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.
[INSERT SHAREHOLDER REPORT]
ANNUAL REPORT
DECEMBER 31, 2003
[UMBRELLA ART TOP]
[UMBRELLA ART BOTTOM]
THE TRAVELERS SERIES TRUST:
MFS VALUE PORTFOLIO
[TRAVELERS 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
MANAGER OVERVIEW............................................ 3
PERFORMANCE COMPARISON...................................... 5
SCHEDULE OF INVESTMENTS..................................... 6
STATEMENT OF ASSETS AND LIABILITIES......................... 10
STATEMENT OF OPERATIONS..................................... 11
STATEMENTS OF CHANGES IN NET ASSETS......................... 12
NOTES TO FINANCIAL STATEMENTS............................... 13
FINANCIAL HIGHLIGHTS........................................ 16
TAX INFORMATION............................................. 16
INDEPENDENT AUDITORS' REPORT................................ 17
ADDITIONAL INFORMATION...................................... 18
</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. Although investment-grade bond
performance was quite subdued, many high yield and
convertible bonds soared. It is no coincidence that both
those bond sectors are heavily influenced by the
fortunes of the stock market.
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 came to a swift completion.
Meanwhile, 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.
However, 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 fund performed as follows:
Performance of the Fund as of December 31, 2003
<Table>
<Caption>
6 MONTHS 12 MONTHS
-------- ---------
MFS VALUE PORTFOLIO................................ 16.41% 24.61%
Russell 1000 Value Index........................... 16.55 30.03
Lipper Large-Cap Value Variable Funds Category
Average.......................................... 16.04 28.39
</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.
The fund's returns reflect expenses incurred by the 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 fund.
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 1000 Value Index measures the performance of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted growth
values.
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 89 funds
for the six-month period and among the 83 funds for the 12-month period in the
Lipper large-cap value variable funds category.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
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 fund has 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.
1
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 24, 2004
2
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MANAGER OVERVIEW
MFS VALUE PORTFOLIO
PERFORMANCE UPDATE
During its fiscal year ended December 31, 2003, the fund returned 24.61%. In
comparison, the fund underperformed both its benchmark, the unmanaged Russell
1000 Value Index(i), which returned 30.03% for the same period, and the Lipper
large cap value variable funds category, which returned 28.39% for the year.(1)
The fund's underperformance largely occurred in the first half of 2003, which
was a challenging market environment for our conservative, quality-focused style
when technology stocks and lower-quality stocks with weaker balance sheets led
stock market returns. With the release of second-quarter corporate earnings in
July 2003, market leadership began to expand to include a broader-based group of
economically-sensitive stocks such as basic materials, industrials, energy and
transportation (railroad) issues. As a result, the fund's returns improved
relative to the benchmark.
PORTFOLIO POSITIONING
The fund's sector positioning did not change significantly during the year.
However, we found opportunities to shift into what we believed were more
reasonably-valued companies within sectors where company fundamentals had
improved but stock prices had lagged the sector's leaders.
As has been the case for most of this year, the fund's relative performance was
most affected by its conservative positioning. Throughout the period, its
underweighting in autos and housing, technology, and financial stocks detracted
from performance. Our cautious positioning within the utility and leisure
sectors also hurt returns.
DETRACTORS FROM PERFORMANCE
Although the financial sector made the best contribution to absolute returns,
its underweighted position in the group caused relative returns to trail the
benchmark. For example, FLEETBOSTON FINANCIAL CORP., which was the object of a
takeover by BANK OF AMERICA CORP., made the strongest relative contribution to
returns. Investment bank, THE GOLDMAN SACHS GROUP, INC. provided strong returns
as the securities markets recovered and merger and acquisition activity
increased. The results from those two companies were somewhat offset by weaker,
yet still positive, returns from the FEDERAL NATIONAL MORTGAGE ASSOCIATION.
