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: JUNE 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
[INSERT SHAREHOLDER REPORT]
SEMI-ANNUAL REPORT
JUNE 30, 2004
[UMBRELLA ART TOP]
[UMBRELLA ART BOTTOM]
THE TRAVELERS SERIES TRUST:
TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO
DISCIPLINED MID CAP STOCK PORTFOLIO
[TRAVELERS LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Cityplace
Hartford, CT 06103
SEMI-ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
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WHAT'S INSIDE
<Table>
LETTER FROM THE CHAIRMAN.................................... 1
SCHEDULES OF INVESTMENTS.................................... 5
STATEMENTS OF ASSETS AND LIABILITIES........................ 47
STATEMENTS OF OPERATIONS.................................... 48
STATEMENTS OF CHANGES IN NET ASSETS......................... 49
NOTES TO FINANCIAL STATEMENTS............................... 51
FINANCIAL HIGHLIGHTS........................................ 57
</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,
Both the stock and bond markets changed gears during the
first half of this year, largely due to shifting tides
of investor sentiment.
After a torrid second half of 2003, the equity markets
took a breather this year. Markets typically abhor
uncertainty, so as the year progressed, investors grew
increasingly lethargic amid questions over Iraq, global
terrorism, a rise in oil prices, interest rates,
inflation, and the presidential election. The good
news -- solid corporate earnings, the improving economy,
renewed job growth, and the still low level of interest
rates -- largely was ignored. As a result, stock market
returns for the first six months of 2004 generally were
modest, as opposed to the strong, double-digit gains
late last year.
As was the case in 2003, small- and mid-capitalization
stocks generally outperformed their larger brethren in
the first half of this year. Value- and growth-oriented
stocks frequently traded short-term performance
leadership during the past six months, but value stocks
slightly outperformed growth stocks over the full
six-month period. The performance of foreign stock
markets in the first half largely was in-line with that
of the broad U.S. market.
Although the bond market got off to a formidable start, its performance also was
hampered by heightened worries about resurgent inflation, rising rates, and
anticipation that the Federal Reserve Bank ("Fed") would begin to raise key
short-term rates after a long accommodative stance on monetary policy. Higher
interest rates can act as a brake on robust economic growth, which helps
maintain a balance between steady growth and the inflation that generally
accompanies that growth. Given that the economy appeared to be humming along at
a healthy pace, as was widely expected, the central bank edged up its federal
funds rate(i) target from a four-decade low to 1.25% at the end of June.
Over the six-month period, following a significant pullback this past spring,
bond prices finished on a flat note. However, municipal bonds, mortgage-backed
securities, U.S. Agencies, and corporate issues in general held up better than
those of U.S. Treasury bonds on a total return basis. High-yield bonds outpaced
most other sectors of the U.S. fixed-income market.
Although investor sentiment was shaky this past spring, by the end of the period
the U.S. Consumer Confidence Index(ii) rose to levels not seen since June of
2002. The domestic unemployment rate held steady, job growth slowed following a
strong increase in March through the early spring, and inflation picked up
during the period.
PORTFOLIO PERFORMANCE
Within this environment, the Portfolios performed as follows:(1)
TRAVELERS QUALITY BOND PORTFOLIO
During the period ended June 30, 2004, the Travelers Quality Bond Portfolio
returned -0.14%. The Portfolio performed essentially in-line with its unmanaged
benchmark, the Lehman Brothers Intermediate Government/Credit Bond Index(iii),
which returned -0.11%. The Portfolio slightly lagged its Lipper
short-intermediate investment grade debt variable funds category average(2),
which returned 0.12%.
(1) Each fund is an underlying investment option of various variable annuity and
life products. Fund performance returns do not reflect the deduction of
sales charges and expenses imposed in connection with investing in variable
annuity and life contracts such as administrative fees, account charges, and
surrender charges, which if reflected, would reduce the performance of the
fund. An investor may not invest directly in the fund. PAST PERFORMANCE IS
NO INDICATION OF FUTURE RESULTS.
(2) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 31 funds in the Lipper short-intermediate investment grade
debt variable funds category with reinvestment of dividends and capital
gains, if any.
1
LAZARD INTERNATIONAL STOCK PORTFOLIO
During the period ended June 30, 2004, the Lazard International Stock Portfolio
returned 1.61%. The Portfolio underperformed its unmanaged benchmark, the MSCI
EAFE GDP Index(iv), which returned 5.60% and its Lipper international value
variable funds category average(3), which returned 5.27%.
MFS EMERGING GROWTH PORTFOLIO
During the period ended June 30, 2004, the MFS Emerging Growth Portfolio
returned 5.03%. The Portfolio outperformed its unmanaged benchmark, the Russell
3000 Growth Index(v), which returned 2.96% and its Lipper multi-cap growth
variable funds category average(4), which returned 3.96%.
