or seizure of private business or property, may be
more likely in emerging markets.
DERIVATIVES AND HEDGING Derivative contracts, such as futures and options on securities, may be
TECHNIQUES used for any of the following purposes:
o To hedge against the economic impact of adverse changes in the market
value of its securities, due to changes in stock market prices,
currency exchange rates or interest rates
o As a substitute for buying or selling securities
o To enhance return
o Forward foreign currency contracts may be used to hedge against
foreign currency exposure
Even a small investment in derivative contracts can have a big impact on a
Fund's stock market, currency and interest rate exposure. Therefore, using
derivatives can disproportionately increase losses and reduce opportunities
for gain when stock prices, currency rates or interest rates are changing.
For a more complete description of derivative and hedging techniques and
their associated risks, please refer to the SAI.
OTHER RISK FACTORS
SELECTION RISK Fund investors are subject to selection risk in that a strategy used, or
stock selected, may fail to have the desired effect. Specifically, stocks
believed to show potential for capital growth may not achieve that growth.
Strategies or instruments used to hedge against a possible risk or loss may
fail to protect against the particular risk or loss.
-B-5-
TEMPORARY DEFENSIVE POSITION The Fund may depart from principal investment strategies in response to
adverse market, economic or political conditions by taking a temporary
defensive position by investing all or a substantial part of its assets in
debt securities including lower-risk debt securities, and money market
instruments. If a Fund takes a temporary defensive position, it may be
unable to achieve its investment goal.
PORTFOLIO TURNOVER The Fund may actively trade portfolio securities in an attempt to achieve
its investment objective. Active trading will cause the Fund to have an
increased portfolio turnover rate, which increases the Fund's trading costs
and may have an adverse impact on the Fund's performance.
NON-DIVERSIFICATION The Fund is not diversified, which means that it can invest a higher
percentage of its assets in any one issuer than a diversified fund. Being
non-diversified may magnify the Fund's losses from adverse events affecting
a particular issuer and increase the Fund's volatility.
MANAGEMENT
INVESTMENT ADVISER
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC ("TAMIC") provides
investment advice and, in general, supervises the management and investment
program for the Fund. TAMIC employs a subadviser to manage the Fund's daily
investment operations, subject to the supervision of the Board of Trustees and
TAMIC.
TAMIC is a registered investment adviser that was incorporated in 1978. Its
principal offices are located at 242 Trumbull Street, Hartford, Connecticut, and
it is an indirect wholly owned subsidiary of Citigroup Inc. TAMIC also acts as
an investment adviser or subadviser for:
o other investment companies used to fund variable products
o individual and pooled pension and profit-sharing accounts
o domestic insurance companies affiliated with The Travelers Insurance
Company (which is affiliated with TAMIC)
o nonaffiliated insurance companies
For the year ended December 31, 2003, the Fund paid TAMIC 0.80% of the Fund's
average daily net assets.
THE SUBADVISER AND PORTFOLIO MANAGERS
The subadviser is Massachusetts Financial Services ("MFS"), 500 Boylston Street,
Boston, MA. TAMIC pays a subadvisory fee to MFS. MFS also acts as an investment
adviser to other investment companies not affiliated with the Fund, as well as
to individual, corporate, charitable and retirement accounts.
A team of portfolio managers has served as the Fund's day-to-day portfolio
manager since May 2002. The team is comprised of David E. Sette-Ducati, an MFS
Senior Vice President and Eric B. Fischman. Messrs. Sette-Ducati and Fischman
have been employed in the MFS investment management area since 1995 and 2000,
respectively. Prior to joining MFS, Mr. Fischman was an equity research analyst
for two other investment companies.
-B-6-
TRANSFER AGENT AND FUND ADMINISTRATOR
TRANSFER AGENT
Citicorp Trust Bank, fsb, a subsidiary of Citigroup, serves as the Fund's
transfer agent ("transfer agent"). The transfer agent has entered into a
sub-transfer agency agreement with PFPC Inc. to serve as the Fund's sub-transfer
agent and perform certain recordkeeping and accounting services.
RECENT DEVELOPMENTS
During the period from 1997-1999, Citicorp Trust Bank, fsb ("Citicorp Trust"),
an affiliate of Citigroup Asset Management ("CAM"), entered the transfer agent
business. CAM is the Citigroup business unit that includes the Fund's investment
manager and other investment advisory companies. Citicorp Trust hired a
subcontractor to perform some of the transfer agent services. The subcontractor,
in exchange, signed a separate agreement with CAM in 1998 that guaranteed
investment management revenue to CAM and investment banking revenue to a CAM
affiliate. The sub-contractor's business was later taken over by PFPC Inc. (the
Fund's current sub-transfer agent), and at that time the revenue guarantee was
eliminated and a one-time payment was made by the subcontractor to a CAM
affiliate.
CAM did not disclose the revenue guarantee agreement when the board of the Fund
and various other CAM-managed funds hired Citicorp Trust as transfer agent. Nor
did CAM disclose the one-time payment to the boards of the CAM-managed funds
when it was made.
CAM is taking corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the revenue guarantee agreement and the one-time payment. CAM is also
conducting an independent review to verify that the transfer agency fees charged
by Citicorp Trust were fair compared to competitive alternatives. CAM is
strengthening its procedures in order to avoid similar situations in the future.
CAM has given this information to regulators and other government authorities,
and understands that the SEC and the U.S. Attorney are investigating this
situation.
FUND ADMINISTRATOR
The Travelers Insurance Company ("TIC") serves as the Fund's administrator. TIC
has entered into a sub-administrative service agreement with Smith Barney Fund
Management LLC ("SBFM"), an indirect wholly-owned subsidiary of Citigroup, to
perform the Fund's pricing and bookkeeping services.
SHAREHOLDER TRANSACTIONS AND PRICING
Fund shares are currently sold only to insurance company separate accounts in
connection with the variable annuity and variable life insurance contracts
issued by The Companies. The term "shareholder" as used in this prospectus
refers to any insurance company separate account that may use Fund shares as a
funding option now or in the future. Fund shares are not sold to the general
public. Fund shares are sold on a continuing basis without a sales charge at the
net asset value next computed after the Fund's custodian receives payment. The
separate accounts, to which shares are sold, however, may impose sales and other
charges, as described in the appropriate contract prospectus.
The Fund currently issues only one class of shares. All shares participate
equally in dividends and distributions and have equal voting, liquidation and
other rights. When issued for the consideration described in the prospectus,
shares are fully paid and nonassessable by the Fund. Shares are redeemable,
transferable and freely assignable as collateral. (See your contract prospectus
for a discussion of voting rights applicable to purchasers of variable annuity
and variable life insurance contracts.)
PRICING OF FUND SHARES
The offering price of Fund shares is the net asset value or NAV of a single
share. Normally NAV is computed as of the close of regular trading (generally,
4:00 p.m. Eastern time) each day the New York Stock Exchange ("Exchange") is
open. NAV is calculated by adding the value of a Fund's investments, cash and
other assets, subtracting its liabilities, and dividing the result by the number
of shares outstanding.
-B-7-
The Fund's assets are valued primarily based on market value. Short-term money
market instruments with remaining maturities of sixty days or less are valued
using the amortized-cost method. This method approximates market value and
minimizes the effect of changes in a security's market value. Foreign securities
are valued on the basis of quotations from the primary market in which they are
traded; the value is then converted into U.S. dollars from the local currency.
In cases where market quotations are not readily available or, for foreign
securities, if the values have been materially impacted by events occurring
after the closing of a foreign market, an asset is valued at fair value as
determined in good faith in accordance with procedures adopted by the Trust's
Board of Trustees ("Board"). However, this procedure is not used to determine
the value of the securities owned by a Fund if, in the opinion of the committee
appointed by the Board, some other method (e.g., closing over-the-counter bid
prices in the case of debt instruments traded off an exchange) would more
accurately reflect the fair market value of such securities.