In the leisure sector, cable and publishing holdings such as VIACOM INC. and
TRIBUNE CO. experienced weaker-than-expected advertising revenues. Although the
price of both stocks rose, they lagged the sector. REED ELSEVIER PLC, which
publishes professional journals and textbooks, trailed other leisure stocks.
Investors were concerned about tight school budgets and weakness in advertising
revenues from its business-to-business publications.
Investors in auto stocks, in which the fund was underweighted, appeared to focus
their attention on improving auto sales. We continued to be concerned about U.S.
market share losses to overseas manufacturers, weak pricing, earnings quality,
and pension and health care liabilities.
The portfolio's cash position, which was held to buy new holdings and to cover
investor transfers or redemptions, also detracted from relative performance. In
a period when equity markets rose sharply, cash hurt performance against the
Russell 1000 Value, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Returns from CATERPILLAR INC., DEERE & CO., and EMERSON ELECTRIC CO. led
performance in the industrial goods and services sector. Rising commodity prices
combined with increased farm subsidies improved the outlook for spending on
agricultural equipment, benefiting Deere & Co. Also, restructuring initiatives
continue to drive improvements in margins and free cash flow. Strong quarterly
earnings reports and continued expectations for improved economic activity
helped move both Caterpillar and Emerson higher. The fund sold Caterpillar
before the end of the period when it reached our target price.
(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 83 funds in the Lipper large-cap value variable funds category
including the reinvestment of dividends and capital gains, if any.
3
Although technology continues to be a relatively small sector in the portfolio,
our holdings in this group provided strong absolute returns for the year.
Contributors within this group included semiconductor manufacturer TEXAS
INSTRUMENTS INC., networking solutions provider NORTEL NETWORKS CORPORATION,
semiconductor manufacturer INTEL CORPORATION, and electronic communications firm
MOTOROLA, INC. Improvements in telecommunications-related equipment sales also
helped to boost Texas Instruments' stock price. Nortel's stock rose sharply in
the third quarter when the company announced a number of new contracts with
large wireless companies such as VERIZON COMMUNICATIONS INC. and AT&T WIRELESS
SERVICES, INC.
Intel's stock price soared throughout the period when the company experienced
better-than-expected personal computer sales, positive earnings, and a generally
positive semiconductor environment. Motorola's stock price rose as a result of
an improved outlook for its handset sales and a more focused corporate strategy.
Texas Instruments, Nortel Networks, and Intel stock were sold when they achieved
our price objectives.
ALTRIA GROUP, INC, formerly Philip Morris, led the fund's consumer staples
holdings. The company continued to rebound from earlier concerns about
litigation and competitive pressures.
Thank you for your investment in the MFS Value Portfolio. We appreciate that you
have entrusted us to manage your money and value our relationship with you.
Sincerely,
- -s- Lisa B. Nurme
Lisa B. Nurme
Massachusetts Financial Services
- -s- Steven R. Gorham
Steven R. Gorham
Massachusetts Financial Services
January 24, 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 and may not be representative of the portfolio manager's current or
future investments. The fund's top ten holdings as of this date were: Bank of
America Corp. (3.54%); Exxon Mobil Corp. (3.01%); FleetBoston Financial Corp.
(2.82%); The Goldman Sachs Group, Inc., (2.82%); Altria Group, Inc., (2.82%);
Johnson & Johnson (2.34%); MetLife, Inc. (2.29%); SunTrust Banks, Inc. (2.29%);
Mellon Financial Corp. (2.23%); Pfizer, Inc. (2.23%). Please refer to pages 6
through 9 for a list and percentage breakdown of the funds' 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.
RISKS: Investing in foreign securities is subject to certain risks not
associated with domestic investing, such as currency fluctuations, and changes
in political and economic conditions. These risks are magnified in emerging or
developing markets. Additionally, 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 1000 Value Index measures the performance of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted growth
values.