FEDERATED HIGH YIELD PORTFOLIO
During the period ended June 30, 2004, the Federated High Yield Portfolio
returned 2.08%. The Portfolio outperformed its unmanaged benchmarks, the Lehman
Brothers High Yield Index(vi) and the Lehman Brothers Aggregate Bond Index(vii),
which returned 1.36% and 0.15%, respectively. The Portfolio also outperformed
its Lipper high current yield variable funds category average(5), which returned
1.07%.
FEDERATED STOCK PORTFOLIO
During the period ended June 30, 2004, the Federated Stock Portfolio returned
3.18%. The Portfolio slightly underperformed its unmanaged benchmark, the S&P
500/Barra Value Index(viii), which returned 4.17%. The Portfolio also
underperformed its Lipper multi-cap value variable funds category average(6),
which returned 4.49%.
DISCIPLINED MID CAP STOCK PORTFOLIO
During the period ended June 30, 2004, the Disciplined Mid Cap Stock Portfolio
returned 6.65%. The Portfolio slightly outperformed its unmanaged benchmark, the
S&P 500 MidCap 400 Index(ix), which returned 6.08%. The Portfolio also
outperformed its Lipper mid-cap core variable funds category average(7), which
returned 6.00%.
(3) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 33 funds in the Lipper international value variable funds
category with reinvestment of dividends and capital gains, if any.
(4) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 106 funds in the Lipper multi-cap growth variable funds
category with reinvestment of dividends and capital gains, if any.
(5) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 88 funds in the Lipper high current yield variable funds
category with reinvestment of dividends and capital gains, if any.
(6) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 99 funds in the Lipper multi-cap value variable funds
category with reinvestment of dividends and capital gains, if any.
(7) Lipper is a major independent mutual fund tracking organization. Average
annual returns are based on the six-month period ended June 30, 2004,
calculated among 73 funds in the Lipper mid-cap core variable funds category
with reinvestment of dividends and capital gains, if any.
2
PERFORMANCE OF THE FUNDS
AS OF JUNE 30, 2004
<Table>
<Caption>
6 MONTHS
TRAVELERS QUALITY BOND PORTFOLIO -0.14%
Lehman Brothers Intermediate Government/Credit Bond Index -0.11%
Lipper Short-Intermediate Investment Grade Debt Variable
Funds Category Average 0.12%
LAZARD INTERNATIONAL STOCK PORTFOLIO 1.61%
MSCI EAFE GDP Index 5.60%
Lipper International Value Variable Funds Category Average 5.27%
MFS EMERGING GROWTH PORTFOLIO 5.03%
Russell 3000 Growth Index 2.96%
Lipper Multi-Cap Growth Variable Funds Category Average 3.96%
FEDERATED HIGH YIELD PORTFOLIO 2.08%
Lehman Brothers High Yield Index 1.36%
Lehman Brothers Aggregate Bond Index 0.15%
Lipper High Current Yield Variable Funds Category Average 1.07%
FEDERATED STOCK PORTFOLIO 3.18%
S&P 500/Barra Value Index 4.17%
Lipper Multi-Cap Value Variable Funds Category Average 4.49%
DISCIPLINED MID CAP STOCK PORTFOLIO 6.65%
S&P MidCap 400 Index 6.08%
Lipper Mid-Cap Core Variable Funds Category Average 6.00%
</Table>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER
OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE AND INVESTORS' SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
The performance returns set forth above do not reflect the reduction
of sales charges and expenses imposed in connection with investing in
variable annuity and life contracts such as administrative fees,
account charges, and surrender charges, which if reflected, would
reduce the performance of the funds.
INFORMATION ABOUT YOUR FUND
In recent months several issues in the mutual fund and variable product
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, revenue sharing, 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.
In November 2003, Citigroup Asset Management disclosed an investigation by the
Securities and Exchange Commission ("SEC") and the U.S. Attorney relating to
Citigroup Asset Management's entry into the transfer agency business during
1997-1999. On July 20, 2004, Citigroup disclosed that it had been notified by
the Staff of the SEC that the Staff is considering recommending a civil
injunctive action and/or an administrative proceeding against certain advisory
and transfer agent entities affiliated with Citigroup relating to the creation
and operation of its internal transfer agent unit to serve primarily the Smith
Barney family of mutual funds. Citigroup is cooperating with the SEC and will
seek to resolve this matter in discussion with the SEC Staff. Although there can
be no assurance, Citigroup does not believe that this matter will have a
material adverse effect on the funds.
3
SPECIAL SHAREHOLDER NOTICE
Effective January 1, 2004, Gene Collins replaced F. Denney Voss as Portfolio
Manager of the Travelers Quality Bond Portfolio. Mr. Collins is a Senior Vice
President of Travelers Asset Management International Company LLC.
Effective June 28, 2004, a new team of individuals employed by Travelers
Investment Management Company replaced Sandip Bhagat as Portfolio Manager of the
Disciplined Mid Cap Stock Portfolio.
Effective July 7, 2004, Camille H. Lee joined the Portfolio Management Team of
David E. Sette-Ducati and Eric B. Fischman for the MFS Emerging Growth
Portfolio.