PURCHASES AND REDEMPTIONS
Owners of variable annuity or variable life insurance contracts should follow
the purchase and redemption procedures described in your contract prospectus.
The following is general information with regard to purchases and redemptions of
Fund shares by insurance company separate accounts.
Fund shares are purchased and redeemed at the NAV next determined after the Fund
receives a purchase or redemption order. NAVs are adjusted for fractions of a
cent. Upon redemption, a shareholder may receive more or less than the amount
paid at the time of purchase, depending upon changes in the value of the Fund's
investment portfolio between purchase and redemption.
The Fund computes the NAV for purchases and redemptions as of the close of the
Exchange on the day that the Fund has received all proper documentation from the
shareholder. Redemption proceeds are normally wired or mailed either the same or
the next business day, but not more than seven days later.
The Fund retains the right to refuse a purchase order. The Fund may temporarily
suspend the redemption rights or postpone payments when the Exchange is closed
(other than on weekends and holidays), when trading on the Exchange is
restricted, or when permitted by the SEC.
EXCESSIVE EXCHANGE TRANSACTIONS
Excessive trading of Fund shares can harm the Fund and its shareholders.
However, the Fund's shares are offered exclusively to insurance company Separate
Accounts that fund certain insurance contracts, and the Fund generally has
little or no access to the records of individual contract holders. The Fund is
dependent on the ability of the insurance company sponsors of these Separate
Accounts to limit excessive trading of Fund shares. The sponsoring insurance
company has advised the Fund that it has procedures it uses in seeking to
monitor excessive and abusive trading by a contract owner. There can be no
assurance, however, that excessive trading in the fund's shares will not occur.
TAX CONSEQUENCES OF DIVIDENDS AND DISTRIBUTIONS
Capital gains and dividends are reinvested in additional Fund shares, without a
sales charge. The Fund expects that Fund shares will be held under a variable
annuity or variable life insurance contract. Under current tax law,
distributions that are left to accumulate in the variable annuity or life
insurance contract are not subject to federal income tax until they are
withdrawn from the contract. Contract purchasers should review the accompanying
contract prospectus for a discussion of the tax treatment applicable to variable
annuity or variable life insurance contracts.
The Fund intends to make distributions of income and capital gains in order to
qualify each year as a regulated company under Subchapter M of the Internal
Revenue Code. Further, the Fund intends to meet certain diversification
requirements applicable to mutual funds underlying variable insurance products.
-B-8-
FINANCIAL HIGHLIGHTS
MFS MID CAP GROWTH PORTFOLIO
The financial highlights table provides information to help you understand the
Fund's financial performance for the past 5 years. Certain information presents
financial results for a single Fund share. The total returns in the table
represent the rate that a Fund investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). The information was audited by KPMG LLP, independent auditors,
whose report, along with the Fund's financial statements, is included in the
annual report to shareholders, which is available upon request.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2003 2002(1) 2001(1) 2000(1) 1999(1)
-------------- -------------- ------------- ------------ -----------
NET ASSET VALUE, BEGINNING OF YEAR........... $ 5.02 $ 9.81 $ 16.75 $ 16.43 $ 10.05
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (2)................... (0.03) (0.04) (0.06) (0.05) (0.04)
Net realized and unrealized gain (loss)... 1.89 (4.75) (3.90) 1.69 6.46
-------------- -------------- ------------- ------------ -----------
Total Income (Loss) From Operations.......... 1.86 (4.79) (3.96) 1.64 6.42
-------------- -------------- ------------- ------------ -----------
LESS DISTRIBUTIONS FROM:
Net realized gains........................ -- -- (2.98) (1.32) (0.04)
Total Distributions.......................... -- -- (2.98) (1.32) (0.04)
-------------- -------------- ------------- ------------ -----------
NET ASSET VALUE, END OF YEAR................. $ 6.88 $ 5.02 $ 9.81 $ 16.75 $ 16.43
-------------- -------------- ------------- ------------ -----------
TOTAL RETURN (3)............................. 37.05% (48.83)% (23.62)% 9.29% 64.17%
NET ASSETS, END OF YEAR (000'S).............. $ 192,608 $ 138,221 $ 278,504 $ 314,150 $ 94,124
RATIOS TO AVERAGE NET ASSETS
Expenses (2)(4)........................... 0.92% 0.93% 0.92% 0.90% 1.00%
Net investment loss....................... (0.49) (0.56) (0.49) (0.30) (0.33)
PORTFOLIO TURNOVER RATE...................... 98% 167% 96% 143% 162%
- --------------
(1) Per share amounts have been calculated using the average shares method.
(2) The Travelers Insurance Company has agreed to reimburse the Fund for
expenses in the amount of $27,304 for the year ended December 31, 1999. If
such expenses were not reimbursed, the increase to net investment loss and
the actual expense ratio would have been $0.01 and 1.07%, respectively.
(3) Performance figures may reflect fee waivers and or/expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
Total returns do not reflect expenses associated with your variable
contract such as administrative fees, account charges and surrender charges
which, if reflected, would reduce the total returns for all periods shown.
(4) As a result of a voluntary expense limitation, the ratio of expenses
(excluding interest expense) to average net assets will not exceed 1.00%.
-B-9-
APPENDIX
MFS Mid Cap Growth Portfolio
The Fund invests in various instruments subject to its investment policy. The
following techniques and practices are all available to the Fund, and are
described together with their risks in the SAI.
INVESTMENT TECHNIQUE
- --------------------
American Depositary Receipts
Bankers' Acceptances
Buying Put and Call Options
Certificates of Deposit
Commercial Paper
Convertible Securities
Debt Securities
Emerging Market Securities
Equity Securities
Floating & Variable Rate Instruments
Foreign Securities
Forward Contracts on Foreign Currency
Futures Contracts
High-Yield, High-Risk Bonds
Illiquid Securities
Index Futures Contracts
Investment Company Securities
Investment in Unseasoned Companies
Lending Portfolio Securities
Letters of Credit
Options on Foreign Currencies
Options on Index Futures Contracts
Options on Stock Indices
Real Estate-Related Instruments
Repurchase Agreements
Short Sales (including "Against the Box")
Short-Term Money Market Instruments
Temporary Bank Borrowing
U.S. Government Securities
Variable Amount Master Demand Notes
When-Issued & Delayed Delivery Securities
Writing Covered Call Options
-B-10-
MFS MID CAP GROWTH PORTFOLIO
Investors who want more information about the Fund can obtain the SAI that
provides more detailed information on a number of topics and is made a part of
this prospectus. Additional information about the Fund's investments is
available in its annual and semi-annual reports to shareholders. The Fund's
annual report provides a discussion of the market conditions and investment
strategies that particularly impact the Fund's performance over the past fiscal
year. These documents are free of charge. To obtain a copy, or ask other
questions about the Fund, do one of the following:
-------------------------------------------------------------------------------
CALL -- 1-800-842-9368
-------------------------------------------------------------------------------
WRITE -- TRAVELERS LIFE AND ANNUITY, P.O. BOX 990009, HARTFORD, CT 06199-0009
-------------------------------------------------------------------------------
ACCESS THE EDGAR DATABASE ON THE SEC'S WEBSITE -- HTTP://WWW.SEC.GOV
-------------------------------------------------------------------------------
Investors may also review or copy the above referenced documents at the SEC's
Public Reference Room in Washington, D.C. Information on the operation of the
reference room may be obtained by calling the SEC at 1-202-942-8090. These
documents may also be obtained, for a duplicating fee, by writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102, or by sending an e-mail
request to publicinfo@sec.gov.
(1940 Act # 811-6465)
SUPPLEMENT DATED SEPTEMBER 30, 2004 TO
MFS MID CAP GROWTH PORTFOLIO PROSPECTUS DATED MAY 3, 2004
The following information supplements the information in the Travelers Series
Trust: MFS Mid Cap Growth Portfolio prospectus. Please retain this supplement
and keep it with the prospectus for future reference.