4
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PERFORMANCE COMPARISON -- MFS VALUE PORTFOLIO AS OF 12/31/03 (UNAUDITED)
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------
Year Ended 12/31/03 24.61%
Five Years Ended 12/31/03 5.07
7/20/98* through 12/31/03 3.67
<Caption>
CUMULATIVE TOTAL RETURN
-----------------------
7/20/98* through 12/31/03 21.73%
* Commencement of operations.
</Table>
This chart assumes an initial investment of $10,000 made at
inception on July 20, 1998, assuming reinvestment of dividends,
through December 31, 2003. The Russell 1000 Index measures the
performance of the 1,000 largest companies in the Russell 3000
Index, which represents approximately 92% of the total market
capitalization of the Russell 3000 Index. The Russell 1000 Value
Index measures the performance of those Russell 1000 Index
companies with lower price-to-book ratios and lower forecasted
growth values.
(LINE GRAPH)
<Table>
<Caption>
MFS VALUE PORTFOLIO RUSSELL 1000 INDEX++ RUSSELL 1000 VALUE INDEX++
------------------- -------------------- --------------------------
7/20/98 10000 10000 10000
12/98 9506 11064 10495
12/99 9979 13377 11266
12/00 11135 12336 12057
12/01 11247 10800 11382
12/02 9769 8462 9614
12/31/03 12173 10991 12502
</Table>
++ It is the opinion of the management that the Russell 1000 Value Index more
accurately reflects the current composition of the Fund than the Russell 1000
Index. In future reporting, the Russell 1000 Value Index will be used as the
basis of comparison of total return performance rather than the Russell 1000
Index.
- --------------------------------------------------------------------------------
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 total returns for all periods shown.
5
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SCHEDULE OF INVESTMENTS DECEMBER 31, 2003
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCK -- 90.8%
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AEROSPACE & DEFENSE -- 2.2%
4,400 Lockheed Martin Corp. ...................................... $ 226,160
6,830 Northrop Grumman Corp....................................... 652,948
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879,108
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BANKS -- 13.7%
17,670 Bank of America Corp........................................ 1,421,198
8,470 Bank One Corp. ............................................. 386,147
25,960 FleetBoston Financial Corp. ................................ 1,133,154
27,910 Mellon Financial Corp. ..................................... 896,190
5,500 PNC Financial Services Group................................ 301,015
6,130 SouthTrust Corp. ........................................... 200,635
12,850 SunTrust Banks, Inc. ....................................... 918,775
4,400 Wells Fargo & Co. .......................................... 259,116
- -----------------------------------------------------------------------------------------
5,516,230
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BEVERAGES -- 0.4%
3,080 PepsiCo, Inc. .............................................. 143,590
- -----------------------------------------------------------------------------------------
CHEMICALS -- 4.1%
8,870 Air Products & Chemicals, Inc. ............................. 468,602
9,640 The Dow Chemical Co. ....................................... 400,735
700 Monsanto Co. ............................................... 20,146
9,720 PPG Industries, Inc. ....................................... 622,274
3,380 Praxair, Inc. .............................................. 129,116
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1,640,873
- -----------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.9%
25,900 Motorola, Inc. ............................................. 364,413
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COMPUTERS & PERIPHERALS -- 1.5%
5,600 Hewlett-Packard Co. ........................................ 128,632
5,300 International Business Machines Corp. ...................... 491,204
- -----------------------------------------------------------------------------------------
619,836
- -----------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.5%
9,880 Smurfit-Stone Container Corp.+.............................. 183,472
- -----------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 8.5%
17,100 American Express Co. ....................................... 824,733
11,020 Fannie Mae.................................................. 827,161
11,450 The Goldman Sachs Group, Inc. .............................. 1,130,458
1,200 Janus Capital Group, Inc. .................................. 19,692
10,590 Merrill Lynch & Co., Inc. .................................. 621,104
- -----------------------------------------------------------------------------------------
3,423,148
