UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6465
The Travelers Series Trust
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
- ---------------------------------------------------
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
- ---------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
ANNUAL REPORT
DECEMBER 31, 2003
[UMBRELLA GRAPHIC]
THE TRAVELERS SERIES TRUST:
EQUITY INCOME PORTFOLIO
LARGE CAP PORTFOLIO
[TRAVELERS LIFE AND ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Cityplace
Hartford, CT 06103
ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
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WHAT'S INSIDE
<Table>
LETTER FROM THE CHAIRMAN.................................... 1
EQUITY INCOME PORTFOLIO
MANAGER OVERVIEW....................................... 3
PERFORMANCE COMPARISON................................. 5
LARGE CAP PORTFOLIO
MANAGER OVERVIEW....................................... 6
PERFORMANCE COMPARISON................................. 7
SCHEDULES OF INVESTMENTS.................................... 8
STATEMENTS OF ASSETS AND LIABILITIES........................ 20
STATEMENTS OF OPERATIONS.................................... 21
STATEMENTS OF CHANGES IN NET ASSETS......................... 22
NOTES TO FINANCIAL STATEMENTS............................... 24
FINANCIAL HIGHLIGHTS........................................ 28
INDEPENDENT AUDITORS' REPORT................................ 30
ADDITIONAL INFORMATION...................................... 31
</Table>
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LETTER FROM THE CHAIRMAN
[R. JAY GERKEN PHOTO]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
DEAR SHAREHOLDER,
The year 2003 marked the end of the three-year equity
bear market, with the resurgence of stocks of all sizes
and styles and from a variety of industries. However,
the greatest gains were made by small-cap, rather than
large-cap stocks, and by those whose stock price had
fallen the farthest since 2000's market peaks,
particularly technology stocks. In general, mid-cap
stocks performed better than large-caps, yet not as well
as small-caps.
The turning point for stocks came in mid-March as the
U.S. ended the uncertainty over the impending Iraq War
and the major combat war came to a swift completion.
But, historically low interest rates and lowered income
taxes provided a double economic stimulus, which first
raised expectations for economic growth and then led to
gains in consumer confidence and rapid expansion.
Meanwhile, job growth remained sluggish, causing some
concerns over the sustainability of both the economic
rebound and the market's positive performance.
Within this environment, the funds performed as follows:
Performance of the Funds as of December 31, 2003
<Table>
<Caption>
6 MONTHS 12 MONTHS
-------- ---------
EQUITY INCOME PORTFOLIO................... 16.14% 31.17%
Russell 3000 Value Index.................. 17.18 31.14
Lipper Equity Income Variable Funds
Category Average........................ 15.37 26.81
LARGE CAP PORTFOLIO....................... 14.32 24.67
S&P 500 Index............................. 15.14 28.67
Lipper Large Cap Core Variable Funds
Category Average........................ 13.96 26.42
</Table>
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. Principal value and investment returns will fluctuate and investors'
shares, when redeemed may be worth more or less than their original cost. Each
fund's returns reflect expenses incurred by that fund, but do not reflect any
charges or expenses imposed by the variable annuity or life contract you own,
and do not reflect the deduction of any taxes. Therefore, your actual returns
would have been lower. An investor may not invest directly in the funds.
Index returns are provided for comparison, but an investor cannot invest
directly in an index. Additionally, these returns do not reflect any deduction
for fees or expenses, as indices are unmanaged, and do not incur such expenses.
Index returns also do not reflect any deduction for taxes.
The Russell 3000 Value Index measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values. (A price-to-book ratio is the price of a stock compared to the
difference between a company's assets and liabilities.) The S&P 500 Index is a
market capitalization-weighted index of 500 widely-held common stocks.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns
are based on the period ended December 31, 2003 and include the reinvestment of
dividends and capital gains, if any. Returns were calculated among the 64 funds
for the six-month period and among the 56 funds for the 12-month period in the
Lipper equity income variable funds category. Returns were calculated among the
230 funds for the six-month period and among the 224 funds for the 12-month
period in the Lipper large cap core variable funds category.
Please read on for a more detailed look at prevailing economic and market
conditions during the funds' fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
1
INFORMATION ABOUT YOUR FUND
In recent months several issues in the mutual fund and variable insurance
products industries have come under the scrutiny of federal and state
regulators. Travelers Life & Annuity and some of its affiliates have received
requests for information from various government regulators regarding market
timing, late trading, and other mutual fund and variable product issues in
connection with various investigations. The funds have been informed that
Travelers Life & Annuity and its affiliates are responding to those information
requests and cooperating with the regulators, but are not in a position to
predict the outcome of these requests and investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
[/s/ R. JAY GERKEN]
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
January 19, 2004
2
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MANAGER OVERVIEW
EQUITY INCOME PORTFOLIO
PERFORMANCE UPDATE
During its fiscal year ended December 31, 2003, the fund returned 31.17%. In
comparison, the fund outperformed its unmanaged benchmark, the Russell 3000
Value Index(i), which returned 31.14% for the same period. The fund also
outperformed its Lipper equity income variable funds category average, which
returned 26.81% for the same period.(1)
The fund outperformed the Russell 3000 Value Index and its peer group average.
An overweighting and good stock selection in information technology was the
fund's top contributor to return, including semiconductor stocks that rose in
anticipation of an upturn in the technology spending cycle. Other economically
sensitive positions also enhanced returns, including selected industrials and
consumer discretionary stocks showing improved earnings prospects. On the down
side, energy positions detracted from the fund's relative return, particularly
energy services stocks that were held back in part by investor concerns about
the sustainability of energy prices. Overexposure to out-of-favor health care
stocks, particularly contra-cyclical pharmaceutical stocks, also hampered
performance.
A variety of overweighted industrial and materials positions with operating
leverage to an economic rebound contributed to the fund's outperformance
relative to the Russell 1000 Value Index. Below-average exposure to the lagging
utilities sector and its perceived defensive traits also helped. On the other
hand, the fund's financial services positions held back relative returns.
Despite increasing equity market values, the fund's overweighted brokerage and
processing-oriented bank positions trailed other stocks in the sector, including
some banks that benefited from industry consolidation activity. Below-average
performance in the fund's concentrated energy holdings and consumer
discretionary positions also held back its relative return.
MARKET OVERVIEW
In calendar year 2003, equities staged a rapid rebound. Except for the period
earlier in the year prior to the start of the war in Iraq, vigorous monetary and
fiscal stimuli contributed to rising investor optimism about dramatic
improvements in the economy and growth in corporate earnings following three
years of dismal equity market performance. Most equity market segments
registered double-digit gains, and economically-sensitive cyclical industries
outpaced the more defensive sectors. Additionally, value stocks outpaced growth
stocks.
(1) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended December 31, 2003, calculated
among the 56 funds in the Lipper equity income variable funds category
including the reinvestment of dividends and capital gains, if any.
3
Thank you for your investment in the Equity Income Portfolio. We appreciate that
you have entrusted us to manage your money and value our relationship with you.
Sincerely,
The Portfolio Management Team
Fidelity Management & Research Company
January 19, 2004
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.
Portfolio holdings and breakdowns are as of December 31, 2003 and are subject to
change. Please refer to pages 8 through 13 for a list and percentage breakdown
of the fund's holdings.
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.
RISK: The fund may use derivatives, such as options and futures, which can be
illiquid, may disproportionately increase losses, and have a potentially large
impact on fund performance.
(i) The Russell 3000 Value Index measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values. (A price-to-book ratio is the price of a stock compared to the
difference between a company's assets and liabilities.)
4
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PERFORMANCE COMPARISON -- EQUITY INCOME PORTFOLIO AS OF 12/31/03 (UNAUDITED)
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------
Year Ended 12/31/03 31.17%
Five Years Ended 12/31/03 3.84
8/30/96* through 12/31/03 9.91
<Caption>
CUMULATIVE TOTAL RETURN
-----------------------
8/30/96* through 12/31/03 100.06%
* Commencement of operations.
</Table>
This chart assumes an initial investment of $10,000 made at
inception on August 30, 1996, assuming reinvestment of dividends,
through December 31, 2003. Index information is available at
month-end only; therefore, the closest month-end to inception date
of the Portfolio has been used. The Russell 3000 Value Index
measures the performance of those Russell 3000 Index companies with
lower price-to-book ratios and lower forecasted growth values. (A
price-to-book ratio is the price of a stock compared to the
difference between a company's assets and liabilities.)
(LINE GRAPH)
<Table>
<Caption>
EQUITY INCOME PORTFOLIO RUSSELL 3000 VALUE INDEX
----------------------- ------------------------
8/30/96 10000 10000
12/96 11169 11421
12/97 14749 15399
12/98 16574 17478
12/99 17389 18640
12/00 18976 20139
12/01 17722 19267
12/02 15252 16342
12/31/03 20006 21431
</Table>
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PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The total returns and graph presented above do not
reflect expenses associated with your variable contract such as administrative
fees, account charges and surrender charges which, if reflected, would reduce
the performance shown.