The Board of Trustees of the Trust, on behalf of the Fund, has approved an
amendment to the investment advisory agreement between the Fund and TAMIC.
Effective September 1, 2004, the investment advisory fee will be revised from
the annual rate of 0.80% of the average daily net assets of the Fund to a fee
calculated at an annual rate in accordance with the following schedule:
AVERAGE DAILY NET ASSETS INVESTMENT
ADVISORY FEE
First $600 million.......................... 0.800%
Next $300 million........................... 0.775%
Next $600 million........................... 0.750%
Next $1 billion............................. 0.725%
Next $2.5 billion........................... 0.675%
THE SECTION "TRANSFER AGENT AND FUND ADMINISTRATOR - RECENT DEVELOPMENTS" IS
DELETED AND REPLACED WITH THE FOLLOWING:
Citigroup has been notified by the Staff of the Securities and Exchange
Commission (SEC) that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
(CAM), including it applicable investment advisory companies and Citigroup Trust
Bank (CTB), an internal transfer agent, relating to the creation and operation
of the internal transfer agent unit to serve certain CAM-managed fund, including
the Fund. This notification arises out of a previously disclosed SEC
investigation by the SEC and the U.S. Attorney and relates to CTB's entry in
1999 into the transfer agency business, CAM's retention of, and agreements with
an unaffiliated sub transfer agent, the adequacy of the disclosure made to the
fund boards that approved the transfer agency arrangements, (including CAM's
failure to disclose a related revenue guarantee agreement benefiting CAM and its
affiliates), and CAM's operation of and compensation for the transfer agency
business. The revenue guarantee described above was terminated in 1999 and CAM
will be paying the applicable funds, primarily through fee waivers, a total of
approximately $17 million (plus interest) that s the amount of the revenue
received by Citigroup relating to the revenue guarantee. Citigroup is
cooperating fully in the investigation and will seek to resolve the matter in
discussions with the SEC Staff. Although there can be no assurances, Citigroup
does not believe that this matter will have a material adverse effect on the
fund.
September 2004 L-24417
-1-
SUPPLEMENT DATED OCTOBER 22, 2004
TO PROSPECTUSES DATED MAY 3, 2004
Capital Appreciation Portfolio
High Yield Bond Trust
Managed Assets Trust
The Travelers Series Trust:
Convertible Securities Portfolio
Disciplined Mid Cap Stock Portfolio
Equity Income Portfolio
Federated Stock Portfolio
Federated High Yield Portfolio
Large Cap Portfolio
Lazard International Stock Portfolio
Merrill Lynch Large Cap Core Portfolio
MFS Emerging Growth Portfolio
MFS Mid Cap Growth Portfolio
MFS Value Portfolio
Pioneer Fund Portfolio
Social Awareness Stock Portfolio
Travelers Quality Bond Portfolio
U.S. Government Securities Portfolio
Zero Coupon Bond Fund Portfolio (Series 2005)
The following information replaces in its entirety the information under the
"Recent Developments" heading in the "Transfer Agent and Fund Administration"
section for each of the above referenced prospectuses, and any supplements
thereto. Please retain this supplement and keep it with your prospectus for
future reference.
In connection with an investigation previously disclosed by Citigroup, the Staff
of the Securities and Exchange Commission (SEC) has notified Citigroup Asset
Management (CAM), the Citigroup business unit that includes the funds'
investment manager and other investment advisory companies; Citicorp Trust Bank
(CTB), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and two
other individuals, one of whom is an employee and the other of whom is a former
employee of CAM, that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against each of them relating to the
creation and operation of an internal transfer agent unit to serve various
CAM-managed funds.
In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated
subcontractor to perform some of the transfer agent services. The subcontractor,
in exchange, had signed a separate agreement with CAM in 1998 that guaranteed
investment management revenue to CAM and investment banking revenue to a CAM
affiliate. The sub-contractor's business was later taken over by PFPC (the
fund's current sub-transfer agent), and at that time the revenue guarantee was
eliminated and a one-time payment was made by the subcontractor to a CAM
affiliate.
CAM did not disclose the revenue guarantee when the board of various CAM-managed
funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the
CAM-managed funds the one-time payment received by the subcontractor when it was
made.
The SEC Staff has indicated that it is also considering action based on the
adequacy of the disclosures made to the fund boards that approved the transfer
agency arrangement, CAM's operation of and compensation for the transfer agent
business and CAM's retention of, and agreements with, the unaffiliated
sub-transfer agent.
-2-
Citigroup is cooperating fully in the investigation and will seek to resolve the
matter in discussions with the SEC Staff. Although there can be no assurance,
Citigroup does not believe that this matter will have a material adverse effect
on the funds. As previously disclosed, CAM has already agreed to pay the
applicable funds, primarily through fee waivers, a total of approximately $17
million (plus interest) that is the amount of the revenue received by Citigroup
relating to the revenue guarantee.
October 2004 L-24427
-3-
PART B
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER __, 2004
THE TRAVELERS SERIES TRUST
MFS EMERGING GROWTH PORTFOLIO
MFS MID CAP GROWTH PORTFOLIO
One Cityplace
Hartford, Connecticut 06103
(800) 842-9368
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Prospectus/Proxy Statement dated December
__, 2004 for the Special Meeting of Shareholders of MFS Emerging Growth
Portfolio ("Emerging Growth Portfolio"), a series of The Travelers Series Trust
(the "Trust"), to be held on February __, 2005. Copies of the Combined
Prospectus/Proxy Statement may be obtained at no charge by calling
1-800-842-9368.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement.
Further information about Mid Cap Portfolio is contained in the Trust's
Statement of Additional Information dated May 3, 2004, which is incorporated
herein by reference to Post-Effective Amendment No. 35 of the Trust filed under
rule 485(b) under the Securities Act of 1933 on April 30, 2004, and will be
provided to all shareholders or contract owners requesting this SAI.
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents
GENERAL INFORMATION............................................................2
FINANCIAL STATEMENTS...........................................................3
-1-
GENERAL INFORMATION
The Shareholders of Emerging Growth Portfolio are being asked to consider
and vote on one proposal with respect to a Plan of Reorganization (the
"Reorganization Plan") dated as of _________ by the Trust, on behalf of each of
Emerging Growth Portfolio and Mid Cap Portfolio, and the transactions
contemplated thereby. The Reorganization Plan contemplates the transfer of
substantially all of the assets and all of the liabilities of Emerging Growth
Portfolio to Mid Cap Portfolio in exchange for shares issued by the Trust in Mid
Cap Portfolio with an aggregate net asset value equal to the aggregate net asset
value of the shares of Emerging Growth Portfolio that are outstanding
immediately before the Reorganization takes effect.
A Special Meeting of shareholders of Emerging Growth Portfolio to consider
the proposal and the related transaction will be held at One Cityplace,
Hartford, Connecticut 06103 on February __, 2005 at 9:00 a.m., Eastern time. For
further information about the transaction, see the Combined Prospectus/Proxy
Statement.
-2-
FINANCIAL STATEMENTS
The audited financial statements and notes thereto of Emerging Growth
Portfolio contained in its Annual Report to Shareholders dated December 31, 2003
are incorporated by reference into this Statement of Additional Information. The
financial statements and notes thereto which appear in Emerging Growth
Portfolio's Annual Report to Shareholders have been audited by KPMG LLP, whose
report thereon also appears in such Annual Report and are also incorporated
herein by reference to the Form N-CSR for the Emerging Growth Portfolio filed on
March 10, 2004. The unaudited financial statements and notes thereto of Emerging
Growth Portfolio contained in its Semi-Annual Report to Shareholders, dated June
30, 2004, are incorporated into this Statement of Additional Information by
reference to the Form N-CSR for the Emerging Growth Portfolio filed on September
9, 2004.
The audited financial statements and notes thereto of Mid Cap Portfolio
contained in its Annual Report to Shareholders, dated December 31, 2003, are
incorporated by reference into this Statement of Additional Information related.