- -----------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.5%
7,000 BellSouth Corp. ............................................ 198,100
33,650 SBC Communications, Inc. ................................... 877,256
20,300 Verizon Communications Inc. ................................ 712,124
- -----------------------------------------------------------------------------------------
1,787,480
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
6
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SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.2%
7,200 Cinergy Corp. .............................................. $ 279,432
2,500 Dominion Resources, Inc. ................................... 159,575
9,920 Energy East Corp. .......................................... 222,208
1,800 Entergy Corp. .............................................. 102,834
2,800 FirstEnergy Corp. .......................................... 98,560
2,730 FPL Group, Inc. ............................................ 178,597
3,760 NSTAR....................................................... 182,360
4,300 PPL Corp. .................................................. 188,125
11,990 TXU Corp. .................................................. 284,403
- -----------------------------------------------------------------------------------------
1,696,094
- -----------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.4%
8,400 Emerson Electric Co. ....................................... 543,900
- -----------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.9%
3,100 Baker Hughes, Inc. ......................................... 99,696
9,230 Noble Corp.+................................................ 330,249
6,160 Schlumberger Ltd. .......................................... 337,075
- -----------------------------------------------------------------------------------------
767,020
- -----------------------------------------------------------------------------------------
FOOD & DRUG RETAILING -- 0.2%
2,900 Safeway, Inc.+.............................................. 63,539
- -----------------------------------------------------------------------------------------
FOOD PRODUCTS -- 4.8%
38,346 Archer-Daniels-Midland Co. ................................. 583,626
10,970 H.J. Heinz Co. ............................................. 399,637
22,590 Kellogg Co. ................................................ 860,227
5,000 Tyson Foods, Inc., Class A Shares........................... 66,200
- -----------------------------------------------------------------------------------------
1,909,690
- -----------------------------------------------------------------------------------------
GAS UTILITIES -- 0.7%
4,040 KeySpan Corp. .............................................. 148,672
4,830 National Fuel Gas Co. ...................................... 118,045
- -----------------------------------------------------------------------------------------
266,717
- -----------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2%
1,500 Guidant Corp. .............................................. 90,300
- -----------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE -- 0.3%
4,800 McDonald's Corp. ........................................... 119,184
- -----------------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.5%
9,400 Newell Rubbermaid Inc. ..................................... 214,038
- -----------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.1%
14,270 Kimberly-Clark Corp. ....................................... 843,214
- -----------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.2%
2,100 Honeywell International, Inc. .............................. 70,203
- -----------------------------------------------------------------------------------------
INSURANCE -- 6.0%
13,720 Allstate Corp. ............................................. 590,234
5,550 The Chubb Corp. ............................................ 377,955
7,180 The Hartford Financial Services Group, Inc. ................ 423,835
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
7
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SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
INSURANCE -- 6.0% (CONTINUED)
2,200 Marsh & McLennan Cos., Inc. ................................ $ 105,358
27,290 MetLife, Inc. .............................................. 918,854
- -----------------------------------------------------------------------------------------
2,416,236
- -----------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.2%
4,000 Hasbro, Inc. ............................................... 85,120
- -----------------------------------------------------------------------------------------
MACHINERY -- 0.8%
4,650 Deere & Co. ................................................ 302,482
- -----------------------------------------------------------------------------------------
MEDIA -- 6.6%