5
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MANAGER OVERVIEW
LARGE CAP PORTFOLIO
PERFORMANCE UPDATE
During its fiscal year ended December 31, 2003, the fund returned 24.67%. In
comparison, the fund underperformed its unmanaged benchmark, the S&P 500
Index,(i) which returned 28.67% for the same period. The fund also
underperformed its Lipper large cap core variable funds category average, which
returned 26.42% for the same period.(1)
MARKET OVERVIEW
The S&P 500 Index gained substantial ground over 2003 providing some relief to
investors who endured several years of dismal equity returns. The strong results
were likely a product of several factors: improving economic conditions led to a
rapid gain in corporate earnings, and investors reacted to the strong earnings
reports by pushing stock prices higher. Throughout most of the year, smaller-cap
companies dominated returns, a trend that continued through the fourth quarter.
Value stocks were also strong performers.
Against this backdrop, the fund underperformed both its benchmark as well as its
Lipper category average. Security selection in technology detracted from
performance, as the fund generally favored large industry bellwethers that
underperformed amid a rally led by higher-growth, smaller-cap companies. The
fund's overweighting in the healthcare sector also dampened results.
Specifically, a focus on some large-cap pharmaceutical companies hurt as the
group suffered from industry-specific problems such as drug patent expirations,
weak product pipelines, and the threat of cheaper imported drugs from Canada.
Although security selection in technology detracted from performance, an
overweighting in the sector contributed to returns, as did security selection in
the consumer discretionary sector. Within the consumer discretionary sector, the
fund held securities in a media company that performed well following a
restructuring of some of its businesses. Furthermore, the fund had holdings in a
retailer that was under new management and reported solid third-quarter
earnings.
Thank you for your investment in the Large Cap Portfolio. We appreciate that you
have entrusted us to manage your money and value our relationship with you.
Sincerely,
The Portfolio Management Team
Fidelity Management & Research Company
January 19, 2004
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.
Portfolio holdings and breakdowns are as of December 31, 2003 and are subject to
change. Please refer to pages 14 through 18 for a list and percentage breakdown
of the fund's holdings.
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.
RISK: The fund may use derivatives, such as options and futures, which can be
illiquid, may disproportionately increase losses, and have a potentially large
impact on fund performance.
(1) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended December 31, 2003, calculated
among the 224 funds in the Lipper large cap core variable funds category
including the reinvestment of dividends and capital gains, if any.
(i) The S&P 500 Index is a market capitalization-weighted index of 500 widely
held common stocks.
6
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PERFORMANCE COMPARISON -- LARGE CAP PORTFOLIO AS OF 12/31/03 (UNAUDITED)
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------
Year Ended 12/31/03 24.67%
Five Years Ended 12/31/03 (2.53)
8/30/96* through 12/31/03 7.22
<Caption>
CUMULATIVE TOTAL RETURN
-----------------------
8/30/96* through 12/31/03 66.82%
* Commencement of operations.
</Table>
This chart assumes an initial investment of $10,000 made on August
30, 1996 (commencement of operations), assuming reinvestment of
dividends, through December 31, 2003, with that of a similar
investment in the S&P 500 Index. Index information is available at
month-end only; therefore, the closest month-end to inception date
of the Portfolio has been used. The S&P 500 Index is an unmanaged
index composed of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange and over-the-counter
markets.
[Line Graph]
<Table>
<Caption>
LARGE CAP PORTFOLIO S&P 500 INDEX
------------------- -------------
8/30/96 10000 10000
12/96 11330 11442
12/97 13982 15258
12/98 18966 19622
12/99 24513 23748
12/00 20964 21587
12/01 17332 19022
12/02 13382 14820
12/31/03 16682 19069
</Table>
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PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The total returns and graph presented above do not
reflect expenses associated with your variable contract such as administrative
fees, account charges and surrender charges which, if reflected, would reduce
the performance shown.
7
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SCHEDULES OF INVESTMENTS DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
COMMON STOCK -- 97.5%
- --------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 4.4%
20,600 European Aeronautic Defence and Space Co. .................. $ 489,251
177,600 Goodrich Corp. ............................................. 5,272,944
118,500 Lockheed Martin Corp. ...................................... 6,090,900
4,300 Precision Castparts Corp. .................................. 195,263
37,000 Raytheon Co. ............................................... 1,111,480
8,100 Rockwell Collins, Inc. ..................................... 243,243
- --------------------------------------------------------------------------------------------------
13,403,081
- --------------------------------------------------------------------------------------------------
AIRLINES -- 0.3%
52,700 Continental Airlines Inc.+.................................. 857,429
- --------------------------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
65,500 Delphi Corp. ............................................... 668,755
- --------------------------------------------------------------------------------------------------
AUTOMOBILES -- 1.0%
195,200 Ford Motor Co. ............................................. 3,123,200
- --------------------------------------------------------------------------------------------------
BANKS -- 10.8%
86,200 Bank of America Corp. ...................................... 6,933,066
137,800 The Bank of New York Co., Inc. ............................. 4,563,936
71,400 Bank One Corp. ............................................. 3,255,126
6,800 City National Corp. ........................................ 422,416
13,400 Comerica Inc. .............................................. 751,204
82,414 Northern Trust Corp. ....................................... 3,825,658
121,700 U.S. Bancorp................................................ 3,624,226
60,148 Wachovia Corp. ............................................. 2,802,295
106,200 Wells Fargo & Co. .......................................... 6,254,118
- --------------------------------------------------------------------------------------------------
32,432,045
- --------------------------------------------------------------------------------------------------
BEVERAGES -- 0.5%
26,400 Anheuser-Busch Co., Inc. ................................... 1,390,752
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 3.2%
51,500 Air Products & Chemicals, Inc. ............................. 2,720,745
14,700 BASF AG, Sponsored ADR...................................... 819,525
24,300 The Dow Chemical Co. ....................................... 1,010,151
30,500 E.I. du Pont de Nemours & Co. .............................. 1,399,645
52,900 Eastman Chemical Co. ....................................... 2,091,137
6,600 FMC Corp.+.................................................. 225,258
13,200 Great Lakes Chemical Corp. ................................. 358,908
3,500 PPG Industries, Inc. ....................................... 224,070
18,600 Rohm and Haas Co. .......................................... 794,406
- --------------------------------------------------------------------------------------------------
9,643,845
- --------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.4%
38,600 R.R. Donnelley & Sons Co. .................................. 1,163,790
- --------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
8
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SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.9%
40,000 Alcatel SA, Sponsored ADR................................... $ 514,000
63,800 Avaya Inc.+................................................. 825,572
60,000 Motorola, Inc. ............................................. 844,200
115,300 Nortel Networks Corp.+...................................... 487,719
- --------------------------------------------------------------------------------------------------
2,671,491
- --------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 4.2%
185,900 Hewlett-Packard Co. ........................................ 4,270,123
89,500 International Business Machines Corp. ...................... 8,294,860
- --------------------------------------------------------------------------------------------------
12,564,983
- --------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.2%
15,000 Vulcan Materials Co. ....................................... 713,550
- --------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 11.9%
31,900 American Express Co. ....................................... 1,538,537
59,100 AmeriCredit Corp.+.......................................... 941,463
1,140,040 The Charles Schwab Corp. ................................... 13,498,074
69,000 Fannie Mae.................................................. 5,179,140
36,400 Friedman, Billings Ramsey Group, Inc. ...................... 840,112
223,300 Morgan Stanley.............................................. 12,922,371
23,800 SLM Corp. .................................................. 896,784
- --------------------------------------------------------------------------------------------------
35,816,481
- --------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.8%
150,000 SBC Communications, Inc. ................................... 3,910,500
32,200 Telefonaktiebolaget LM Ericsson+............................ 569,940
366,800 Verizon Communications Inc. ................................ 12,867,344
- --------------------------------------------------------------------------------------------------
17,347,784
- --------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.2%
90,100 The AES Corp.+.............................................. 850,544
10,100 DPL Inc. ................................................... 210,888
15,700 Entergy Corp. .............................................. 896,941
53,670 Wisconsin Energy Corp. ..................................... 1,795,262
- --------------------------------------------------------------------------------------------------
3,753,635
- --------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.2%
20,800 Thomas & Betts Corp.+....................................... 476,112
- --------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.3%
36,200 Arrow Electronics, Inc.+.................................... 837,668
700 Avnet, Inc.+................................................ 15,162
54,200 Ingram Micro Inc., Class A Shares+.......................... 861,780
51,700 Solectron Corp. ............................................ 862,356
57,400 Solectron Corp.+............................................ 339,234
42,200 Vishay Intertechnology, Inc.+............................... 966,380
- --------------------------------------------------------------------------------------------------
3,882,580
- --------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
9
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.0%
28,500 ENSCO International Inc. ................................... $ 774,345
5,400 Rowan Cos., Inc.+........................................... 125,118
21,200 Varco International, Inc.+.................................. 437,356
44,000 Weatherford International Ltd.+............................. 1,584,000
- --------------------------------------------------------------------------------------------------
2,920,819
- --------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING -- 0.7%
57,000 Safeway, Inc.+.............................................. 1,248,870
22,300 Walgreen Co. ............................................... 811,274
- --------------------------------------------------------------------------------------------------
2,060,144
- --------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.9%
31,000 Campbell Soup Co. .......................................... 830,800
94,000 McCormick & Co., Inc. ...................................... 2,829,400