As always, thank you for your continued 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
July 20, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole. Please note an investor cannot invest
directly in an index.
Past performance is no guarantee of future results. The performance returns set
forth above do not reflect the deduction of sales charges and expenses imposed
in connection with investing in variable annuity and life contracts including,
but not limited to, administrative fees, account charges, and surrender charges,
which if reflected, would reduce performance.
Portfolio holdings and breakdowns are as of June 30, 2004 and are subject to
change. Please refer to pages 5 through 44 for a list and percentage breakdown
of the fund's holdings.
The commentary provided is as of July 20, 2004 and is subject to change based on
the market and other conditions. The views expressed are those of the portfolio
manager and are not intended to be a forecast of future events, a guarantee of
future results or investment advice. These views may differ from those of other
portfolio managers or the firm as a whole.
(i) The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that need
overnight loans.
(ii) Source: June 2004 Consumer Confidence Index, The Conference Board.
(iii) The Lehman Brothers Intermediate Government/Credit Index is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues (rated Baa/BBB or higher) with maturities between
one and ten years.
(iv) The MSCI EAFE GDP Index is an unmanaged index of common stocks of
companies located in Europe, Australasia, and the Far East, generally
considered representative of the foreign markets.
(v) The Russell 3000 Growth Index measures the performance of those Russell
3000 Index companies with higher price-to-book ratios and higher
forecasted growth values.
(vi) The Lehman Brothers High Yield Index covers the universe of fixed-rate,
non-investment grade debt, including corporate and non-corporate sectors.
Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries
designated as emerging markets are excluded, but Canadian and global
bonds (SEC registered) of issuers in non-emerging market countries are
included. Original issue zero coupon bonds, step-up coupon structures,
and 144-As also are included.
(vii) The Lehman Brothers Aggregate Bond Index is a broad-based bond index
comprised of Government, Corporate, Mortgage and Asset-backed issues,
rated investment grade or higher, and having at least one year to
maturity.
(viii) The S&P 500 Barra Value is a market-capitalization weighted index of
stocks in the S&P 500 having lower price-to-book ratios relative to the
S&P 500 as a whole. (A price-to-book ratio is the price of a stock
compared to the difference between a company's assets and liabilities.)
(ix) The S&P MidCap 400 Index is a market-value weighted index which consists
of 400 domestic stocks chosen for market size, liquidity, and industry
group representation.
4
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SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
TRAVELERS QUALITY BOND PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT SECURITY VALUE
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U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 38.6%
U.S. Treasury Notes:
$14,610,000 5.875% due 11/15/05....................................... $ 15,305,699
21,350,000 3.500% due 11/15/06....................................... 21,632,738
4,500,000 3.125% due 9/15/08........................................ 4,417,209
1,920,000 3.375% due 11/15/08....................................... 1,899,602
4,550,000 4.750% due 11/15/08....................................... 4,753,330
7,400,000 5.750% due 8/15/10........................................ 8,070,632
8,899,000 4.750% due 5/15/14........................................ 8,994,602
Fannie Mae:
Benchmark Notes:
2,400,000 1.750% due 6/16/06...................................... 2,344,056
3,900,000 6.000% due 5/15/11...................................... 4,193,253
2,600,000 Notes, 2.000% due 2/9/07 (a).............................. 2,582,174
1,200,000 Freddie Mac, Medium-Term Notes, 2.900% due 2/27/19 (a)...... 1,191,431
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TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost -- $76,733,022)....................................... 75,384,726
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<Caption>
FACE
AMOUNT RATING(B) SECURITY VALUE
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CORPORATE BONDS & NOTES -- 48.8%
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AEROSPACE/DEFENSE -- 2.0%
3,800,000 BBB Northrop Grumman Corp., Notes, 8.625% due 10/15/04.......... 3,869,240
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AUTOMOTIVE -- 1.6%
2,100,000 A3* DaimlerChrysler North America Holding Corp., Notes, 4.050%
due 6/4/08................................................ 2,060,942
1,000,000 BBB- Lear Corp., Sr. Notes, Series B, 7.960% due 5/15/05......... 1,042,934
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3,103,876
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BANKING -- 4.2%
1,720,000 AA- ABN AMRO Bank N.V., Sr. Notes, 1.250% due 5/11/07 (a) 1,723,194
970,000 Baa2* Capital One Bank, Notes, 5.000% due 6/15/09................. 973,831
600,000 Aa3* Credit Suisse First Boston (USA), Inc., Notes, 6.125% due
11/15/11.................................................. 632,451
2,165,000 A2* FleetBoston Financial Corp., Sub. Notes, 7.125% due