14,000 Comcast Corp., Special Class A Shares+...................... 437,920
13,500 Cox Communications, Inc., Class A Shares+................... 465,075
23,700 Time Warner Inc.+........................................... 426,363
11,340 Tribune Co.................................................. 585,144
16,420 Viacom Inc., Class B Shares................................. 728,720
- -----------------------------------------------------------------------------------------
2,643,222
- -----------------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.5%
4,800 Sears Roebuck & Co. ........................................ 218,352
- -----------------------------------------------------------------------------------------
OIL & GAS -- 10.7%
18,090 BP PLC, Sponsored ADR....................................... 892,742
4,400 ChevronTexaco Corp. ........................................ 380,116
11,870 ConocoPhillips.............................................. 778,316
2,760 Devon Energy Corp. ......................................... 158,038
29,450 Exxon Mobil Corp. .......................................... 1,207,450
3,770 Total SA, Sponsored ADR..................................... 348,763
14,850 Unocal Corp. ............................................... 546,926
- -----------------------------------------------------------------------------------------
4,312,351
- -----------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.3%
3,880 Bowater Inc. ............................................... 179,683
8,020 International Paper Co. .................................... 345,742
- -----------------------------------------------------------------------------------------
525,425
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.1%
18,210 Johnson & Johnson........................................... 940,729
25,320 Pfizer Inc. ................................................ 894,556
34,600 Schering-Plough Corp. ...................................... 601,694
- -----------------------------------------------------------------------------------------
2,436,979
- -----------------------------------------------------------------------------------------
ROAD & RAIL -- 1.7%
9,620 Union Pacific Corp.......................................... 668,398
- -----------------------------------------------------------------------------------------
SOFTWARE -- 0.8%
11,600 Microsoft Corp. ............................................ 319,464
- -----------------------------------------------------------------------------------------
TOBACCO -- 2.8%
20,770 Altria Group, Inc. ......................................... 1,130,303
- -----------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
26,300 AT&T Wireless Services Inc.+................................ 210,137
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $31,952,959).................... 36,410,518
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
8
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2003
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
FOREIGN STOCK -- 6.6%
- -----------------------------------------------------------------------------------------
CANADA -- 0.1%
1,700 Finning International Inc. ................................. $ 39,463
- -----------------------------------------------------------------------------------------
SWITZERLAND -- 3.5%
10,800 Novartis AG+................................................ 490,116
4,500 Roche Holding AG............................................ 453,710
6,670 Syngenta AG+................................................ 449,051
- -----------------------------------------------------------------------------------------
1,392,877
- -----------------------------------------------------------------------------------------
UNITED KINGDOM -- 3.0%
30,800 BHP Billiton PLC+........................................... 268,300
21,880 Diageo PLC+................................................. 287,068
60,400 Reed Elsevier PLC........................................... 503,775
6,100 Rio Tinto Ltd.+............................................. 168,014
- -----------------------------------------------------------------------------------------
1,227,157
- -----------------------------------------------------------------------------------------
TOTAL FOREIGN STOCK (Cost -- $2,289,363).................... 2,659,497
- -----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
FACE
AMOUNT SECURITY VALUE
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 2.6%
$1,050,000 Federal Home Loan Discount Notes, zero coupon bond to yield
1.000% due 1/2/04 (Cost -- $1,049,978).................... 1,049,978
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $35,292,300*)............ $40,119,993
- -----------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* Aggregate cost for Federal income tax purpose is $35,491,385.