17,700 Smithfield Foods, Inc.+..................................... 366,390
28,000 Unilever NV................................................. 1,817,200
- --------------------------------------------------------------------------------------------------
5,843,790
- --------------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES -- 0.3%
19,000 Becton Dickinson & Co. ..................................... 781,660
11,800 Steris Corp.+............................................... 266,680
- --------------------------------------------------------------------------------------------------
1,048,340
- --------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 0.8%
40,500 Hilton Hotels Corp. ........................................ 693,765
13,200 Mandalay Resort Group....................................... 590,304
22,600 Marriott International Inc., Class A Shares................. 1,044,120
- --------------------------------------------------------------------------------------------------
2,328,189
- --------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.5%
27,600 Colgate-Palmolive Co. ...................................... 1,381,380
4,200 Kimberly-Clark Corp. ....................................... 248,178
28,400 The Procter & Gamble Co. ................................... 2,836,592
- --------------------------------------------------------------------------------------------------
4,466,150
- --------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.8%
16,200 3M Co. ..................................................... 1,377,486
140,200 General Electric Co. ....................................... 4,343,396
70,200 Honeywell International, Inc. .............................. 2,346,786
8,700 Teleflex Inc. .............................................. 420,471
- --------------------------------------------------------------------------------------------------
8,488,139
- --------------------------------------------------------------------------------------------------
INSURANCE -- 3.0%
30,900 AFLAC, Inc. ................................................ 1,117,962
115,100 American International Group, Inc. ......................... 7,628,828
3,600 Marsh & McLennan Cos., Inc. ................................ 172,404
- --------------------------------------------------------------------------------------------------
8,919,194
- --------------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 2.1%
185,633 InterActiveCorp+............................................ 6,298,528
- --------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
10
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.2%
50,281 DoubleClick, Inc.+.......................................... $ 513,872
- --------------------------------------------------------------------------------------------------
IT CONSULTING & SERVICES -- 1.5%
27,700 Accenture Ltd., Class A Shares+............................. 729,064
63,900 BearingPoint, Inc.+......................................... 644,751
16,900 Computer Sciences Corp.+.................................... 747,487
83,702 Electronic Data Systems Corp. .............................. 2,054,047
4,900 Keane, Inc.+................................................ 71,736
12,700 SunGard Data Systems Inc.+.................................. 351,917
- --------------------------------------------------------------------------------------------------
4,599,002
- --------------------------------------------------------------------------------------------------
MACHINERY -- 2.9%
6,800 Caterpillar Inc. ........................................... 564,536
141,700 Dover Corp. ................................................ 5,632,575
5,100 Eaton Corp. ................................................ 550,698
16,400 Illinois Tool Works, Inc. .................................. 1,376,124
8,700 SPX Corp.+.................................................. 511,647
- --------------------------------------------------------------------------------------------------
8,635,580
- --------------------------------------------------------------------------------------------------
MEDIA -- 6.3%
59,500 Belo Corp., Class A Shares.................................. 1,686,230
24,200 EchoStar Communications Corp., Class A Shares+.............. 822,800
5,300 The McGraw Hill Cos., Inc. ................................. 370,576
120,000 News Corp. Ltd., Sponsored ADR.............................. 4,332,000
19,000 Omnicom Group, Inc. ........................................ 1,659,270
157,200 Time Warner Inc.+........................................... 2,828,028
29,300 Tribune Co. ................................................ 1,511,880
106,900 Viacom Inc., Class B Shares................................. 4,744,222
24,100 The Walt Disney Co. ........................................ 562,253
500 Washington Post Co., Class B Shares......................... 395,700
- --------------------------------------------------------------------------------------------------
18,912,959
- --------------------------------------------------------------------------------------------------
METALS & MINING -- 1.5%
93,200 Alcoa Inc. ................................................. 3,541,600
15,600 Nucor Corp. ................................................ 873,600
- --------------------------------------------------------------------------------------------------
4,415,200
- --------------------------------------------------------------------------------------------------
MULTI-LINE RETAIL -- 0.7%
27,700 Kohl's Corp.+............................................... 1,244,838
35,700 Saks, Inc.+................................................. 536,928
5,900 Wal-Mart Stores, Inc. ...................................... 312,995
- --------------------------------------------------------------------------------------------------
2,094,761
- --------------------------------------------------------------------------------------------------
OIL & GAS -- 8.9%
273,700 Burlington Resources, Inc. ................................. 15,157,506
265,610 Exxon Mobil Corp. .......................................... 10,890,010
21,000 Pioneer Natural Resources Co.+.............................. 670,530
- --------------------------------------------------------------------------------------------------
26,718,046
- --------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.1%
8,800 International Paper Co. .................................... 379,368
- --------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
11
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.9%
14,700 The Estee Lauder Cos., Inc. ................................ $ 577,122
58,100 The Gillette Co. ........................................... 2,134,013
- --------------------------------------------------------------------------------------------------
2,711,135
- --------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.0%
48,300 Johnson & Johnson........................................... 2,495,178
58,500 Merck & Co. Inc. ........................................... 2,702,700
33,000 Novartis AG ADR............................................. 1,514,370
136,430 Pfizer Inc. ................................................ 4,820,072
20,100 Valeant Pharmaceuticals International....................... 505,515
- --------------------------------------------------------------------------------------------------
12,037,835
- --------------------------------------------------------------------------------------------------
REAL ESTATE -- 0.9%
48,500 Duke Realty Corp. .......................................... 1,503,500
42,506 Prologis.................................................... 1,364,017
- --------------------------------------------------------------------------------------------------
2,867,517
- --------------------------------------------------------------------------------------------------
ROAD & RAIL -- 5.1%
33,500 GATX Corp. ................................................. 937,330
201,900 Norfolk Southern Corp. ..................................... 4,774,935
106,400 Union Pacific Corp. ........................................ 7,392,672
112,230 Werner Enterprises, Inc. ................................... 2,187,363
- --------------------------------------------------------------------------------------------------
15,292,300
- --------------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 1.5%
94,000 Integrated Device Technology, Inc.+......................... 1,613,980
32,900 Kulicke & Soffa Industries, Inc.+........................... 473,102
93,400 Teradyne, Inc.+............................................. 2,377,030
- --------------------------------------------------------------------------------------------------
4,464,112
- --------------------------------------------------------------------------------------------------
SOFTWARE -- 0.8%
52,900 BMC Software, Inc.+......................................... 986,585
48,325 Microsoft Corp. ............................................ 1,330,870
11,700 Oracle Corp.+............................................... 154,440
- --------------------------------------------------------------------------------------------------
2,471,895
- --------------------------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.1%
30,179 Foot Locker Inc. ........................................... 707,697
107,400 The Gap, Inc. .............................................. 2,492,754
- --------------------------------------------------------------------------------------------------
3,200,451
- --------------------------------------------------------------------------------------------------
TOBACCO -- 0.5%
28,000 Altria Group, Inc. ......................................... 1,523,760
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $270,678,968)................... 293,120,599
- --------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
EQUITY INCOME PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.4%
- --------------------------------------------------------------------------------------------------
OFFICE AUTOMATION & EQUIPMENT -- 0.0%
500 Xerox Corp., 6.250%......................................... $ 64,875
- --------------------------------------------------------------------------------------------------
OIL & GAS -- 0.4%
22,200 Amerada Hess Corp., 7.000%.................................. 1,217,670
- --------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost -- $1,243,135)...... 1,282,545
- --------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.1%
- --------------------------------------------------------------------------------------------------
BANKS -- 0.1%
10,000 Chevy Chase Bank fsb., 8.000% (Cost -- $278,500)............ 287,000
- --------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.3%
- --------------------------------------------------------------------------------------------------
ADVANCED MATERIALS & PRODUCTS -- 0.0%
$ 20,000 Caa3* Hexcel Corp., 7.000% due 8/1/11............................. 16,625
- --------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
700,000 CC Level 3 Communications Inc., 6.000% due 9/15/09............. 495,250
- --------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
130,000 NR Pharmaceutical Resources Inc., 2.875% due 9/30/10 (b)....... 143,000
220,000 B Valeant Pharmaceuticals International, 3.000% due 8/16/10
(b)....................................................... 241,725
- --------------------------------------------------------------------------------------------------
384,725
- --------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost -- $756,336).................. 896,600
- --------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $272,956,939)................ 295,586,744
- --------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
5,141,000 State Street Bank & Trust Co., 0.800% due 1/2/04;
Proceeds at maturity -- $5,141,228; (Fully collateralized
by Freddie Mac Notes, 1.310% due 8/30/04; Market
value -- $5,247,541)
(Cost -- $5,141,000)...................................... 5,141,000
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $278,097,939**)........ $300,727,744
- --------------------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
(a) All ratings are by Standard & Poor's Ratings Service, except for those
identified by an asterisk (*), which are rated by Moody's Investors Service.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers. These securities
have been deemed liquid pursuant to guidelines established by the Board of
Trustees.