4/15/06................................................... 2,323,004
700,000 A Huntington National Bank, Notes, 4.650% due 6/30/09......... 702,628
1,800,000 Aa2* U.S. Bank N.A., Notes, 2.870% due 2/1/07.................... 1,770,241
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8,125,349
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BROKERAGE -- 3.5%
2,100,000 Aa3* The Goldman Sachs Group, Inc., Notes, 4.750% due 7/15/13.... 1,976,289
1,300,000 A1* Lehman Brothers Holdings Inc., Medium-Term Notes, Series G,
4.800% due 3/13/14........................................ 1,217,745
1,200,000 Aa3* Merrill Lynch & Co., Medium-Term Notes, Series B, 3.375% due
9/14/07................................................... 1,188,857
Morgan Stanley:
1,000,000 Aa3* Notes, 6.600% due 4/1/12.................................. 1,078,203
1,600,000 A1* Sub. Notes, 4.750% due 4/1/14............................. 1,479,002
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6,940,096
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CONGLOMERATES -- 1.0%
1,800,000 BBB Tyco International Group S.A., Notes, 6.125% due 11/1/08.... 1,916,797
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</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
5
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SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
TRAVELERS QUALITY BOND PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(B) SECURITY VALUE
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CONSTRUCTION -- 0.4%
$ 800,000 BBB- MDC Holdings, Inc., Notes, 5.500% due 5/15/13............... $ 776,762
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DISTRIBUTORS -- 0.3%
700,000 A+ Southern California Gas Co., First Mortgage Bonds, Series
II,
4.375% due 1/15/11........................................ 685,718
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ENERGY -- 2.9%
700,000 BBB+ Anadarko Finance Co., Sr. Notes, Series B, 6.750% due
5/1/11.................................................... 770,974
400,000 A- Cooper Cameron Corp., Sr. Notes, 2.650% due 4/15/07......... 388,287
870,000 BBB Duke Energy Field Services, LLC, Notes, 7.500% due
8/16/05................................................... 913,653
3,600,000 B+ Transcontinental Gas Pipe Line Corp., Notes, 6.125% due
1/15/05................................................... 3,672,000
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5,744,914
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FINANCE CAPTIVE -- 3.4%
1,000,000 BBB Devon Financing Corp., ULC, Notes, 6.875% due 9/30/11....... 1,090,219
Ford Motor Credit Co., Global Landmark Securities(TM):
1,900,000 A3* 6.875% due 2/1/06......................................... 1,993,647
1,300,000 A3* 7.000% due 10/1/13........................................ 1,314,520
1,200,000 A3* General Motors Acceptance Corp., Notes, 7.250% due 3/2/11... 1,261,099
1,100,000 A+ National Rural Utilities Cooperative Finance Corp.,
Collateral Trust Bonds, 4.750% due 3/1/14................. 1,058,531
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6,718,016
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FINANCE NON-CAPTIVE -- 3.0%
1,130,000 A Countrywide Home Loans, Inc., Medium-Term Notes, Series L,
4.000% due 3/22/11........................................ 1,055,472
2,000,000 AAA General Electric Capital Corp., Medium-Term Notes, Series A,
5.450% due 1/15/13........................................ 2,031,242
2,590,000 A1* Household Finance Corp., Notes, 6.375% due 11/27/12......... 2,750,603
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5,837,317
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INSURANCE -- 1.8%
1,700,000 AAA MassMutual, Global Funding II, Notes, 2.550% due 7/15/08
(c)....................................................... 1,602,828
1,900,000 AA+ New York Life Global Funding, Medium-Term Notes,
5.375% due 9/15/13 (c).................................... 1,911,011
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3,513,839
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MEDIA -- 5.9%
400,000 BBB- Clear Channel Communications, Inc., Sr. Notes, 4.400% due
5/15/11................................................... 378,355
900,000 BBB Comcast Cable Communications, Inc., Exchange Notes,
8.500% due 5/1/27......................................... 1,092,868
3,700,000 Baa1* Cox Enterprises Inc., Notes, 7.875% due 9/15/10 (c)......... 4,210,866
2,000,000 BBB- Liberty Media Corp., Sr. Notes, 2.670% due 9/17/06 (a)...... 2,037,560
3,600,000 BBB+ Time Warner Inc., Notes, 6.150% due 5/1/07.................. 3,814,150
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11,533,799
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PACKAGING -- 0.3%
550,000 BBB Sealed Air Corp., Sr. Notes, 5.625% due 7/15/13 (c)......... 544,250
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PAPER PRODUCTS -- 0.4%
800,000 BBB International Paper Co., Notes, 5.500% due 1/15/14.......... 784,607
- --------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
6
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SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
TRAVELERS QUALITY BOND PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(B) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.1%
$ 2,200,000 A Wyeth, Notes, 5.500% due 2/1/14............................. $ 2,105,968
- --------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 3.0%