Abbreviation used in this schedule:
-----------------------------------
ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
9
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2003
<Table>
ASSETS:
Investments, at value (Cost -- $35,292,300)............... $40,119,993
Cash...................................................... 3
Dividends and interest receivable......................... 68,726
Receivable for Fund shares sold........................... 10,584
Receivable from administrator............................. 2,314
- -------------------------------------------------------------------------
TOTAL ASSETS.............................................. 40,201,620
- -------------------------------------------------------------------------
LIABILITIES:
Investment advisory fee payable........................... 24,783
Payable for securities purchased.......................... 8,556
Accrued expenses.......................................... 40,292
- -------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 73,631
- -------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $40,127,989
- -------------------------------------------------------------------------
NET ASSETS:
Paid-in capital........................................... $37,197,164
Undistributed net investment income....................... 3,057
Accumulated net realized loss on investment
transactions........................................... (1,900,435)
Net unrealized appreciation of investments and foreign
currencies............................................. 4,828,203
- -------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $40,127,989
- -------------------------------------------------------------------------
SHARES OUTSTANDING.......................................... 3,706,378
- -------------------------------------------------------------------------
NET ASSET VALUE............................................. $10.83
- -------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
10
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
INVESTMENT INCOME:
Interest.................................................. $ 12,252
Dividends................................................. 819,071
Less: Foreign withholding tax............................. (8,252)
- ------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 823,071
- ------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)......................... 252,534
Custody................................................... 28,289
Audit and legal........................................... 27,911
Shareholder communications................................ 21,494
Administration fees (Note 2).............................. 20,203
Trustees' fees............................................ 6,354
Shareholder and system servicing fees..................... 5,003
Other..................................................... 970
- ------------------------------------------------------------------------
TOTAL EXPENSES............................................ 362,758
Less: Expense reimbursement (Note 2)...................... (26,185)
- ------------------------------------------------------------------------
NET EXPENSES.............................................. 336,573
- ------------------------------------------------------------------------
NET INVESTMENT INCOME....................................... 486,498
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES
(NOTE 3):
Realized Gain From:
Investment transactions................................ 266,346
Foreign currency transactions.......................... 2,599
- ------------------------------------------------------------------------
NET REALIZED GAIN......................................... 268,945
- ------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments From:
Investments............................................ 7,155,111
Foreign currencies..................................... 321
- ------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION................... 7,155,432
- ------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCIES.............. 7,424,377
- ------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................... $7,910,875
- ------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
11
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
<Table>
<Caption>
2003 2002
- ---------------------------------------------------------------------------------------
OPERATIONS:
Net investment income..................................... $ 486,498 $ 440,297
Net realized gain (loss).................................. 268,945 (1,942,261)
Increase (decrease) in net unrealized appreciation........ 7,155,432 (2,958,914)
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 7,910,875 (4,460,878)
- ---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (493,786) (704,032)
Net realized gains........................................ -- (1,300,123)
- ---------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (493,786) (2,004,155)
- ---------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares.......................... 5,804,112 9,850,958
Net asset value of shares issued for reinvestment of
dividends.............................................. 493,786 2,004,155
Cost of shares reacquired................................. (4,566,914) (6,705,321)
- ---------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS....... 1,730,984 5,149,792
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... 9,148,073 (1,315,241)
NET ASSETS:
Beginning of year......................................... 30,979,916 32,295,157
- ---------------------------------------------------------------------------------------
END OF YEAR*.............................................. $40,127,989 $30,979,916
- ---------------------------------------------------------------------------------------
* Includes undistributed net investment income of:.......... $3,057 $9,356
- ---------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
MFS Value Portfolio ("Fund") is a separate investment fund 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 this fund and fifteen 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, Large Cap, Equity Income, Convertible Securities,
Merrill Lynch Large Cap Core (formerly MFS Research), MFS Mid Cap Growth and
Zero Coupon Bond Fund Portfolio (Series 2005) Portfolios. Shares 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 financial statements and financial highlights for
the other funds are presented in separate shareholder reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets
or, if there were no sales during the day, at the mean between the bid and ask
prices; securities primarily traded on foreign exchanges are generally valued at
the preceding closing values of such securities on their respective exchanges,
except that when a significant event, subsequent to the time a value was so
established, 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 or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and asked prices in the over-the-counter market;
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 sales price; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities that have a
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity; (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 Fund distributes
dividends and capital gains, if any, at least annually; (h) the accounting
records of the Fund are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies are translated into U.S. dollars 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 are 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 Fund'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
change; (j) the Fund intends 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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS
Travelers Asset Management International Company LLC ("TAMIC"), an indirect
wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
adviser to the Fund. The Fund pays TAMIC an investment advisory fee calculated
at the annual rate of 0.75% of the Fund's average daily net assets. This fee is
calculated daily and paid monthly.
TAMIC has entered into a sub-advisory agreement with Massachusetts
Financial Services ("MFS"). Pursuant to the sub-advisory agreement, MFS is
responsible for the day-to-day portfolio operations and investment decisions for
the Fund. TAMIC pays MFS 0.375% of the Fund's average daily net assets.