The financial statements and notes thereto which appear in Mid Cap Portfolio's
Annual Report to Shareholders have been audited by KPMG LLP, whose report
thereon also appears in such Annual Report and are also incorporated herein by
reference to the Form N-CSR for the Mid Cap Portfolio filed on March 11, 2004.
The unaudited financial statements and notes thereto of Mid Cap Portfolio
contained in its Semi-Annual Report to Shareholders, dated June 30, 2004, are
incorporated into this Statement of Additional Information by reference to the
Form N-CSR for the Mid Cap Portfolio filed on September 9, 2004.
The financial statements set forth above will be provided to all
shareholders or contract owners requesting this SAI.
The following are projected (PRO FORMA) financial statements that were
prepared to indicate the anticipated financial information for Mid Cap Portfolio
following the completion of the Reorganization. They consist of a Pro Forma
Statement of Assets and Liabilities, a Pro Forma Statement of Operation, a Pro
Forma Schedule of Investments, and notes relating to the pro forma financial
information.
-3-
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
MFS MFS COMBINED
MID CAP EMERGING MFS MID CAP
GROWTH PORTFOLIO GROWTH PORTFOLIO ADJUSTMENTS GROWTH PORTFOLIO
------------------ -------------------- --------------- ------------------
ASSETS:
Investments, at value (Cost --
$174,126,324 and $139,697,311) $210,385,606 $166,868,317 $377,253,923
Cash 17 400 417
Receivable for securities sold 1,230,592 977,502 2,208,094
Dividends and interest receivable 30,059 53,442 83,501
Receivable for Fund shares sold 28,230 19,599 47,829
------------------ -------------------- --------------- ------------------
TOTAL ASSETS $211,674,504 $167,919,260 - $379,593,764
------------------ -------------------- --------------- ------------------
LIABILITIES:
Payable for securities purchased 3,744,308 938,278 4,682,586
Payable for Fund shares reacquired 116,833 581,129 697,962
Investment advisory fees payable 133,442 93,002 226,444
Administration fees payable 10,008 16,564 26,572
Accrued expenses 40,349 45,801 86,150
------------------ -------------------- --------------- ------------------
TOTAL LIABILITIES 4,044,940 1,674,774 - 5,719,714
------------------ -------------------- --------------- ------------------
NET ASSETS $207,629,564 $166,244,486 - $373,874,050
================== ==================== =============== ==================
NET ASSETS:
Paid-in capital 409,166,061 336,222,688 745,388,749
Accumulated net investment loss (695,633) (377,568) (1,073,201)
Accumulated net realized losses
from investment transactions (237,100,147) (196,772,013) (433,872,160)
Net unrealized appreciation of
investments and foreign currencies 36,259,283 27,171,379 63,430,662
------------------ -------------------- --------------- ------------------
NET ASSETS $207,629,564 $166,244,486 - $373,874,050
================== ==================== =============== ==================
OUTSTANDING SHARES: 27,928,811 16,925,739 5,444,484 50,299,034
================== ====================
NET ASSET VALUE $7.43 $9.82 $7.43
- ------------------------------------- ================== ==================== ==================
See accompanying notes to unaudited pro forma financial statements
-4-
PRO FORMA STATEMENT OF OPERATION
FOR THE TWELVE MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
MFS MFS ADJUSTMENTS COMBINED
MID CAP EMERGING MFS MID CAP
GROWTH PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO
------------------ -------------------- --------------- ------------------
INVESTMENT INCOME:
Interest $55,003 $44,692 - $99,695
Dividends 531,764 $802,142 - 1,333,906
Less: Foreign withholding tax (1,181) (17,298) - (18,479)
------------------ -------------------- --------------- ------------------
TOTAL INVESTMENT INCOME $585,586 829,536 - 1,415,122
------------------ -------------------- --------------- ------------------
EXPENSES:
Investment advisory fees 1,526,263 1,250,912 (85,666) a 2,691,509
Administration fees 114,470 100,073 - 214,543
Custody 41,977 52,037 (7,260) b 86,754
Audit and legal 34,665 39,182 (22,100) b 51,747
Shareholder communications 26,152 28,125 (15,000) b 39,277
Transfer agency services 5,013 5,143 (5,000) b 5,156
Trustees' fees 7,253 7,013 - 14,266
Other 3,959 - - 3,959
------------------ -------------------- --------------- ------------------
TOTAL EXPENSES 1,759,752 1,482,485 (135,026) 3,107,211
------------------ -------------------- --------------- ------------------
NET INVESTMENT LOSS (1,174,166) (652,949) 135,026 (1,692,089)
================== ==================== =============== ==================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Realized Gain (Loss) From:
Investment transactions 27,213,951 18,644,068 - 45,858,019
Foreign currency transactions 5,786 (1,280) - 4,506
------------------ -------------------- --------------- ------------------
NET REALIZED GAIN 27,219,737 18,642,788 - 45,862,525
------------------ -------------------- --------------- ------------------
Change in Net Unrealized Appreciation
From:
Investments 15,012,833 8,166,487 23,179,320
Foreign currencies (123) 170 47
------------------ -------------------- --------------- ------------------
INCREASE IN NET UNREALIZED APPRECIATION 15,012,710 8,166,657 - 23,179,367
------------------ -------------------- --------------- ------------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES 42,232,447 26,809,445 - 69,041,892
------------------ -------------------- --------------- ------------------
INCREASE IN NET ASSETS FROM OPERATIONS $41,058,281 $26,156,496 $135,026 $67,349,803
================== ==================== =============== ==================
(a) Reflects adjustment for change in investment advisory fees to the combined
MFS Mid Cap Growth Portfolio and MFS Emerging Growth Portfolio, respectively.
(b) Reflects adjustment to eliminate duplicate services.