460,000 BB+ iStar Financial Inc., Sr. Notes, 6.000% due 12/15/10........ 459,424
250,000 BBB- Nationwide Health Properties, Inc., Medium-Term Notes,
Series C,
6.900% due 10/1/37........................................ 253,484
5,000,000 BBB Post Apartment Homes, L.P., MOPPRS(SM), 6.850% due
3/16/15................................................... 5,096,415
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5,809,323
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RETAILERS -- 2.2%
4,500,000 AA Wal-Mart Stores, Inc., Notes, 4.550% due 5/1/13............. 4,343,180
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SUPERMARKETS -- 0.7%
1,300,000 BBB Fred Meyer, Inc., Notes, 7.450% due 3/1/08.................. 1,443,748
- --------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.1%
2,000,000 BBB+ Deutsche Telekom International Finance B.V., Bonds,
8.250% due 6/15/05........................................ 2,103,334
1,350,000 BBB- Sprint Capital Corp., Notes, 6.125% due 11/15/08............ 1,420,365
2,700,000 BBB+ Telecom Italia Capital S.A., Sr. Global Notes, 5.250% due
11/15/13 (c).............................................. 2,617,939
- --------------------------------------------------------------------------------------------------------
6,141,638
- --------------------------------------------------------------------------------------------------------
TOBACCO -- 0.9%
1,700,000 BBB Altria Group, Inc., Notes, 5.625% due 11/4/08............... 1,709,024
- --------------------------------------------------------------------------------------------------------
UTILITIES -- 7.1%
650,000 B+ CMS Energy Corp., Notes, 7.625% due 11/15/04................ 663,000
2,800,000 BBB Pepco Holdings, Inc., Notes, 5.500% due 8/15/07............. 2,892,621
2,900,000 Baa* Progress Energy, Inc., Sr. Notes, 6.050% due 4/15/07........ 3,059,233
750,000 BB- PSE&G Energy Holdings Inc., Sr. Notes, 8.625% due 2/15/08... 810,000
1,800,000 A3* SCANA Corp., Sr. Notes, 1.620% due 11/15/06 (a)............. 1,802,174
1,700,000 AA+ SP PowerAssets Ltd., Notes, 5.000% due 10/22/13 (c)......... 1,658,313
800,000 Baa2* TransAlta Corp., Sr. Notes, 5.750% due 12/15/13............. 793,539
2,200,000 BBB- Xcel Energy Inc., Sr. Notes, 3.400% due 7/1/08.............. 2,125,504
- --------------------------------------------------------------------------------------------------------
13,804,384
- --------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES (Cost -- $94,420,032)......... 95,451,845
- --------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.2%
1,358,878 AAA California Infrastructure PG&E-1, Series 1997-1, Class A7,
6.420% due 9/25/08........................................ 1,418,882
1,000,000 AAA Chase Funding Trust, Series 2002-2, Class 1A5,
5.833% due 4/25/32........................................ 1,041,113
2,207,939 AAA DaimlerChrysler Auto Trust, Series 2001-C, Class A4,
4.630% due 12/6/06........................................ 2,239,953
1,700,000 AAA Discover Card Master Trust I, Series 1996-3, Class A,
6.050% due 8/18/08........................................ 1,785,605
2,200,000 AAA Ford Credit Auto Owner Trust, Series 2002-B, Class A4,
4.750% due 8/15/06........................................ 2,249,449
1,510,188 AAA Toyota Auto Receivables Owner Trust, Series 2002-C, Class
A3,
2.650% due 11/15/06....................................... 1,515,760
- --------------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (Cost -- $10,516,165)......... 10,250,762
- --------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
7
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SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
TRAVELERS QUALITY BOND PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(B) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.5%
$ 1,000,000 AAA Banc of America Commercial Mortgage Inc., Series 2004-3,
Class A4, 5.176% due 6/10/39.............................. $ 1,005,001
1,500,000 AAA Credit Suisse First Boston Mortgage Securities Corp., Series
2003-C5,
Class A4, 4.900% due 12/15/36............................. 1,456,619
LB-UBS Commercial Mortgage Trust:
1,090,000 AAA Series 2002-C4, Class A5, 4.853% due 9/15/31.............. 1,069,755
2,000,000 AAA Series 2003-C3, Class A2, 3.086% due 5/15/27.............. 1,923,624
1,900,000 AAA Series 2004-C1, Class A4, 4.568% due 1/15/31.............. 1,795,702
1,450,000 AAA Wachovia Bank Commercial Mortgage Trust, Series 2003-C6,
Class A3, 4.957% due 8/15/35.............................. 1,452,127
- --------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost -- $8,946,440)........................................ 8,702,828
- --------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.9%
5,615,000 State Street Bank & Trust Co. dated 6/30/04, 1.150% due
7/1/04; Proceeds at maturity -- $5,615,179; (Fully
collateralized by U.S. Treasury Notes, 6.500% due
10/15/06; Market value -- $5,730,730)
(Cost -- $5,615,000)...................................... 5,615,000
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $196,230,659**)........ $195,405,161
- --------------------------------------------------------------------------------------------------------
</Table>
(a) Variable rate security.
(b) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*), which are rated by Moody's Investors Service,
Inc.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers. These securities
have been deemed liquid pursuant to guidelines established by the Board of
Trustees.
** Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this Schedule:
MOPPRS(SM) -- MandatOry Par Put Remarketed Securities(SM). "MandatOry Par Put
Remarketed Securities(SM)" and MOPPRS(SM) are service marks
owned by Merrill Lynch & Co., Inc.
See pages 45 and 46 for definitions of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
8
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
LAZARD INTERNATIONAL STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------------
STOCK -- 97.8%
- -------------------------------------------------------------------------------------------
FINLAND -- 4.5%
132,800 Stora Enso Oyj, Series R Shares............................. $ 1,803,664
378,800 Nokia Oyj................................................... 5,514,314
- -------------------------------------------------------------------------------------------
7,317,978
- -------------------------------------------------------------------------------------------
FRANCE -- 11.2%
37,200 Aventis S.A.+............................................... 2,811,690
18,400 BNP Paribas S.A.+........................................... 1,132,979
49,700 Carrefour S.A.+............................................. 2,414,317
144,400 Credit Agricole S.A.+....................................... 3,517,871
35,700 Lagardere S.C.A.+........................................... 2,233,014
25,900 Sanofi-Synthelabo+.......................................... 1,643,691
23,251 Total S.A.+................................................. 4,438,062
- -------------------------------------------------------------------------------------------
18,191,624
- -------------------------------------------------------------------------------------------
GERMANY -- 10.0%
45,600 BASF AG+.................................................... 2,443,439
82,800 Deutsche Telekom AG++....................................... 1,456,399
49,100 E.ON AG+.................................................... 3,546,655
35,500 Muenchener Rueckversicherungs-Gesellschaft AG+.............. 3,852,910
1,440 Porsche AG, Preferred Shares................................ 964,823
32,600 Schering AG................................................. 1,923,157
27,300 Siemens AG.................................................. 1,965,651
- -------------------------------------------------------------------------------------------
16,153,034
- -------------------------------------------------------------------------------------------
HONG KONG -- 0.9%
279,500 CLP Holdings Ltd. .......................................... 1,530,142
- -------------------------------------------------------------------------------------------
IRELAND -- 4.3%
133,892 Allied Irish Banks, PLC..................................... 2,071,613
206,400 Bank of Ireland............................................. 2,755,516
103,942 CRH PLC..................................................... 2,199,027
- -------------------------------------------------------------------------------------------
7,026,156
- -------------------------------------------------------------------------------------------
ITALY -- 2.8%
195,150 Eni S.p.A.+................................................. 3,879,462
307,800 Terna S.p.A.++.............................................. 667,377
- -------------------------------------------------------------------------------------------
4,546,839
- -------------------------------------------------------------------------------------------
JAPAN -- 16.3%
20,650 ACOM CO., LTD. ............................................. 1,338,959
31,600 Canon Inc.+................................................. 1,661,713
309 East Japan Railway Co. ..................................... 1,729,462
34,700 FANUC Ltd. ................................................. 2,065,911
170,000 Mitsubishi Estate Co., Ltd. ................................ 2,105,080
26,700 NEC Electronics Corp.+...................................... 1,636,014
317,000 Nissan Motor Co., Ltd. ..................................... 3,516,585
205,000 Nomura Holdings, Inc. ...................................... 3,027,802
781 NTT DoCoMo, Inc. ........................................... 1,392,794
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
9
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
LAZARD INTERNATIONAL STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------------
JAPAN -- 16.3% (CONTINUED)
40,200 Shin-Etsu Chemical Co., Ltd. ............................... $ 1,433,810
253,000 The Sumitomo Trust and Banking Co., Ltd.+................... 1,797,805
66,700 Takeda Chemical Industries, Ltd. ........................... 2,921,880
499,000 Tokyo Gas Co., Ltd. ........................................ 1,766,089
- -------------------------------------------------------------------------------------------
26,393,904
- -------------------------------------------------------------------------------------------
THE NETHERLANDS -- 10.0%
44,700 Akzo Nobel N.V. ............................................ 1,645,995
58,357 Heineken N.V. .............................................. 1,919,996
320,000 Koninklijke KPN N.V. ....................................... 2,440,097
148,172 Koninklijke (Royal) Philips Electronics N.V. ............... 3,994,205
122,500 Royal Dutch Petroleum Co. .................................. 6,293,981
- -------------------------------------------------------------------------------------------
16,294,274
- -------------------------------------------------------------------------------------------
NORWAY -- 1.1%
100,000 DnB NOR ASA................................................. 682,451
81,700 Statoil ASA+................................................ 1,037,326
- -------------------------------------------------------------------------------------------
1,719,777
- -------------------------------------------------------------------------------------------
SINGAPORE -- 1.2%
286,800 Oversea-Chinese Banking Corp. Ltd. ......................... 2,016,081
- -------------------------------------------------------------------------------------------
SPAIN -- 1.9%
83,300 Altadis, S.A.+.............................................. 2,577,279
8,900 Antena 3 de Television, S.A.++.............................. 471,587
- -------------------------------------------------------------------------------------------