** Aggregate cost for federal income tax purposes is $278,933,385.
See page 19 for definitions of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
13
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
LARGE CAP PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
COMMON STOCK -- 97.4%
- ---------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.8%
26,600 The Boeing Co. ............................................. $ 1,120,924
17,300 Precision Castparts Corp. .................................. 785,593
- ---------------------------------------------------------------------------------------
1,906,517
- ---------------------------------------------------------------------------------------
AIR FREIGHT & COURIERS -- 0.4%
14,400 FedEx Corp. ................................................ 972,000
- ---------------------------------------------------------------------------------------
AIRLINES -- 0.6%
82,500 Southwest Airlines Co. ..................................... 1,331,550
- ---------------------------------------------------------------------------------------
BANKS -- 5.0%
43,600 Bank of America Corp. ...................................... 3,506,748
63,300 The Bank of New York Co., Inc. ............................. 2,096,496
75,200 Bank One Corp. ............................................. 3,428,368
21,151 Wachovia Corp. ............................................. 985,425
22,900 Wells Fargo & Co. .......................................... 1,348,581
- ---------------------------------------------------------------------------------------
11,365,618
- ---------------------------------------------------------------------------------------
BEVERAGES -- 1.7%
54,500 The Coca-Cola Co. .......................................... 2,765,875
26,000 PepsiCo, Inc. .............................................. 1,212,120
- ---------------------------------------------------------------------------------------
3,977,995
- ---------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.0%
56,500 Amgen Inc.+................................................. 3,491,700
25,100 Cephalon, Inc.+............................................. 1,215,091
52,500 Millennium Pharmaceuticals, Inc.+........................... 980,175
5,614 Neurocrine Biosciences, Inc.+............................... 306,188
43,120 Protein Design Labs, Inc.+.................................. 771,848
- ---------------------------------------------------------------------------------------
6,765,002
- ---------------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.6%
14,500.... American Standard Cos. Inc.+................................ 1,460,150
- ---------------------------------------------------------------------------------------
CHEMICALS -- 1.6%
42,000 The Dow Chemical Co. ....................................... 1,745,940
69,600 Monsanto Co. ............................................... 2,003,088
- ---------------------------------------------------------------------------------------
3,749,028
- ---------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.6%
31,100 Ceridian Corp.+............................................. 651,234
20,700 Waste Management, Inc. ..................................... 612,720
- ---------------------------------------------------------------------------------------
1,263,954
- ---------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.4%
153,500 CIENA Corp.+................................................ 1,019,240
259,161 Cisco Systems, Inc.+........................................ 6,295,021
51,700 Juniper Networks, Inc.+..................................... 965,756
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
LARGE CAP PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.4% (CONTINUED)
94,900 Motorola, Inc. ............................................. $ 1,335,243
12,000 UTStarcom, Inc.+............................................ 444,840
- ---------------------------------------------------------------------------------------
10,060,100
- ---------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 5.6%
141,400 Dell Inc.+.................................................. 4,801,944
131,400 EMC Corp.+.................................................. 1,697,688
81,300 Hewlett-Packard Co. ........................................ 1,867,461
37,800 International Business Machines Corp. ...................... 3,503,304
32,300 Storage Technology Corp.+................................... 831,725
- ---------------------------------------------------------------------------------------
12,702,122
- ---------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 5.8%
13,800 Aeon Credit Service Co., Ltd. .............................. 588,659
63,100 American Express Co. ....................................... 3,043,313
33,100 Ameritrade Holding Corp.+................................... 465,717
30,500 The Charles Schwab Corp. ................................... 361,120
29,800 Credit Saison Co., Ltd. .................................... 673,132
6,182 Deutsche Boerse AG.......................................... 337,654
11,000 Fannie Mae.................................................. 825,660
15,500 Legg Mason, Inc. ........................................... 1,196,290
65,400 MBNA Corp. ................................................. 1,625,190
64,000 Morgan Stanley.............................................. 3,703,680
11,800 Principal Financial Group, Inc. ............................ 390,226
- ---------------------------------------------------------------------------------------
13,210,641
- ---------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6%
39,100 SBC Communications, Inc. ................................... 1,019,337
74,600 Verizon Communications Inc. ................................ 2,616,968
- ---------------------------------------------------------------------------------------
3,636,305
- ---------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.3%
56,600 Allegheny Energy, Inc.+..................................... 722,216
- ---------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.6%
148,100 Solectron Corp.+............................................ 875,271
21,400 Vishay Intertechnology, Inc.+............................... 490,060
- ---------------------------------------------------------------------------------------
1,365,331
- ---------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.8%
27,400 Rowan Cos., Inc.+........................................... 634,858
48,400 Schlumberger Ltd. .......................................... 2,648,448
24,600 Tidewater, Inc. ............................................ 735,048
- ---------------------------------------------------------------------------------------
4,018,354
- ---------------------------------------------------------------------------------------
FOOD & DRUG RETAILING -- 0.3%
35,300 Safeway, Inc.+.............................................. 773,423
- ---------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
15
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
LARGE CAP PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.5%
12,800 Dean Foods Co.+............................................. $ 420,736
18,600 Kellogg Co. ................................................ 708,288
- ---------------------------------------------------------------------------------------
1,129,024
- ---------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.5%
28,600 Boston Scientific Corp.+.................................... 1,051,336
47,300 Medtronic, Inc. ............................................ 2,299,253
17,400 St. Jude Medical, Inc.+..................................... 1,067,490
14,100 Stryker Corp. .............................................. 1,198,641
- ---------------------------------------------------------------------------------------
5,616,720
- ---------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.1%
25,500 Carnival Corp. ............................................. 1,013,115
15,100 CBRL Group, Inc. ........................................... 577,726
249,653 Hilton Group PLC............................................ 1,001,584
- ---------------------------------------------------------------------------------------
2,592,425
- ---------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.9%
20,700 The Procter & Gamble Co. ................................... 2,067,516
- ---------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 5.1%
27,200 3M Co. ..................................................... 2,312,816
208,500 General Electric Co. ....................................... 6,459,330
109,800 Tyco International Ltd. .................................... 2,909,700
- ---------------------------------------------------------------------------------------
11,681,846
- ---------------------------------------------------------------------------------------
INSURANCE -- 1.2%
25,200 AFLAC, Inc. ................................................ 911,736
25,950 American International Group, Inc. ......................... 1,719,966
- ---------------------------------------------------------------------------------------
2,631,702
- ---------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.8%
16,800 Amazon.com, Inc.+........................................... 884,352
14,500 eBay Inc.+.................................................. 936,555
- ---------------------------------------------------------------------------------------
1,820,907
- ---------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 1.1%
70,386 CNET Networks, Inc.+........................................ 480,033
44,400 Yahoo! Inc.+................................................ 2,005,548
- ---------------------------------------------------------------------------------------
2,485,581
- ---------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.3%
48,000 Konica Minolta Holdings, Inc. .............................. 645,615
- ---------------------------------------------------------------------------------------
MACHINERY -- 2.3%
46,200 Caterpillar Inc. ........................................... 3,835,524
36,150 Graco Inc. ................................................. 1,449,615
- ---------------------------------------------------------------------------------------
5,285,139
- ---------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
LARGE CAP PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
MEDIA -- 11.4%
54,900 Belo Corp., Class A Shares.................................. $ 1,555,866
38,624 British Sky Broadcasting PLC, Sponsored ADR+................ 1,967,507
28,050 Citadel Broadcasting Co.+................................... 627,478
81,100 Comcast Corp., Special Class A Shares+...................... 2,536,808
17,500 Dow Jones & Co., Inc. ...................................... 872,375
18,900 News Corp. Ltd., Sponsored ADR.............................. 682,290
8,700 Pixar, Inc.+................................................ 602,823
28,769 Societe Television Francaise 1.............................. 1,003,331
298,500 Time Warner Inc.+........................................... 5,370,015
40,780 Tribune Co. ................................................ 2,104,248
27,100 Univision Communications Inc., Class A Shares+.............. 1,075,599
57,431 Viacom Inc., Class B Shares................................. 2,548,788
220,600 The Walt Disney Co. ........................................ 5,146,598
- ---------------------------------------------------------------------------------------
26,093,726
- ---------------------------------------------------------------------------------------
MULTI-LINE RETAIL -- 1.7%
72,800 Wal-Mart Stores, Inc. ...................................... 3,862,040
- ---------------------------------------------------------------------------------------
OIL & GAS -- 2.5%
24,700 ChevronTexaco Corp. ........................................ 2,133,833
88,000 Exxon Mobil Corp. .......................................... 3,608,000
- ---------------------------------------------------------------------------------------
5,741,833
- ---------------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 2.0%
33,300 Alberto Culver Co., Class B Shares.......................... 2,100,564
69,000 The Gillette Co. ........................................... 2,534,370
- ---------------------------------------------------------------------------------------
4,634,934
- ---------------------------------------------------------------------------------------
PHARMACEUTICALS -- 10.3%
19,800 Allergan, Inc. ............................................. 1,520,838
24,300 AstraZeneca PLC, Sponsored ADR.............................. 1,175,634
47,900 Bristol-Myers Squibb Co. ................................... 1,369,940
30,700 Eli Lilly & Co. ............................................ 2,159,131
26,000 Forest Laboratories, Inc., Class A Shares+.................. 1,606,800
42,900 Johnson & Johnson........................................... 2,216,214
13,100 Medicis Pharmaceutical Corp., Class A Shares................ 934,030
81,380 Merck & Co. Inc. ........................................... 3,759,756
146,260 Pfizer Inc. ................................................ 5,167,366
11,157 Roche Holding AG............................................ 1,124,898
71,200 Schering-Plough Corp. ...................................... 1,238,168
27,100 Wyeth....................................................... 1,150,395
- ---------------------------------------------------------------------------------------
23,423,170
- ---------------------------------------------------------------------------------------
ROAD & RAIL -- 0.6%
19,400 Union Pacific Corp. ........................................ 1,347,912
- ---------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 7.3%
34,300 Altera Corp.+............................................... 778,610
17,100 Amkor Technology, Inc.+..................................... 311,391
35,800 Analog Devices, Inc.+....................................... 1,634,270
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
17
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
LARGE CAP PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 7.3% (CONTINUED)