See accompanying notes to unaudited pro forma financial statements
-5-
MFS EMERGING GROWTH PORTFOLIO (EG) MFS MID CAP GROWTH PORTFOLIO (MCG)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
MCG MCG
EG MCG COMBINED EG MCG COMBINED
SHARE SHARE SHARE SECURITY VALUE VALUE VALUE
=================================================================================================================================
COMMON STOCK - 97.7%
=================================================================================================================================
CONSUMER DISCRETIONARY - 19.9%
AUTOMOBILE - 0.5%
41,100 41,100 Bayerische Motoren Werke (BMW) AG $1,820,824 $1,820,824
- ---------------------------------------------------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE - 4.6%
38,870 38,870 Carnival Corp. 1,826,890 1,826,890
11,840 44,980 56,820 The Cheesecake Factory Inc.+ 471,114 $1,789,754 2,260,868
5,620 20,260 25,880 Four Seasons Hotels, Inc. 338,380 1,219,855 1,558,235
13,760 16,600 30,360 GTECH Holdings Corp. 637,226 768,746 1,405,972
18,040 35,920 53,960 International Game Technology 696,344 1,386,512 2,082,856
11,270 15,960 27,230 Outback Steakhouse, Inc. 466,127 660,106 1,126,233
9,930 14,040 23,970 P.F. Chang's China Bistro, Inc. + 408,620 577,746 986,366
35,540 61,870 97,410 Royal Caribbean Cruises Ltd. 1,542,791 2,685,777 4,228,568
6,720 6,720 Starbucks Corp.+ 292,186 292,186
17,350 36,530 53,880 WMS Industries Inc. + 517,030 1,088,564 1,605,624
- ---------------------------------------------------------------------------------------------------------------------------------
7,196,708 10,177,090 17,373,798
- ---------------------------------------------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL - 1.9%
34,950 34,950 eBay Inc.+ 3,213,653 3,213,653
74,770 62,546 137,316 InterActiveCorp+ 2,253,568 1,885,136 4,138,704
- ---------------------------------------------------------------------------------------------------------------------------------
5,467,221 1,885,136 7,352,357
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIA - 6.8%
43,490 218,760 262,250 Citadel Broadcasting Co.+ 633,649 3,187,333 3,820,982
66,860 96,760 163,620 EchoStar Communications Corp., Class A Shares+ 2,055,945 2,975,370 5,031,315
3,500 3,500 Entercom Communications Corp.+ 130,550 130,550
37,460 66,420 103,880 Getty Images, Inc.+ 2,247,600 3,985,200 6,232,800
15,660 15,660 Grupo Televisa, SA, Sponsored ADR 708,928 708,928
15,300 58,300 73,600 Meredith Corp. 840,888 3,204,168 4,045,056
48,780 48,780 The News Corp. Ltd., Sponsored Preferred ADR 1,603,886 1,603,886
19,940 19,940 Playboy Enterprises, Inc., Class B Shares+ 231,503 231,503
42,270 42,270 The Walt Disney Co. 1,077,462 1,077,462
47,040 67,510 114,550 Westwood One, Inc.+ 1,119,552 1,606,738 2,726,290
- ---------------------------------------------------------------------------------------------------------------------------------
10,519,413 15,089,359 25,608,772
- ---------------------------------------------------------------------------------------------------------------------------------
MULTI-LINE RETAIL - 1.9%
120,400 120,400 99 Cents Only Stores+ 1,836,100 1,836,100
26,310 68,400 94,710 Family Dollar Stores, Inc. 800,350 2,080,728 2,881,078
20,940 20,940 Kohl's Corp.+ 885,343 885,343
41,250 41,250 Target Corp. 1,751,888 1,751,888
- ---------------------------------------------------------------------------------------------------------------------------------
3,437,581 3,916,828 7,354,409
- ---------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 3.2%
13,050 13,050 Best Buy Co., Inc. 662,157 662,157
13,650 13,650 CDW Corp. 870,324 870,324
56,220 56,220 Pacific Sunwear of California, Inc. + 1,100,225 1,100,225
25,920 74,040 99,960 PETsMART, Inc. 841,104 2,402,598 3,243,702
42,190 42,190 Ross Stores, Inc. 1,129,004 1,129,004
42,070 42,070 Staples, Inc. 1,233,072 1,233,072
33,940 67,580 101,520 Tiffany & Co. 1,250,689 2,490,323 3,741,012
- ---------------------------------------------------------------------------------------------------------------------------------
5,986,350 5,993,146 11,979,496
- ---------------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL - 1.0%
13,320 52,320 65,640 Coach, Inc.+ 601,931 2,364,341 2,966,272
27,030 27,030 Reebok International Ltd. 972,539 972,539
- ---------------------------------------------------------------------------------------------------------------------------------
1,574,470 2,364,341 3,938,811
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY 36,002,567 39,425,900 75,428,467
=================================================================================================================================
CONSUMER STAPLES - 1.5%
FOOD & DRUG RETAILING - 1.5%
38,700 129,760 168,460 CoolBrands International, Inc.+ 632,202 2,119,755 2,751,957
15,590 15,590 CVS Corp. 655,092 655,092
57,180 57,180 Walgreen Co. 2,070,488 2,070,488
- ---------------------------------------------------------------------------------------------------------------------------------
3,357,782 2,119,755 5,477,537
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CONSUMER STAPLES 3,357,782 2,119,755 5,477,537
=================================================================================================================================
ENERGY - 1.9%
ENERGY EQUIPMENT & SERVICES - 1.9%
24,490 46,570 71,060 BJ Services Co.+ 1,122,622 2,134,769 3,257,391
10,650 31,790 42,440 Cooper Cameron Corp.+ 518,655 1,548,173 2,066,828
22,670 9,800 32,470 GlobalSantaFe Corp. 600,755 259,700 860,455
15,060 15,060 Smith International, Inc.+ 839,746 839,746
- ---------------------------------------------------------------------------------------------------------------------------------
3,081,778 3,942,642 7,024,420
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ENERGY 3,081,778 3,942,642 7,024,420
=================================================================================================================================
-6-
MFS EMERGING GROWTH PORTFOLIO (EG) MFS MID CAP GROWTH PORTFOLIO (MCG)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
MCG MCG
EG MCG COMBINED EG MCG COMBINED
SHARE SHARE SHARE SECURITY VALUE VALUE VALUE
=================================================================================================================================
COMMON STOCK - 97.7%
=================================================================================================================================
FINANCIALS - 4.6%
BANKS - 0.9%
17,100 60,300 77,400 Investors Financial Services Corp. $745,218 $2,627,874 $3,373,092
- ---------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS - 3.7%
29,130 29,130 American Express Co. 1,496,699 1,496,699
121,000 227,620 348,620 Ameritrade Holding Corp.+ 1,373,350 2,583,487 3,956,837
600 8,200 8,800 The Chicago Mercantile Exchange 86,622 1,183,834 1,270,456
12,020 12,020 The Goldman Sachs Group, Inc. 1,131,803 1,131,803
18,780 34,420 53,200 Legg Mason, Inc. 1,709,168 3,132,564 4,841,732
20,700 20,700 Merrill Lynch & Co., Inc. 1,117,386 1,117,386
- ---------------------------------------------------------------------------------------------------------------------------------
6,915,028 6,899,885 13,814,913
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FINANCIALS 7,660,246 9,527,759 17,188,005
=================================================================================================================================
HEALTHCARE - 25.8%
BIOTECHNOLOGY - 8.2%
22,900 22,900 Amgen Inc.+ 1,249,653 1,249,653
22,470 22,470 Biogen Idec Inc.+ 1,421,228 1,421,228
22,070 26,700 48,770 Celgene Corp.+ 1,263,728 1,528,842 2,792,570
8,130 8,130 Genentech, Inc.+ 456,906 456,906
21,670 37,900 59,570 Gen-Probe Inc.+ 1,025,424 1,793,428 2,818,852
45,960 89,130 135,090 Genzyme Corp.+ 2,175,287 4,218,523 6,393,810
44,590 50,430 95,020 Gilead Sciences, Inc.+ 2,987,530 3,378,810 6,366,340
8,140 8,140 ImClone Systems Inc.+ 698,331 698,331
9,040 44,350 53,390 Invitrogen Corp.+ 650,790 3,192,756 3,843,546
35,610 103,630 139,240 MedImmune, Inc.+ 833,274 2,424,942 3,258,216
9,540 13,120 22,660 Neurocrine Biosciences, Inc.+ 494,649 680,272 1,174,921
21,170 21,170 Protein Design Labs, Inc.+ 404,982 404,982
- ---------------------------------------------------------------------------------------------------------------------------------
11,835,572 19,043,783 30,879,355
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 11.4%
16,370 16,370 Alcon, Inc. 1,287,500 1,287,500
6,870 6,870 Apogent Technologies, Inc.+ 219,840 219,840
42,720 42,720 Baxter International, Inc. 1,474,267 1,474,267
36,440 58,960 95,400 C.R. Bard, Inc. 2,064,326 3,340,084 5,404,410
146,940 253,870 400,810 Cytyc Corp.+ 3,727,868 6,440,682 10,168,550
21,720 65,870 87,590 DENTSPLY International Inc. 1,131,612 3,431,827 4,563,439
37,770 53,130 90,900 Fisher Scientific International Inc.+ 2,181,218 3,068,257 5,249,475