3,048,866
- -------------------------------------------------------------------------------------------
SWITZERLAND -- 6.2%
61,700 Compagnie Financiere Richemont AG, Class A Shares........... 1,611,622
111,030 Credit Suisse Group++....................................... 3,946,669
43,800 Swiss Reinsurance Co. ...................................... 2,846,178
24,300 UBS AG...................................................... 1,712,976
- -------------------------------------------------------------------------------------------
10,117,445
- -------------------------------------------------------------------------------------------
UNITED KINGDOM -- 27.4%
480,800 Barclays PLC................................................ 4,094,543
273,800 BP PLC...................................................... 2,417,334
197,696 Cadbury Schweppes PLC....................................... 1,705,104
198,874 Diageo PLC.................................................. 2,680,607
270,500 GlaxoSmithKline PLC......................................... 5,472,750
385,207 HSBC Holdings PLC........................................... 5,726,407
54,120 Imperial Tobacco Group PLC.................................. 1,165,597
148,260 Kesa Electricals PLC........................................ 777,448
306,600 Prudential PLC.............................................. 2,637,440
465,300 Rentokil Initial PLC........................................ 1,218,920
109,100 Rio Tinto PLC............................................... 2,622,663
162,900 Royal Bank of Scotland Group PLC............................ 4,689,707
63,800 Smiths Group PLC............................................ 863,425
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
10
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
LAZARD INTERNATIONAL STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------------
UNITED KINGDOM -- 27.4% (CONTINUED)
224,600 Unilever PLC................................................ $ 2,202,831
2,823,400 Vodafone Group PLC.......................................... 6,180,644
- -------------------------------------------------------------------------------------------
44,455,420
- -------------------------------------------------------------------------------------------
TOTAL STOCK (Cost -- $144,047,557).......................... 158,811,540
- -------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT SECURITY VALUE
- -------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.2%
$ 3,604,000 State Street Bank and Trust Co. dated 6/30/04, 1.150% due
7/1/04; Proceeds at maturity -- $3,604,115; (Fully
collateralized by U.S. Treasury Bonds,
8.125% due 8/15/19; Market value -- $3,679,549)
(Cost -- $3,604,000)...................................... 3,604,000
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $147,651,557*)......... $162,415,540
- -------------------------------------------------------------------------------------------
LOANED SECURITIES COLLATERAL
29,910,541 State Street Navigator Securities Lending Trust Prime
Portfolio (Cost -- $29,910,541)........................... $ 29,910,541
- -------------------------------------------------------------------------------------------
</Table>
+ All or a portion of this security is on loan (See Note 8).
++ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCK -- 94.7%
- -----------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 20.5%
HOTELS, RESTAURANTS & LEISURE -- 4.3%
38,870 Carnival Corp. ............................................. $ 1,826,890
11,840 The Cheesecake Factory Inc.+................................ 471,114
5,620 Four Seasons Hotels, Inc. .................................. 338,380
13,760 GTECH Holdings Corp. ....................................... 637,226
18,040 International Game Technology............................... 696,344
11,270 Outback Steakhouse, Inc. ................................... 466,127
9,930 P.F. Chang's China Bistro, Inc.+............................ 408,620
35,540 Royal Caribbean Cruises Ltd. ............................... 1,542,791
6,720 Starbucks Corp.+............................................ 292,186
17,350 WMS Industries Inc.+........................................ 517,030
- -----------------------------------------------------------------------------------------
7,196,708
- -----------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 3.3%
34,950 eBay Inc.+.................................................. 3,213,653
74,770 InterActiveCorp+............................................ 2,253,568
- -----------------------------------------------------------------------------------------
5,467,221
- -----------------------------------------------------------------------------------------
MEDIA -- 6.3%
43,490 Citadel Broadcasting Co.+................................... 633,649
66,860 EchoStar Communications Corp., Class A Shares+.............. 2,055,945
37,460 Getty Images, Inc.+......................................... 2,247,600
15,660 Grupo Televisa, S.A., Sponsored ADR......................... 708,928
15,300 Meredith Corp. ............................................. 840,888
48,780 The News Corp. Ltd., Sponsored Preferred ADR................ 1,603,886
19,940 Playboy Enterprises, Inc., Class B Shares+.................. 231,503
42,270 The Walt Disney Co. ........................................ 1,077,462
47,040 Westwood One, Inc.+......................................... 1,119,552
- -----------------------------------------------------------------------------------------
10,519,413
- -----------------------------------------------------------------------------------------
MULTI-LINE RETAIL -- 2.1%
26,310 Family Dollar Stores, Inc. ................................. 800,350
20,940 Kohl's Corp.+............................................... 885,343
41,250 Target Corp. ............................................... 1,751,888
- -----------------------------------------------------------------------------------------
3,437,581
- -----------------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.6%
13,050 Best Buy Co., Inc. ......................................... 662,157
13,650 CDW Corp. .................................................. 870,324
25,920 PETsMART, Inc. ............................................. 841,104