The Travelers Insurance Company ("TIC"), another indirect wholly-owned
subsidiary of Citigroup, acts as administrator to the Fund. The Fund pays TIC an
administration fee calculated at an annual rate of 0.06% of the Fund's average
daily net assets. This fee is calculated daily and paid monthly. TIC has entered
into a sub-administrative service agreement with
13
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Fund's average daily net assets, plus $30,000,
subject to a maximum of 0.06% of the Fund's average daily net assets.
For the year ended December 31, 2003, the Fund had a voluntary expense
limitation in place of 1.00%. As a result, TIC has agreed to reimburse the Fund
for expenses in the amount of $26,185. This expense limitation can be terminated
at any time by TIC.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as
the Fund's transfer agent. CTB receives account fees and asset-based fees that
vary according to the size and type of account. For the year ended December 31,
2003, the Fund paid transfer agent fees of $5,000 to CTB.
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, did not receive any brokerage commissions.
One Trustee and all officers of the Trust are employees of Citigroup or its
affiliates.
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>
- -------------------------------------------------------------------------
Purchases................................................... $20,233,623
Sales....................................................... 18,634,199
- -------------------------------------------------------------------------
</Table>
At December 31, 2003, aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<Table>
- ------------------------------------------------------------------------
Gross unrealized appreciation............................... $4,905,670
Gross unrealized depreciation............................... (277,062)
- ------------------------------------------------------------------------
Net unrealized appreciation................................. $4,628,608
- ------------------------------------------------------------------------
</Table>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund from time to time 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.
At December 31, 2003, the Fund did not have any open forward foreign
currency contracts.
5. 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 the
Fund were as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
- ------------------------------------------------------------------------------------------------------
Shares sold................................................. 629,956 1,015,193
Shares issued on reinvestment............................... 45,825 218,577
Shares reacquired........................................... (490,506) (693,773)
- ------------------------------------------------------------------------------------------------------
Net Increase................................................ 185,275 539,997
- ------------------------------------------------------------------------------------------------------
</Table>
14
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAX INFORMATION AND DISTRIBUTIONS TO SHAREHOLDERS
The tax basis components of distributable earnings for December 31 were:
<Table>
<Caption>
2003 2002
- ------------------------------------------------------------------------------------------------------
Undistributed ordinary income............................... $ 3,057 $ 8,620
Accumulated capital losses.................................. (1,701,350) (1,499,036)
Unrealized appreciation (depreciation)...................... 4,629,118 (2,726,298)
- ------------------------------------------------------------------------------------------------------
</Table>
At December 31, 2003 and December 31, 2002, the difference between book
basis and tax basis unrealized appreciation and depreciation was attributable to
wash sale loss deferrals.
The tax character of distributions paid during the year ended December 31
was:
<Table>
<Caption>
2003 2002
- ------------------------------------------------------------------------------------------------------
Ordinary income............................................. $493,786 $ 843,444
Long-term capital gains..................................... -- 1,160,711
- ------------------------------------------------------------------------------------------------------
Total....................................................... $493,786 $2,004,155
- ------------------------------------------------------------------------------------------------------
</Table>
7. CAPITAL LOSS CARRYFORWARD
At December 31, 2003, the Fund had, for Federal income tax purposes,
approximately $1,701,000 of unused capital loss carryforwards available to
offset future capital gains. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed.
The amount and year of expiration for each carryforward loss is indicated
below. Expiration occurs on December 31 of the year indicated:
<Table>
<Caption>
2010 2011
- ------------------------------------------------------------------------------------------------------
Carryforward Amounts........................................ $1,499,000 $202,000
- ------------------------------------------------------------------------------------------------------
</Table>
8. ADDITIONAL INFORMATION
The Fund has received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Fund's
Investment Manager, an indirect wholly-owned subsidiary 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 its 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.