41,350 60,960 102,310 Guidant Corp. 2,310,638 3,406,445 5,717,083
32,390 32,390 Medtronic, Inc. 1,578,041 1,578,041
28,930 84,460 113,390 Millipore Corp.+ 1,630,784 4,761,010 6,391,794
101,300 101,300 Thoratec Corp.+ 1,086,949 1,086,949
- ---------------------------------------------------------------------------------------------------------------------------------
17,606,094 25,535,254 43,141,348
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.6%
47,820 47,820 Caremark Rx, Inc.+ 1,575,191 1,575,191
52,100 52,100 Community Health Systems Inc. + 1,394,717 1,394,717
32,910 32,910 HCA Inc. 1,368,727 1,368,727
122,950 122,950 Tenet Healthcare Corp.+ 1,648,760 1,648,760
- ---------------------------------------------------------------------------------------------------------------------------------
2,943,918 3,043,477 5,987,395
- ---------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 4.6%
19,890 12,820 32,710 Allergan, Inc. 1,780,553 1,147,646 2,928,199
19,200 49,900 69,100 Elan Corp. PLC, Sponsored ADR+ 475,008 1,234,526 1,709,534
12,240 12,240 Eli Lilly and Co. 855,698 855,698
55,900 55,900 Endo Pharmaceuticals Holdings, Inc.+ 1,310,855 1,310,855
52,630 52,630 Johnson & Johnson 2,931,491 2,931,491
52,200 91,860 144,060 Medicis Pharmaceutical Corp., Class A Shares 2,085,390 3,669,807 5,755,197
26,290 26,290 Novartis AG 1,160,254 1,160,254
6,420 6,420 Roche Holding AG 635,898 635,898
- ---------------------------------------------------------------------------------------------------------------------------------
9,924,292 7,362,834 17,287,126
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL HEALTHCARE 42,309,876 54,985,348 97,295,224
=================================================================================================================================
-7-
MFS EMERGING GROWTH PORTFOLIO (EG) MFS MID CAP GROWTH PORTFOLIO (MCG)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
MCG MCG
EG MCG COMBINED EG MCG COMBINED
SHARE SHARE SHARE SECURITY VALUE VALUE VALUE
=================================================================================================================================
COMMON STOCK - 97.7%
=================================================================================================================================
INDUSTRIALS - 12.0%
AIR FREIGHT & COURIERS - 0.7%
11,260 42,340 53,600 Expeditors International of Washington, Inc. $556,357 $2,092,019 $2,648,376
- ---------------------------------------------------------------------------------------------------------------------------------
AIRLINES - 1.0%
15,280 60,850 76,130 JetBlue Airways Corp.+ 448,926 1,787,773 2,236,699
79,500 79,500 Southwest Airlines Co. 1,333,215 1,333,215
- ---------------------------------------------------------------------------------------------------------------------------------
1,782,141 1,787,773 3,569,914
- ---------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.2%
=================================================================================================================================
21,180 American Standard Cos. Inc.+ 853,766 853,766
- ---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 9.5%
42,580 39,220 81,800 Alliance Data Systems Corp.+ 1,799,005 1,657,045 3,456,050
10,860 6,200 17,060 Apollo Group, Inc., Class A Shares+ 958,829 547,398 1,506,227
57,900 57,900 ARAMARK Corp., Class B Shares 1,665,204 1,665,204
48,000 50,710 98,710 Career Education Corp.+ 2,186,880 2,310,348 4,497,228
33,770 76,460 110,230 Ceridian Corp.+ 759,825 1,720,350 2,480,175
80,730 99,400 180,130 Corinthian Colleges, Inc.+ 1,997,260 2,459,156 4,456,416
14,060 56,400 70,460 The Corporate Executive Board Co. 812,527 3,259,356 4,071,883
42,140 49,170 91,310 DST Systems, Inc.+ 2,026,513 2,364,585 4,391,098
484 484 Employee Solutions, Inc.+ 1 1
14,780 47,000 61,780 Manpower Inc. 750,381 2,386,190 3,136,571
19,180 113,590 132,770 Monster Worldwide, Inc.+ 493,310 2,921,535 3,414,845
17,480 17,480 Paychex, Inc. 592,222 592,222
21,100 42,530 63,630 Robert Half International Inc. 628,147 1,266,118 1,894,265
3,510 3,510 Strayer Education, Inc. 391,611 391,611
- ---------------------------------------------------------------------------------------------------------------------------------
15,061,715 20,892,081 35,953,796
- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 0.5%
57,950 57,950 Tyco International Ltd. 1,920,463 1,920,463
- ---------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.1%
14,560 14,560 MSC Industrial Direct Co., Class A Shares 478,150 478,150
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INDUSTRIALS 19,320,676 26,103,789 45,424,465
=================================================================================================================================
INFORMATION TECHNOLOGY - 25.0%
COMMUNICATIONS EQUIPMENT - 5.8%
75,770 54,060 129,830 Andrew Corp.+ 1,516,158 1,081,741 2,597,899
139,038 139,038 Cisco Systems, Inc.+ 3,295,201 3,295,201
60,130 202,600 262,730 Comverse Technology, Inc.+ 1,198,992 4,039,844 5,238,836
10,880 23,800 34,680 F5 Networks, Inc. + 288,102 630,224 918,326
82,500 82,500 Foundry Networks, Inc.+ 1,160,775 1,160,775
13,170 30,050 43,220 Harris Corp. 668,378 1,525,038 2,193,416
32,460 32,460 Interdigital Communications Corp.+ 610,573 610,573
21,321 120,714 142,035 Juniper Networks, Inc.+ 523,857 2,965,943 3,489,800
100,440 100,440 Nokia Oyj, Sponsored ADR 1,460,398 1,460,398
11,350 11,350 Research In Motion Ltd.+ 776,794 776,794
- ---------------------------------------------------------------------------------------------------------------------------------
9,727,880 12,014,138 21,742,018
- ---------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 1.6%
31,770 31,770 Apple Computer, Inc.+ 1,033,796 1,033,796
72,200 72,200 Dell Inc.+ 2,586,204 2,586,204
7,040 10,600 17,640 Lexmark International, Inc., Class A Shares+ 679,571 1,023,218 1,702,789
40,900 40,900 Network Appliance, Inc.+ 880,577 880,577
- ---------------------------------------------------------------------------------------------------------------------------------
4,299,571 1,903,795 6,203,366
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.7%
15,600 15,600 Amphenol Corp., Class A Shares+ 519,792 519,792
51,460 51,460 Thermo Electron Corp.+ 1,581,880 1,581,880
34,830 59,610 94,440 Waters Corp.+ 1,664,177 2,848,166 4,512,343
- ---------------------------------------------------------------------------------------------------------------------------------
1,664,177 4,949,838 6,614,015
- ---------------------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES - 1.1%
27,560 27,560 Akamai Technologies, Inc.+ 494,702 494,702
17,200 17,200 Softbank Corp. 755,041 755,041
76,710 76,710 Yahoo! Inc.+ 2,786,874 2,786,874
- ---------------------------------------------------------------------------------------------------------------------------------
4,036,617 - 4,036,617
- ------------- --------- -------------- --------------------------------------------------- ---------- ------------ --------------
-8-
MFS EMERGING GROWTH PORTFOLIO (EG) MFS MID CAP GROWTH PORTFOLIO (MCG)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
MCG MCG
EG MCG COMBINED EG MCG COMBINED
SHARE SHARE SHARE SECURITY VALUE VALUE VALUE
=================================================================================================================================
COMMON STOCK - 97.7%
=================================================================================================================================
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 4.7%
31,340 23,250 54,590 Analog Devices, Inc.+ $1,475,487 $1,094,610 $2,570,097
14,660 14,660 Cymer, Inc. + 548,870 548,870
26,810 93,440 120,250 Integrated Circuit Systems, Inc. + 728,160 2,537,830 3,265,990
83,140 122,160 205,300 Marvell Technology Group Ltd.+ 2,219,838 3,261,672 5,481,510
74,370 74,370 Novellus Systems, Inc.+ 2,338,193 2,338,193
60,710 153,600 214,310 PMC-Sierra, Inc.+ 871,188 2,204,160 3,075,348
15,230 15,230 Xilinx, Inc. 507,311 507,311
- ----------------------------------------------------------------------------------------------------------------------------------
5,801,984 11,985,335 17,787,319
- ----------------------------------------------------------------------------------------------------------------------------------
SOFTWARE - 10.1%
33,560 33,560 Adobe Systems Inc. 1,560,540 1,560,540
110,280 156,110 266,390 Amdocs Ltd.+ 2,583,860 3,657,657 6,241,517
41,580 41,580 Ascential Software Corporation + 664,864 664,864
35,270 41,100 76,370 Electronic Arts Inc.+ 1,923,978 2,242,005 4,165,983
60,900 60,900 Intuit Inc.+ 2,349,522 2,349,522
26,500 43,900 70,400 Mercury Interactive Corp.+ 1,320,495 2,187,537 3,508,032
96,650 96,650 Microsoft Corp. 2,760,324 2,760,324
92,700 92,700 Networks Associates, Inc.+ 1,680,651 1,680,651