43,200 Applied Materials, Inc.+.................................... $ 969,840
171,000 Intel Corp. ................................................ 5,506,200
10,600 KLA-Tencor Corp.+........................................... 621,902
21,600 Marvell Technology Group Ltd.+.............................. 819,288
38,500 Micrel Inc.+................................................ 599,830
3,700 Samsung Electronics Co., Ltd. .............................. 695,600
132,100 Texas Instruments Inc. ..................................... 3,881,098
10,600 Tokyo Electron Ltd. ........................................ 805,376
- ---------------------------------------------------------------------------------------
16,623,405
- ---------------------------------------------------------------------------------------
SOFTWARE -- 4.9%
12,700 Adobe Systems, Inc. ........................................ 499,110
24,200 Ascential Software Corp.+................................... 627,506
301,900 Microsoft Corp. ............................................ 8,314,326
124,900 Oracle Corp.+............................................... 1,648,680
- ---------------------------------------------------------------------------------------
11,089,622
- ---------------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.7%
88,700 The Gap, Inc. .............................................. 2,058,727
43,500 The Home Depot, Inc. ....................................... 1,543,815
33,100 Lowe's Cos., Inc. .......................................... 1,833,409
20,300 The Sherwin-Williams Co. ................................... 705,222
- ---------------------------------------------------------------------------------------
6,141,173
- ---------------------------------------------------------------------------------------
TEXTILES & APPAREL -- 1.7%
31,400 Coach, Inc.+................................................ 1,185,350
25,400 NIKE Inc., Class B Shares................................... 1,738,884
30,900 Polo Ralph Lauren Corp. .................................... 889,920
- ---------------------------------------------------------------------------------------
3,814,154
- ---------------------------------------------------------------------------------------
TOBACCO -- 0.8%
33,500 Altria Group, Inc. ......................................... 1,823,070
- ---------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 1.0%
51,100 Nextel Communications, Inc.+................................ 1,433,865
38,400 Vodafone Group PLC, Sponsored ADR........................... 961,536
- ---------------------------------------------------------------------------------------
2,395,401
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $208,452,284)................... 222,227,221
- ---------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
$5,937,000 State Street Bank & Trust Co., 0.800% due 1/2/04; Proceeds
at maturity -- $5,937,264; (Fully collateralized by
Freddie Mac Notes, 4.500% due 8/15/04;
Market value -- $6,059,324) (Cost -- $5,937,000).......... 5,937,000
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $214,389,284*)......... $228,164,221
- ---------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is $217,499,593.
Abbreviation used in this schedule:
ADR -- American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
18
- --------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
<Table>
AAA -- Bonds rated "AAA" have the highest rating assigned by S&P to
a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differs from the highest rated
issues only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC and CC -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. "BB" represents a lower degree of
speculation than "B", "CCC" and "CC" the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
</Table>
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2, and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest rating within its generic category.
<Table>
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally
strong position of these bonds.
Aa -- Bonds rated "Aa" are judged to be of the high quality by all
standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities, or fluctuation of
protective elements may be of greater amplitude, or there
may be other elements present that make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the
future.
Baa -- Bonds rated "Baa" are considered to be medium grade
obligations; that is they are neither highly protected nor
poorly secured. Interest payment and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack
outstanding investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby may not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payment or
of maintenance of other terms of the contract over any long
period of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be
in default, or present elements of danger may exist with
respect to principal or interest.
Ca and C -- Bonds rated "Ca" and "C" represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
</Table>
19
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003
<Table>
<Caption>
EQUITY INCOME LARGE CAP
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost...................................... $278,097,939 $ 214,389,284
Foreign currency, at cost................................. 664 5,218
- -------------------------------------------------------------------------------------------
Investments, at value..................................... $300,727,744 $ 228,164,221
Foreign currency, at value................................ 673 5,256
Cash...................................................... 387 698
Receivable for securities sold............................ 2,428,152 --
Dividends and interest receivable......................... 395,270 270,698
Receivable for Fund shares sold........................... 74,050 --
Receivable for open forward foreign currency contracts
(Note 5)................................................ -- 3,252
Other receivables......................................... 58,296 16,314
- -------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 303,684,572 228,460,439
- -------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased.......................... 3,763,213 197,480
Payable for Fund shares reacquired........................ 2,172,129 261,942
Investment advisory fees payable.......................... 182,539 140,922
Administration fees payable............................... 14,647 11,270
Accrued expenses.......................................... 58,217 49,180
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 6,190,745 660,794
- -------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $297,493,827 $ 227,799,645
- -------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital........................................... $268,501,440 $ 323,499,229
Undistributed net investment income....................... 207,403 39,202
Accumulated net realized gain (loss) from investment
transactions and foreign currencies..................... 6,155,170 (109,515,126)
Net unrealized appreciation of investments and foreign
currencies.............................................. 22,629,814 13,776,340
- -------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $297,493,827 $ 227,799,645
- -------------------------------------------------------------------------------------------
SHARES OUTSTANDING.......................................... 17,934,234 17,278,475
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE.................................. $16.59 $13.18
- -------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
20
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
EQUITY INCOME LARGE CAP
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.................................................. $ 211,105 $ 29,809
Dividends................................................. 4,184,655 2,456,994
Less: Foreign withholding tax............................. (8,336) (8,500)
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 4,387,424 2,478,303
- -----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)......................... 1,732,205 1,473,633
Custody................................................... 90,009 62,542
Administration fees (Note 2).............................. 78,577 63,355
Audit and legal........................................... 35,500 33,499
Shareholder servicing fees................................ 21,458 22,167
Shareholder communications................................ 20,000 17,950
Trustees' fees............................................ 6,300 6,300
Other..................................................... 3,089 3,445
- -----------------------------------------------------------------------------------------
TOTAL EXPENSES............................................ 1,987,138 1,682,891
Less: Expense reductions (Note 7)......................... (142,462) (51,648)
- -----------------------------------------------------------------------------------------
NET EXPENSES.............................................. 1,844,676 1,631,243
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME....................................... 2,542,748 847,060
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES (NOTES 3 AND 5):
Realized Gain (Loss) From:
Investment transactions................................. 21,027,620 (4,097,957)
Foreign currency transactions........................... 282 974
- -----------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS).................................. 21,027,902 (4,096,983)
- -----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation From:
Investments............................................. 41,407,173 47,411,861
Foreign currencies...................................... 9 350
- -----------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION..................... 41,407,182 47,412,211
- -----------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCIES.............. 62,435,084 43,315,228
- -----------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................... $64,977,832 $44,162,288
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
<Table>
<Caption>
EQUITY INCOME PORTFOLIO 2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income..................................... $ 2,542,748 $ 2,254,778
Net realized gain (loss).................................. 21,027,902 (12,434,800)
Change in net unrealized appreciation..................... 41,407,182 (21,414,192)
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 64,977,832 (31,594,214)
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (2,393,549) (2,215,538)
- -----------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (2,393,549) (2,215,538)
- -----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares.......................... 54,800,464 55,472,889
Net asset value of shares issued for reinvestment of
dividends............................................... 2,393,549 2,215,538
Cost of shares reacquired................................. (13,294,129) (33,257,838)
- -----------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS....... 43,899,884 24,430,589
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... 106,484,167 (9,379,163)
NET ASSETS:
Beginning of year......................................... 191,009,660 200,388,823
- -----------------------------------------------------------------------------------------
END OF YEAR*.............................................. $297,493,827 $191,009,660
- -----------------------------------------------------------------------------------------
* Includes undistributed net investment income of: ......... $207,403 $78,440
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER
31,
<Table>
<Caption>
LARGE CAP PORTFOLIO 2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income..................................... $ 847,060 $ 942,851
Net realized loss......................................... (4,096,983) (52,312,291)
Change in net unrealized appreciation..................... 47,412,211 (5,398,137)
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 44,162,288 (56,767,577)
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (808,832) (1,013,530)
- -----------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (808,832) (1,013,530)
- -----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares.......................... 25,978,086 18,362,756
Net asset value of shares issued for reinvestment of
dividends............................................... 808,832 1,013,530
Cost of shares reacquired................................. (22,203,616) (31,024,418)
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS............................................ 4,583,302 (11,648,132)
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... 47,936,758 (69,429,239)
NET ASSETS:
Beginning of year......................................... 179,862,887 249,292,126
- -----------------------------------------------------------------------------------------
END OF YEAR*.............................................. $227,799,645 $179,862,887
- -----------------------------------------------------------------------------------------
* Includes undistributed net investment income of: ......... $39,202 --
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Equity Income and Large Cap Portfolios ("Fund(s)") are separate
investment funds of The Travelers Series Trust ("Trust"). The Trust is a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company and
consists of these Funds and fourteen other separate investment funds: Travelers
Quality Bond, Lazard International Stock, MFS Emerging Growth, Federated High
Yield, Federated Stock, Disciplined Mid Cap Stock, U.S. Government Securities,
Social Awareness Stock, Pioneer Fund (formerly known as Utilities), Convertible
Securities, MFS Mid Cap Growth, Merrill Lynch Large Cap Core (formerly known as
MFS Research), Zero Coupon Bond Fund (Series 2005) and MFS Value Portfolios. The
financial statements and financial highlights for the other funds are presented
in separate shareholder reports. The Funds and the other investment funds of the
Trust are offered exclusively for use with certain variable annuity and variable
life insurance contracts offered through the separate accounts of various
affiliated life insurance companies.