15
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
2003 2002 2001(1) 2000(1) 1999(1)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR................ $ 8.80 $10.83 $10.89 $ 9.93 $9.46
- -----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2)........................ 0.13 0.12 0.11 0.11 0.13
Net realized and unrealized gain (loss)......... 2.04 (1.53) (0.00)* 1.02 0.34
- -----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations............... 2.17 (1.41) 0.11 1.13 0.47
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income........................... (0.14) (0.21) (0.08) (0.08) --
Net realized gains.............................. -- (0.41) (0.09) (0.09) --
- -----------------------------------------------------------------------------------------------------
Total Distributions............................... (0.14) (0.62) (0.17) (0.17) --
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR...................... $10.83 $ 8.80 $10.83 $10.89 $9.93
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN(3)................................... 24.61% (13.14)% 1.00% 11.59% 4.97%
- -----------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)................... $40,128 $30,980 $32,295 $23,326 $19,908
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)(4).................................. 1.00% 1.00% 1.00% 1.00% 0.99%
Net investment income........................... 1.44 1.38 1.01 1.05 1.26
- -----------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE........................... 57% 60% 123% 54% 41%
- -----------------------------------------------------------------------------------------------------
</Table>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Travelers Insurance Company has agreed to reimburse the Fund for
expenses in the amounts of $26,185, $44,292, $28,095, $15,528 and $24,087
for the years ended December 31, 2003, 2002, 2001, 2000 and 1999,
respectively. If such expenses were not reimbursed, the per share decreases
to net investment income and the actual expense ratios would have been as
follows:
<Table>
<Caption>
PER SHARE DECREASES EXPENSE RATIOS WITHOUT
TO NET INVESTMENT INCOME EXPENSE REIMBURSEMENT
- --------------------------------- --------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ----- ----- ----- ----- ----- ----- ----- ---- ----- -----
$0.01 $0.01 $0.01 $0.01 $0.02 1.08% 1.13% 1.11% 1.07% 1.15%
</Table>
(3) Total returns do not reflect expenses associated with your variable contract
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the total returns for all periods shown. Performance
figures may reflect fee waivers and/or expense reimbursements. Past
performance is no guarantee of future results. In the absence of fee waivers
and/or expense reimbursements, the total return would be reduced.
(4) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.00%.
* Amount represents less than $0.01 per share.
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 2003:
- For corporate shareholders, the percentage of ordinary dividends that
qualify for the dividends received deductions is 100.00%
16
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE TRAVELERS SERIES TRUST:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of MFS Value Portfolio ("Fund") of The Travelers
Series Trust ("Trust") as of December 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years in the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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 but not yet received, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 2003, and the results of its operations for the year
then ended, the changes in its net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
February 13, 2004
17
- --------------------------------------------------------------------------------
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 CFA, CFP Trustee Since 1991 Private Investor 5 Board of Managers of 6
108 Oxford Hill Lane Variable Annuity
Downingtown, PA Separate Accounts of TIC
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>
18
- --------------------------------------------------------------------------------
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 Anti- Since Director of CGM (since 2000); N/A N/A
CAM Money 2002 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>
19
- --------------------------------------------------------------------------------
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 shares and options to purchase shares of Citigroup, the indirect
parent of TIC.
(4) As of January 21, 2004.
20
THE TRAVELERS SERIES TRUST
- --------------------------------------------------------------------------------
<Table>
TRUSTEES INVESTMENT ADVISER
R. Jay Gerken, CFA
Chairman Travelers Asset Management International Company LLC
Frances M. Hawk, CFA, CFP
Lewis Mandell ADMINISTRATOR
Robert E. McGill, III
The Travelers Insurance Company
OFFICERS
CUSTODIAN
R. Jay Gerken, CFA
President and State Street Bank and Trust Company
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 Fund is a separate investment fund 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: MFS Value Portfolio. 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 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.
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