145,600 145,600 PeopleSoft, Inc.+ 2,693,600 2,693,600
58,120 81,600 139,720 Red Hat, Inc.+ 1,335,016 1,874,352 3,209,368
37,580 44,750 82,330 Symantec Corp.+ 1,645,252 1,959,155 3,604,407
75,180 123,130 198,310 VERITAS Software Corp.+ 2,082,486 3,410,701 5,493,187
- ----------------------------------------------------------------------------------------------------------------------------------
15,211,951 22,720,044 37,931,995
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY 40,742,180 53,573,150 94,315,330
==================================================================================================================================
MATERIALS - 0.5%
CHEMICALS - 0.3%
65,370 65,370 Lyondell Chemical Co. 1,136,784 1,136,784
- ----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.2%
5,200 20,400 25,600 Aber Diamond Corp.+ 153,797 603,357 757,154
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL MATERIALS 153,797 1,740,141 1,893,938
==================================================================================================================================
TELECOMMUNICATION SERVICES - 6.5%
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.6%
3,980 3,980 Covad Communications Group, Inc.+ 9,552 9,552
39,427 48,190 87,617 NTL Inc.+ 2,271,784 2,776,708 5,048,492
41,450 66,430 107,880 SpectraSite, Inc.+ 1,791,469 2,871,105 4,662,574
- ----------------------------------------------------------------------------------------------------------------------------------
4,063,253 5,657,365 9,720,618
- ----------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 3.9%
74,750 74,750 Alamosa Holdings, Inc.+ 549,413 549,413
30,640 30,640 America Movil S.A. de C.V., Sponsored ADR 1,114,377 1,114,377
180,490 333,660 514,150 American Tower Corp., Class A Shares+ 2,743,448 5,071,632 7,815,080
217,500 217,500 Crown Castle International Corp.+ 3,208,125 3,208,125
18,240 18,240 Nextel Communications, Inc., Class A Shares+ 486,278 486,278
69,079 69,079 Vodafone Group PLC, Sponsored ADR 1,526,646 1,526,646
- ----------------------------------------------------------------------------------------------------------------------------------
6,420,162 8,279,757 14,699,919
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATION SERVICES 10,483,415 13,937,122 24,420,537
==================================================================================================================================
TOTAL COMMON STOCK 163,112,317 205,355,606 368,467,923
(Cost - $305,037,635)
==================================================================================================================================
FACE AMOUNT
- -------------
SHORT-TERM INVESTMENTS - 2.3%
$5,030,000 $5,030,000 Federal Home Loan Bank Discount Notes, zero
coupon bond to yield 1.000% due 7/1/04 (Cost -
$5,030,000) 5,030,000 5,030,000
$3,756,000 3,756,000 Federal National Mortgage Association, Discount
Notes,
0.010% due 7/1/04 (Cost - $3,756,000) 3,756,000 3,756,000
==================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS 3,756,000 5,030,000 8,786,000
(Cost - $8,786,000)
==================================================================================================================================
TOTAL INVESTMENTS - 100.0% $166,868,317 $210,385,606 $377,253,923
(Cost - $313,823,635*)
==================================================================================================================================
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
ABBREVIATION USED IN THIS SCHEDULE:
ADR - American Depositary Receipt.
-9-
1. General
The accompanying unaudited pro forma financial statements are presented to show
the effect of the proposed acquisition of substantially all of the assets of MFS
Emerging Growth Portfolio (the Acquired Fund) of The Travelers Series Trust (the
"Trust") by MFS Mid Cap Growth Portfolio (the "Fund"), a series in the Trust, in
exchange for shares of the Fund and the assumption by the Fund of substantially
all of the liabilities of the Acquired Fund as described elsewhere in this proxy
statement/prospectus.
Under the terms of the Agreement and Plan of Reorganization, the exchange of
assets of the Acquired Fund for shares of the Fund will be treated as a tax-free
reorganization and accordingly will be accounted for as a tax-free merger. The
acquisition would be accomplished by an acquisition of the net assets of the
Acquired Fund in exchange for shares of the Fund at net asset value. The
unaudited Pro Forma Schedule of Investments and the unaudited Pro Forma
Statement of Assets and Liabilities have been prepared as though the acquisition
had been effective on June 30, 2004. The unaudited Pro Forma Statement of
Operations has been prepared as though the acquisition had been effective July
1, 2003.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements and Schedule of Investments of the Acquired Fund
and the Fund which are included in their respective semi-annual and annual
reports dated June 30, 2004 and December 31, 2003, respectively.
2. Significant Accounting Policies
The Fund is a separate non-diversified investment fund of The Trust. The Trust
is a Massachusetts business trust registered under the Investment Company Act of
1940, as amended, as an open-end management investment company and consists of
the Acquired Fund and the Fund and fourteen other separate investment funds.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with U.S. generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities traded on national securities markets are valued at the closing price
on such markets or, if there were no sales during the day, at the mean between
the closing bid and asked prices; securities primarily traded on foreign
exchanges are generally valued at the closing values of such securities on their
respective exchanges, except that when a significant occurrence exists
subsequent to the time a value was so established and it is likely to have
significantly changed the value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees; securities listed on the NASDAQ National Market System for
which market quotations are available are valued at the official closing price
or, if there is no official closing price on that day, at the last sale price;
securities traded in the over-the counter market are valued at prices based on
market quotations for securities of similar types; U.S. government agencies and
obligations are value at the mean between the last reported bid and asked
prices; (c) securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (d) securities,
other than U.S. government agencies, that have a
-10-
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity; (d) securities for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Trustees; (f) interest income, adjusted for
amortization of premiums and accretion of original issue discount, is recorded
on an accrual basis and dividend income is recorded on the ex-dividend date;
foreign dividends are recorded on the ex-dividend date or as soon as practical
after the Fund determines the existence of a dividend declaration after
exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded on the ex-dividend
date; the Fund distributes dividends and capital gains, if any, at least
annually; (i) the accounting records of the Fund are maintained in U.S. dollars.
All assets and liabilities denominated in foreign currencies are translated into
U.S. dollars on the date of valuation. Purchases and sales of securities, income
and expenses are translated at the rate of exchange quoted on the respective
date that such transactions are recorded. Differences between income or expense
amounts recorded and collected or paid are adjusted when reported by the
custodian; (j) the character of income and gains to be distributed is determined
in accordance with income tax regulations which may differ from GAAP; (k) the
Fund intends to comply with the applicable provisions of the Internal Revenue
Code of 1986, as amended, pertaining to regulated investment companies and to
make distributions of taxable income sufficient to relieve it from substantially
all Federal income and excise taxes; and (l) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
In addition, the Fund may enter into forward exchange contracts in order to
hedge against foreign currency risk. These contracts are marked to market daily,
by recognizing the difference between the contract exchange rate and the current
forward rate as an unrealized gain or loss. Realized gains or losses are
recognized when the contracts are settled or offset by entering into another
forward exchange contract.
3. Pro-Forma Adjustments
The accompanying unaudited pro forma financial statements reflect changes in
shares and fund expenses as if the merger had taken place on July 1, 2003.
Adjustments were made to certain expenses to reflect the merged entities'
anticipated operations.