The significant accounting policies consistently followed by the Funds are:
(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 type; U.S. government agencies and obligations are valued
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 maturity of 60 days or more are valued at
prices based on market quotations for securities of similar type, yield and
maturity; (e) interest income, adjusted for amortization of premium and
accretion of 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; (f) gains
or losses on the sale of securities are calculated by using the specific
identification method; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; the Funds distribute dividends and capital
gains, if any, at least annually; (h) the accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income or expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (i) the character of income and gains to be
distributed is determined in accordance with income tax regulations which may
differ from accounting principles generally accepted in the United States of
America. At December 31, 2003, reclassifications were made to the Equity Income
Portfolio's capital accounts to reflect permanent book/tax differences and
income and gains available for distributions under income tax regulations. Net
investment income, net realized gains and net assets were not affected by this
adjustment; (j) the Funds intend to comply with the provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
In addition, the Equity Income and Large Cap Portfolios may enter into
forward exchange contracts in order to hedge against foreign currency risk.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current 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.
2. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Travelers Asset Management International Company LLC ("TAMIC"), an indirect
wholly owned subsidiary of Citigroup, Inc. provides the funds with investment
management related services. For these services TAMIC receives an investment
advisory fee that is calculated at the annual rate of 0.75% of each Fund's
respective average net assets. These fees
24
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
are calculated daily and paid monthly. TAMIC has entered into a sub-advisory
agreement with Fidelity Management & Research Company ("FMR"). Pursuant to the
sub-advisory agreement FMR is responsible for the day-to-day fund operations and
investment decisions. For its services as each Fund's sub-adviser, FMR is paid a
portion of TAMIC's management fee that is computed at an annual rate of 0.45% of
each Fund's respective average net assets.
Effective July 1, 2003, Travelers Insurance Company ("TIC"), another
wholly-owned subsidiary of Citigroup, acts as administrator to the Funds. The
Funds pay TIC an administration fee calculated at an annual rate of 0.06% of
each respective Fund's average daily net assets. The fee is calculated daily and
paid monthly. TIC has entered into a sub-administration service agreement with
Smith Barney Fund Management LLC ("SBFM"), another indirect wholly-owned
subsidiary of Citigroup. TIC pays SBFM, as sub-administrator, a fee calculated
at an annual rate of 0.02% of the respective average daily net assets of each
Fund, plus $30,000 per Fund, subject to a maximum of 0.06% of each Fund's
respective average daily net assets. Previously, Fidelity Service Company, Inc.,
an affiliate of FMR, maintained each Fund's accounting records.
Effective July 1, 2003, Citicorp Trust Bank, fsb. ("CTB"), another
subsidiary of Citigroup, replaced Fidelity Investments Institutional Operations
Company, Inc. as the Funds' transfer agent. CTB receives account fees and
asset-based fees that vary according to the size and type of account. For the
period July 1, 2003 through December 31, 2003, each Fund paid transfer agent
fees of $2,500 to CTB.
The Central Funds, managed by Fidelity Investments Money Management, Inc.
(FIMM), an affiliate of FMR are open-end investment companies available only to
investment companies and other accounts managed by FMR and its affiliates. The
Central Funds seek preservation of capital and current income and do not pay a
management fee. Income distributions earned by the funds are recorded as income
in the accompanying financial statements. Effective July 1, 2003, the Funds no
longer invested in the Central Funds. Distributions from the Central Funds are
noted in the table below:
<Table>
<Caption>
INCOME
DISTRIBUTIONS
- ---------------------------------------------------------------------------
Equity Income Portfolio..................................... $52,387
Large Cap Portfolio......................................... 50,972
- ---------------------------------------------------------------------------
</Table>
For the year ended December 31, 2003, Citigroup Global Markets Inc.
(formerly known as Salomon Smith Barney Inc.), another indirect wholly-owned
subsidiary of Citigroup, or its affiliates did not receive any brokerage
commissions from the Funds.
One Trustee and all officers of the Trust are employees of Citigroup or its
subsidiaries.
3. INVESTMENTS
During the year ended December 31, 2003, the aggregate cost of purchases
and proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments), were as follows:
<Table>
<Caption>
PURCHASES SALES
- ------------------------------------------------------------------------------------------
Equity Income Portfolio..................................... $362,105,044 $312,806,900
Large Cap Portfolio......................................... 120,698,026 113,305,827
- ------------------------------------------------------------------------------------------
</Table>
At December 31, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
<Table>
<Caption>
NET
UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------------------------------
Equity Income Portfolio..................................... $26,391,301 $(4,596,942) $21,794,359
Large Cap Portfolio......................................... 25,147,912 (14,483,284) 10,664,628
- --------------------------------------------------------------------------------------------------------
</Table>
4. REPURCHASE AGREEMENTS
The Funds purchase (and the custodian takes possession of) U.S. government
securities from securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Funds require continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
25
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may enter into forward foreign currency contracts. A forward
foreign currency contract is an agreement between two parties to buy and sell a
currency at a set price on a future date. The contract is marked-to-market daily
and the change in value is recorded by the Fund as an unrealized gain or loss.
When a forward foreign currency contract is extinguished, through either
delivery or offset by entering into another forward foreign currency contract,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value of the contract at
the time it was extinguished or offset. The Fund bears the market risk that
arises from changes in foreign currency exchange rates and the credit risk
should a counterparty be unable to meet the terms of such contracts.
At December 31, 2003, Large Cap Portfolio had open forward foreign currency
contracts as described below. The unrealized gain on the contracts reflected in
the accompanying financial statements was as follows:
LARGE CAP PORTFOLIO
<Table>
<Caption>
LOCAL MARKET SETTLEMENT UNREALIZED
FOREIGN CURRENCY CURRENCY VALUE DATE GAIN
- -------------------------------------------------------------------------------------------------------
TO BUY:
Euro.................................................... 156,736 $197,480 1/2/04 $3,252
- -------------------------------------------------------------------------------------------------------
</Table>
At December 31, 2003, Equity Income Portfolio did not have any open forward
foreign currency contracts.
6. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Fund were as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
- ---------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
Shares sold................................................. 3,752,047 3,849,060
Shares issued on reinvestment............................... 144,451 174,315
Shares reacquired........................................... (944,979) (2,411,017)
- ---------------------------------------------------------------------------------------------------
Net Increase................................................ 2,951,519 1,612,358
- ---------------------------------------------------------------------------------------------------
LARGE CAP PORTFOLIO
Shares sold................................................. 2,190,153 1,474,801
Shares issued on reinvestment............................... 61,461 95,797
Shares reacquired........................................... (1,928,969) (2,653,092)
- ---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 322,645 (1,082,494)
- ---------------------------------------------------------------------------------------------------
</Table>
7. EXPENSE REDUCTIONS
Many of the brokers with whom FMR places trades on behalf of certain funds
provided services to these funds in addition to trade execution. These services
included payments of expenses on behalf of each applicable fund. In addition,
through arrangements with each applicable fund's custodian and transfer agent,
credits realized as a result of uninvested cash balances were used to reduce
each applicable fund's expenses. All of the applicable expense reductions are
noted in the table below.
<Table>
<Caption>
BROKERAGE CUSTODY TRANSFER AGENT
SERVICE EXPENSE EXPENSE
ARRANGEMENTS REDUCTION REDUCTION
- ------------------------------------------------------------------------------------------------------
Equity Income Portfolio.................................... $142,211 $113 $138
Large Cap Portfolio........................................ 51,625 23 --
- ------------------------------------------------------------------------------------------------------
</Table>
26
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL LOSS CARRYFORWARDS
At December 31, 2003, Large Cap Portfolio had, for Federal income tax
purposes, approximately $106,405,000 of capital loss carryforward available to
offset future capital gains. To the extent that these carryforward losses can be
used to offset realized capital gains, it is probable that such gains will not
be distributed. The amounts and expiration of the carryforwards are indicated
below. Expiration occurs on December 31, of the year indicated:
<Table>
<Caption>
2009 2010 2011
- -----------------------------------------------------------------------------------------------------
Large Cap Portfolio......................................... $41,514,000 $52,058,000 $12,833,000
- -----------------------------------------------------------------------------------------------------
</Table>
9. INCOME TAX INFORMATION AND DISTRIBUTIONS TO SHAREHOLDERS
At December 31, 2003, the tax basis components of distributable earnings
were:
<Table>
<Caption>
ACCUMULATED
UNDISTRIBUTED CAPITAL UNREALIZED
ORDINARY INCOME LOSS APPRECIATION
- -------------------------------------------------------------------------------------------------------
Equity Income Portfolio................................ $7,198,019 -- $21,794,368
Large Cap Portfolio.................................... 42,454 $(106,404,817) 10,662,779
- -------------------------------------------------------------------------------------------------------
</Table>
At December 31, 2003, for Equity Income and Large Cap Portfolios, the
difference between book basis and tax basis unrealized appreciation was
attributable primarily to wash sale loss deferrals, the treatment of accretion
of discounts and amortization of premiums, returns of capital from real estate
investment trusts, and the mark-to-market of derivative contracts.
The tax character of distributions paid during the year ended December 31,
2003 was:
<Table>
<Caption>
ORDINARY INCOME
- -----------------------------------------------------------------------------
Equity Income Portfolio..................................... $2,393,549
Large Cap Portfolio......................................... 808,832
- -----------------------------------------------------------------------------
</Table>
For the year ended December 31, 2002, the Portfolios did not make any
distributions.
10. ADDITIONAL INFORMATION
The Funds have received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Funds'
Investment Manager and other investment advisory companies, all of which are
indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry,
through an affiliate, into the transfer agent business in the period 1997-1999.
As CAM currently understands the facts, at the time CAM decided to enter the
transfer agent business, CAM sub-contracted for a period of five years certain
of the transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the
Revenue Guarantee Agreement with the sub-contractor at the time the Boards
considered and approved the transfer agent arrangements. Nor were the Boards
informed of the subsequent amendment to the Revenue Guarantee Agreement when
that occurred.
CAM has begun to take 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 its amendment. CAM also plans
an independent review to verify that the transfer agency fees charged by CAM
were fairly priced as compared to competitive alternatives. CAM is instituting
new procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
27
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
EQUITY INCOME PORTFOLIO 2003 2002(1) 2001(1) 2000(1) 1999(1)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR.............. $12.75 $14.99 $16.26 $15.05 $15.41
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income......................... 0.14 0.16 0.20 0.13 0.13
Net realized and unrealized gain (loss)....... 3.83 (2.25) (1.27) 1.24 0.59
- ----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations............. 3.97 (2.09) (1.07) 1.37 0.72
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income......................... (0.13) (0.15) (0.16) (0.16) (0.12)
Net realized gains............................ -- -- (0.04) -- (0.63)
In excess of net realized gains............... -- -- -- -- (0.33)
- ----------------------------------------------------------------------------------------------------------
Total Distributions............................. (0.13) (0.15) (0.20) (0.16) (1.08)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................... $16.59 $12.75 $14.99 $16.26 $15.05
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN(2)................................. 31.17% (13.94)% (6.61)% 9.13% 4.92%
- ----------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)................. $297,494 $191,010 $200,389 $170,727 $130,553
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)................................... 0.87% 0.84% 0.85% 0.87% 0.88%
Net investment income......................... 1.11 1.14 1.28 1.17 0.85
- ----------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE......................... 141% 131% 121% 151% 201%
- ----------------------------------------------------------------------------------------------------------
</Table>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.95%.
28
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
LARGE CAP PORTFOLIO 2003 2002(1) 2001(1) 2000(1) 1999(1)
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR............ $10.61 $13.82 $16.81 $21.11 $17.44
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income....................... 0.05 0.05 0.07 0.03 0.05
Net realized and unrealized gain (loss)..... 2.57 (3.20) (2.98) (3.05) 4.94
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........... 2.62 (3.15) (2.91) (3.02) 4.99
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income....................... (0.05) (0.06) (0.07) (0.02) (0.03)
In excess of net investment income.......... -- -- -- (0.01) --
Net realized gains.......................... -- -- (0.01) (0.94) (1.29)
In excess of net realized gains............. -- -- -- (0.31) --
- ------------------------------------------------------------------------------------------------------
Total Distributions........................... (0.05) (0.06) (0.08) (1.28) (1.32)
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................. $13.18 $10.61 $13.82 $16.81 $21.11
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN(2)............................... 24.67% (22.79)% (17.33)% (14.48)% 29.24%
- ------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)............... $227,800 $179,863 $249,292 $277,897 $202,128
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)................................. 0.86% 0.85% 0.83% 0.84% 0.87%
Net investment income....................... 0.43 0.44 0.50 0.15 0.25
- ------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE....................... 60% 95% 131% 96% 90%
- ------------------------------------------------------------------------------------------------------
</Table>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.95%.
29
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE TRAVELERS SERIES TRUST:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Equity Income Portfolio and the Large Cap
Portfolio ("Portfolios"), two of the portfolios of The Travelers Series Trust
("Trust"), as of December 31, 2003, and the related statements of operations,
the statements of changes in net assets and financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statement of changes in net assets for the year ended December 31,
2002 and the financial highlights for each of the years in the four year period
ended December 31, 2002 were audited by other auditors whose report thereon
dated February 12, 2003 expressed an unqualified opinion on the statement of
changes in net assets and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian.
As to securities purchased or sold but not yet received or delivered, we
performed other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Equity Income Portfolio and the Large Cap Portfolio of the Trust as of December
31, 2003 and the result of their operations, and the changes in their net assets
and their financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
[KPMG LLP SIGNATURE]
New York, New York
February 13, 2004
30
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
INFORMATION ABOUT TRUSTEES AND OFFICERS
The business and affairs of The Travelers Series Trust ("Trust") are
managed under the direction of the Trust's Board of Trustees. Information
pertaining to the Trustees and Officers of the Trust is set forth below. The
Statement of Additional Information includes additional information about the
Trustees and is available, without charge, upon request by calling the Trust's
administrator at 1-800-842-9368.
<Table>
<Caption>
TERM OF NUMBER OF
OFFICE(1) AND PORTFOLIOS IN
POSITION(S) LENGTH FUND COMPLEX OTHER
NAME, ADDRESS HELD WITH OF TIME PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY BOARD MEMBERSHIPS
AND AGE FUND SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES:(2)
Robert E. McGill, III Trustee Since 1990 Retired 5 Lydall Inc.; Board of
295 Hancock Road Managers of 6 Variable
Williamstown, MA Annuity Separate
Age 72 Accounts of The
Travelers Insurance Co.