4. Investment Advisory Agreement and Other Transactions
Travelers Asset Management International Company LLC ("TAMIC') an indirect
wholly-owned subsidiary of Citigroup Inc. ("Citigroup") acts as investment
adviser to the Fund. The Fund pays TAMIC an investment advisory fee calculated
at an annual rate of 0.80% on the first $600 million of the Fund's average daily
net assets; 0.775% on the next $300 million; 0.75% on the next $600 million;
0.725% on the next $1 billion; and $0.675% on the next $2.50 billion. These fees
are calculated daily and paid monthly. (Prior to September 1, 2004, TAMIC
received an investment advisory fee from the Fund at an annual rate of 0.80% of
all of the average net assets of the Fund, and an investment advisory fee from
the Acquired Fund at an annual rate of 0.75% of all of the average net assets of
the Acquired Fund).
-11-
The Acquired Fund has a voluntary expense cap of 0.95% and the Fund has a
voluntary expense cap of 1.00%. As the total expenses of the Acquired Fund and
the Fund are currently under such caps, and the total expenses of the Fund are
expected to be under its cap if the Reorganization is consummated, no expenses
reimbursements to the Acquired Fund and the Fund are currently expected.
Upon closing of the Reorganization, a new fee schedule will take effect for the
Fund. The new fee schedule would be as follows:
AVERAGE NET ASSETS FEE RATE
Up to $600,000,000 0.7775%
$600,000,000 to $900,000,000 0.7525%
$900,000,000 to $1.5 billion 0.7275%
$1.5 billion to $2.5 billion 0.7025%
Over $2.5 billion 0.6525%
TAMIC has entered into a sub-advisory agreement with Massachusetts Financial
Services ("MFS"). Pursuant to the sub-advisory agreement, MFS is responsible for
the day-to-day fund operations and investment decisions for the Fund. As a
result, TAMIC pays MFS a sub-advisory fee at an annual rate of 0.37% on the
first $600 million of the Fund's average daily net assets; 0.35% on the next
$300 million; 0.325% on the next $600 million; 0.30% on the next $1 billion; and
$0.25% on the next $2.50 billion.
The Travelers Insurance Company ("TIC"), another indirect wholly-owned
subsidiary of Citigroup, acts as administrator to the Funds. The Funds pay TIC
and administration fee calculated at an annual rate of 0.06% of the average
daily net assets of the Fund. This fee is calculated daily and paid monthly. TIC
has entered into a sub-administrative service agreement with Smith Barney Fund
Management LLC ("SBFM"), another indirect wholly-owned subsidiary of Citigroup.
TIC pays SBFM, as subadministrator, a fee calculated at an annual rate of 0.02%
of the average daily net assets of the Fund, plus $30,000, subject to a maximum
of 0.06% of each Fund's average daily next assets.
One Trustee and all officers of the Trust are employees of Citigroup or its
subsidiaries.
-12-
FORM N-14
PART C - OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
Provisions for the indemnification of the Trust's Trustees and officers are
contained in Article VIII of the Trust's Declaration of Trust.
Registrant's directors and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, trustee, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
trustee, officer or controlling person or principal underwriter in connection
with the shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS.
(1) Agreement and Declaration of Trust. (Incorporated herein by reference
to Exhibit 1 to Post-Effective Amendment No. 13 to the Registration Statement on
Form N-1A filed on April 3, 1996 (File No. 033-43628).)
(2) Bylaws. (Incorporated herein by reference to Exhibit to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A, filed April 3, 1996
(File No. 033-43628).)
(3) Not applicable.
(4) Agreement and Plan of Reorganization (Filed as Appendix A to the
Combined Prospectus/Proxy Statement included in Part A to this Form N-14
Registration Statement.)
(5) Not applicable.
(6) (a) Investment Advisory Agreement between Travelers Asset Management
International Corporation and the Registrant by itself and on behalf of MFS Mid
Cap Growth Portfolio of the Registrant. (Incorporated herein by reference to
Exhibit 5(u) to Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A filed on October 27, 1997 (File No. 033-43628).)
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(b) Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Massachusetts Financial Services Corporation,
as Subadviser for MFS Mid Cap Growth Portfolio. (Incorporated herein by
reference to Exhibit 5(v) to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A filed on October 27, 1997 (File No.
033-43628).)
(c) Amendment to Investment Advisory Agreement between Travelers Asset
Management International Company LLC and the Registrant by itself and on
behalf of MFS Mid Cap Growth Portfolio of the Registrant. (Incorporated by
reference to Exhibit (d)(43) to Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A filed on April 30, 2004 (File No.
033-43628).)
(d) Amendment to Sub-Advisory Agreement between Travelers Asset
Management International Company LLC and Massachusetts Financial Services
Company, as Subadviser for MFS Mid Cap Growth Portfolio. (Incorporated by
reference to Exhibit (d)(44) to Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A filed on April 30, 2004 (File No.
033-43628).)
(7) Not applicable.
(8) Not applicable.
(9) Master Custody Agreement with State Street Bank and Trust.
(Incorporated herein by reference to Exhibit g(5) to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A filed February 27, 2002 (File
No. 033-75644).)
(10) Not applicable.
(11) Opinion and Consent of Counsel. (Incorporated herein by reference to
the Registrant's Rule 24f-2 Notice filing on March 25, 1998 (File No.
033-43628).)
(12) Form of Tax Opinion of Counsel is filed herewith as Exhibit 12.
(13) (a) Form of Amended and Restated Administrative Services Agreement
between the Registrant and The Travelers Insurance Company. (Incorporated by
reference to Exhibit (h)(2) to Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A filed on April 30, 2004 (File No.
033-43628).)
(b) Participation Agreement between the Registrant and The Travelers
Insurance Company. (Incorporated herein by reference to Exhibit 9(f) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
filed on April 21, 1997 (File No. 033-43628).)
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(c) Transfer Agency and Services Agreement between Citi Fiduciary
Trust Company (formerly Smith Barney Private Trust Company) and the
Registrant. (Incorporated herein by reference to Exhibit (h)(2) to
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A
filed on February 28, 2001 (File No. 33-75644).)
(d) Sub-Transfer Agency and Services Agreement between Registrant and
PFPC Global Fund Services. (Incorporated herein by reference to Exhibit
(h)(3) to Post-Effective Amendment No. 14 to the Registration Statement on
Form N-1A filed on February 28, 2001 (File No. 33-75644).)
(14) (a) Consent of independent registered public accounting firm is
filed herewith as Exhibit 14(a).
(b) Consent of independent registered public accounting firm is filed
herewith as 14(b).
(15) Not applicable.
(16) (a) Power of Attorney authorizing Kathleen A. McGah or Ernest J.
Wright as signatory for R. Jay Gerken is filed herewith as Exhibit 16(a).
(b) Power of attorney authorizing Kathleen A. McGah or Ernest J.
Wright as signatory for Frances M. Hawk is filed herewith as Exhibit
16(b).
(c) Power of attorney authorizing Kathleen A. McGah or ernest J.
Wright as signatory for Lewis Mandell is filed herewith as Exhibit 16(c).
(d) Power of Attorney authorizing Kathleen A. McGah or Ernest J.
Wright as signatory for Robert E. McGill III is filed herewith as Exhibit
16(d).
(17) Form of Proxy is filed herewith as Exhibit 17.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus that is part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as
amended (the "1933 Act"), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
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SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant, in the City of Hartford and the State
of Connecticut, on the 24 day of November, 2004.
THE TRAVELERS SERIES TRUST
(Registrant)
By: /s/ R. JAY GERKEN*
---------------------
Name: R. Jay Gerken
Title: Chairman of the Board
Chief Executive Officer
As required by the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated on the
dates indicated.
Signature Title Date
/s/ R. Jay Gerken* Chairman of the Board November 24, 2004
Chief Executive Officer
/s/ Frances M. Hawk* Trustee November 24, 2004
/s/ Lewis Mandell* Trustee November 24, 2004
/s/ Robert E. McGill III* Trustee November 24, 2004
* By: /s/ Kathleen A. McGah, Attorney-in-fact