("TIC")
Lewis Mandell Trustee Since 1990 Professor, University of 5 Delaware North Corp.;
160 Jacobs Hall Buffalo Board of Managers of 6
Buffalo, NY Variable Annuity
Age 60 Separate Accounts of TIC
Frances M. Hawk Trustee Since 1991 Private Investor 5 Board of Managers of 6
CFA, CFP Variable Annuity
108 Oxford Hill Lane Separate Accounts of TIC
Downingtown, PA
Age 55
INTERESTED TRUSTEE:
R. Jay Gerken, CFA(3) Chairman, Since 2002 Managing Director of Citigroup 221 Chairman, Board of
Citigroup Asset Management President, Global Markets ("CGM"); Managers of 6 Variable
("CAM") Chief Chairman, President and Chief Annuity Separate
399 Park Avenue, 4th Floor Executive Executive Officer of Smith Accounts of TIC
New York, NY 10022 Officer and Barney Fund Management LLC
Age 52 Trustee ("SBFM"), Travelers Investment
Adviser, Inc. ("TIA") and Citi
Fund Management Inc. ("CFM");
President and Chief Executive
Officer of certain mutual
funds associated with
Citigroup Inc. ("Citigroup");
formerly, Portfolio Manager of
Smith Barney Allocation Series
Inc. (from 1996 to 2001) and
Smith Barney Growth and Income
Fund (from 1996 to 2000)
</Table>
31
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
<Table>
<Caption>
TERM OF NUMBER OF
OFFICE(1) AND PORTFOLIOS IN
POSITION(S) LENGTH FUND COMPLEX OTHER
NAME, ADDRESS HELD WITH OF TIME PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY BOARD MEMBERSHIPS
AND AGE FUND SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
Andrew B. Shoup(4) Senior Vice Since 2004 Director of CAM; Senior Vice N/A N/A
CAM President and President and Chief
125 Broad Street, 10th Chief Administrative Officer of
Floor Administrative mutual funds associated with
New York, NY 10004 Officer Citigroup; Treasurer of
Age 47 certain mutual funds
associated with Citigroup;
Head of International Funds
Administration of CAM (from
2001 to 2003); Director of
Global Funds Administration of
CAM from 2000 to 2001; Head of
U.S. Citibank Funds
Administration of CAM (from
1998 to 2000)
Richard L. Peteka Treasurer Since 2002 Director of CGM; Chief N/A N/A
CAM Financial Officer and
125 Broad Street, 11th Treasurer of certain mutual
Floor funds associated with
New York, NY 10004 Citigroup; Director and Head
Age 42 of Internal Control for CAM
U.S. Mutual Fund
Administration (from 1999 to
2002); Vice President, Head of
Mutual Fund Administration and
Treasurer at Oppenheimer
Capital (from 1996 to 1999)
Andrew Beagley Chief Since 2002 Director of CGM (since 2000); N/A N/A
CAM Anti-Money Director of Compliance, North
399 Park Avenue, 4th Floor Laundering America, CAM (since 2000);
New York, NY 10022 Compliance Chief Anti-Money Laundering
Age 40 Officer Compliance Officer and Vice
President of certain mutual
funds associated with
Citigroup; Director of
Compliance, Europe, the Middle
East and Africa, CAM (from
1999 to 2000); Compliance
Officer, Salomon Brothers
Asset Management Limited,
Smith Barney Global Capital
Management Inc., Salomon
Brothers Asset Management Asia
Pacific Limited (from 1997 to
1999)
</Table>
32
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
<Table>
<Caption>
TERM OF NUMBER OF
OFFICE(1) AND PORTFOLIOS IN
POSITION(S) LENGTH FUND COMPLEX OTHER
NAME, ADDRESS HELD WITH OF TIME PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY BOARD MEMBERSHIPS
AND AGE FUND SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
Kaprel Ozsolak Controller Since 2002 Vice President of CGM; N/A N/A
CAM Controller of certain mutual
125 Broad Street, 11th funds associated with
Floor Citigroup
New York, NY 10004
Age 38
Ernest J. Wright Secretary Since 1994 Vice President and Secretary N/A N/A
Travelers Life & Annuity of TIC
One Cityplace
Hartford, CT 06103
Age 63
Kathleen A. McGah Assistant Since 1995 Deputy General Counsel of TIC N/A N/A
Travelers Life & Annuity Secretary
One Cityplace
Hartford, CT 06103
Age 53
</Table>
- ---------------
(1) Each Trustee and officer serves until his or her respective successor has
been duly elected and qualified.
(2) Mr. Knight Edwards is an Emeritus Trustee. An Emeritus Trustee is permitted
to attend meetings, but has no voting power.
(3) Mr. Gerken is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is Managing
Director of CGM, an indirect wholly owned subsidiary of Citigroup, and his
ownership of shares and options to purchase shares of Citigroup, the
indirect parent of TIC.
(4) As of January 21, 2004.
33
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 2003:
- A total of 40.16% and 100.00% of the ordinary dividends paid by the
Equity Income Portfolio and Large Cap Portfolio, respectively, as
qualifying for the dividends received deduction.
34
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35
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36
THE TRAVELERS SERIES TRUST
- --------------------------------------------------------------------------------
<Table>
TRUSTEES INVESTMENT ADVISER
R. Jay Gerken, CFA Travelers Asset Management International Company LLC
Chairman
Frances M. Hawk, CFA, CFP ADMINISTRATOR
Lewis Mandell
Robert E. McGill, III The Travelers Insurance Company
OFFICERS CUSTODIAN
R. Jay Gerken, CFA State Street Bank and Trust Company
President and
Chief Executive Officer TRANSFER AGENT
Andrew B. Shoup* Citicorp Trust Bank, fsb.
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Treasurer
Andrew Beagley
Chief Anti-Money Laundering
Compliance Officer
Kaprel Ozsolak
Controller
Ernest J. Wright
Secretary
Kathleen A. McGah
Assistant Secretary
</Table>
- ---------------
* As of January 21, 2004.
The Funds are separate investment funds of The Travelers Series Trust, a
Massachusetts business trust.
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Series Trust: Equity Income and Large
Cap Portfolios. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Annuity and Variable
Universal Life Insurance products offered by The Travelers Insurance Company or
The Travelers Life and Annuity Company and the Prospectuses for the underlying
funds, which collectively contain all pertinent information, including more
complete information on charges and expenses. All the Funds contained in this
report may not be available under your variable annuity or life contract.
Series Trust (Annual) (2-04) Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Robert E.
McGill, a member of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to
qualify as an "audit committee financial expert," and has designated Mr.
McGill as the Audit Committee's financial expert. Mr. McGill is an
"independent" Trustee pursuant to paragraph (a)(2) of Item 3 to Form
N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for The Travelers Series Trust of $276,000 and $225,000
for the years ended 12/31/03 and 12/31/02.
(b) Audit-Related Fees for The Travelers Series Trust of $0 and $0 for
the years ended 12/31/03 and 12/31/02.
(c) Tax Fees for The Travelers Series Trust of $30,000 and $30,000 for
the years ended 12/31/03 and 12/31/02. These amounts represent
aggregate fees paid for tax compliance, tax advice and tax planning
services, which include (the filing and amendment of federal, state
and local income tax returns, timely RIC qualification review and
tax distribution and analysis planning) rendered by the Accountant
to Travelers Series Trust.
(d) All Other Fees for The Travelers Series Trust of $0 and $0 for the
years ended 12/31/03 and 12/31/02.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X. The
Audit Committee ("Committee") has adopted policies and procedures
to, among other purposes, approve all audit and non-audit services
provided to the Registrant and certain other persons by the
Registrant's independent auditors.
The Committee shall not approve non-audit services that the
Committee believes may taint the independence of the auditors. As
of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services
(including tax services), that are not prohibited services as
described below, provided to the Fund by the independent auditors,
other than those provided to the Fund in connection with an audit
or a review of the financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping or other
services related to the accounting records or financial statements
of the Fund; (ii) financial information systems design and
implementation; (iii) appraisal or valuation services, fairness
opinions or contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi) management functions
or human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by
regulation, is impermissible.
The policies and procedures require the Committee to approve (a)
all audit and permissible non-audit services to be provided to the
Registrant and (b) all permissible non-audit services to be
provided by the Fund's independent auditors to the Adviser and any
Covered Service Providers if the engagement relates directly to the
operations and financial reporting of the Registrant. In carrying
out this responsibility, the Committee shall seek periodically from
the Adviser and from the independent auditors a list of audit and
permissible non-audit services that can be expected to be rendered
to the Registrant, the Adviser or any Covered Service Providers by
the Registrant's independent auditors, and an estimate of the fees
sought to be paid in connection with such services. The Committee
may delegate its responsibility to approve any such audit and
permissible non-audit services to a sub-committee consisting of the
Chairperson of the Committee (the "Chairperson") and at least one
other member of the Committee, as the Chairperson, from time to
time, may determine and appoint, and such sub-committee shall
report to the Committee, at its next meeting after the
sub-committee's meeting, its decision(s). From year to year, and at
such other times as the Committee deems appropriate, the Committee
shall report to the Board whether this system of approval has been
effective and efficient or whether this Charter should be amended
to allow for pre-approval pursuant to such policies and procedures
as the Committee shall approve, including the delegation of some or
all of the Committee's per-approval responsibilities to other
persons (other than the Adviser or the Fund's officers).
Pre-approval by the Committee of any permissible non-audit services
is not required so long as: (i) the aggregate amount of all such
permissible non-audit services provided to the Fund, the Adviser
and any service providers controlling, controlled by or under
common control with the Adviser that provide ongoing services to
the Fund ("Covered Service Providers") constitutes not more than 5%
of the total amount of revenues paid to the independent auditors
during the fiscal year in which the permissible non-audit services
are provided by (a) the Fund, (b) the Adviser and (c) any entity
controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Fund during the fiscal year
in which the services are provided that would have to be approved
by the Committee; (ii) the permissible non-audit services were not
recognized by the Fund at the time of the engagement to be
non-audit services; and (iii) such services are promptly brought to
the attention of the Committee and approved by the Committee (or
its delegate(s)) prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. Travelers Series Trust's Audit Committee has considered
whether the provision of non-audit services that were rendered to
Service Affiliates which were not pre-approved (not requiring
pre-approval) is compatible with maintaining the Accountant's
independence. All services provided by the Accountant to the
Travelers Series Trust or to Service Affiliates which were required
to be pre-approved were pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and procedures
required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under
the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of
the Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
The Travelers Series Trust
By: /s/ R. Jay Gerken
-------------------------------
R. Jay Gerken
Chief Executive Officer of
The Travelers Series Trust
Date: March 10, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
--------------------------
R. Jay Gerken
Chief Executive Officer of
The Travelers Series Trust
Date: March 10, 2004
By: /s/ Richard L. Peteka
--------------------------
Richard L. Peteka
Chief Financial Officer of
The Travelers Series Trust
Date: March 10, 2004