42,190 Ross Stores, Inc. .......................................... 1,129,004
42,070 Staples, Inc.+.............................................. 1,233,072
33,940 Tiffany & Co. .............................................. 1,250,689
- -----------------------------------------------------------------------------------------
5,986,350
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
TEXTILES & APPAREL -- 0.9%
13,320 Coach, Inc.+................................................ $ 601,931
27,030 Reebok International Ltd. .................................. 972,539
- -----------------------------------------------------------------------------------------
1,574,470
- -----------------------------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY................................ 34,181,743
- -----------------------------------------------------------------------------------------
CONSUMER STAPLES -- 1.6%
FOOD & DRUG RETAILING -- 1.6%
15,590 CVS Corp. .................................................. 655,092
57,180 Walgreen Co. ............................................... 2,070,488
- -----------------------------------------------------------------------------------------
TOTAL CONSUMER STAPLES...................................... 2,725,580
- -----------------------------------------------------------------------------------------
ENERGY -- 1.8%
ENERGY EQUIPMENT & SERVICES -- 1.8%
24,490 BJ Services Co.+............................................ 1,122,622
10,650 Cooper Cameron Corp.+....................................... 518,655
22,670 GlobalSantaFe Corp. ........................................ 600,755
15,060 Smith International, Inc.+.................................. 839,746
- -----------------------------------------------------------------------------------------
TOTAL ENERGY................................................ 3,081,778
- -----------------------------------------------------------------------------------------
FINANCIALS -- 4.6%
BANKS -- 0.5%
17,100 Investors Financial Services Corp. ......................... 745,218
- -----------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 4.1%
29,130 American Express Co. ....................................... 1,496,699
121,000 Ameritrade Holding Corp.+................................... 1,373,350
600 The Chicago Mercantile Exchange............................. 86,622
12,020 The Goldman Sachs Group, Inc. .............................. 1,131,803
18,780 Legg Mason, Inc. ........................................... 1,709,168
20,700 Merrill Lynch & Co., Inc. .................................. 1,117,386
- -----------------------------------------------------------------------------------------
6,915,028
- -----------------------------------------------------------------------------------------
TOTAL FINANCIALS............................................ 7,660,246
- -----------------------------------------------------------------------------------------
HEALTHCARE -- 24.3%
BIOTECHNOLOGY -- 7.1%
22,900 Amgen Inc.+................................................. 1,249,653
22,070 Celgene Corp.+.............................................. 1,263,728
8,130 Genentech, Inc.+............................................ 456,906
21,670 Gen-Probe Inc.+............................................. 1,025,424
45,960 Genzyme Corp.+.............................................. 2,175,287
44,590 Gilead Sciences, Inc.+...................................... 2,987,530
8,140 ImClone Systems Inc.+....................................... 698,331
9,040 Invitrogen Corp.+........................................... 650,790
35,610 MedImmune, Inc.+............................................ 833,274
9,540 Neurocrine Biosciences, Inc.+............................... 494,649
- -----------------------------------------------------------------------------------------
11,835,572
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES -- 10.5%
16,370 Alcon, Inc. ................................................ $ 1,287,500
6,870 Apogent Technologies, Inc.+................................. 219,840
42,720 Baxter International, Inc. ................................. 1,474,267
36,440 C.R. Bard, Inc. ............................................ 2,064,326
146,940 Cytyc Corp.+................................................ 3,727,868
21,720 DENTSPLY International Inc. ................................ 1,131,612
37,770 Fisher Scientific International Inc.+....................... 2,181,218
41,350 Guidant Corp. .............................................. 2,310,638
32,390 Medtronic, Inc. ............................................ 1,578,041
28,930 Millipore Corp.+............................................ 1,630,784
- -----------------------------------------------------------------------------------------
17,606,094
- -----------------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES -- 1.8%
47,820 Caremark Rx, Inc.+.......................................... 1,575,191
32,910 HCA Inc. ................................................... 1,368,727
- -----------------------------------------------------------------------------------------
2,943,918
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.9%
19,890 Allergan, Inc. ............................................. 1,780,553
19,200 Elan Corp. PLC, Sponsored ADR+.............................. 475,008
12,240 Eli Lilly and Co. .......................................... 855,698
52,630 Johnson & Johnson........................................... 2,931,491
52,200 Medicis Pharmaceutical Corp., Class A Shares................ 2,085,390
- -----------------------------------------------------------------------------------------
8,128,140
- -----------------------------------------------------------------------------------------
TOTAL HEALTHCARE............................................ 40,513,724
- -----------------------------------------------------------------------------------------
INDUSTRIALS -- 11.6%
AIR FREIGHT & COURIERS -- 0.3%
11,260 Expeditors International of Washington, Inc. ............... 556,357
- -----------------------------------------------------------------------------------------
AIRLINES -- 1.1%
15,280 JetBlue Airways Corp.+...................................... 448,926
79,500 Southwest Airlines Co. ..................................... 1,333,215
- -----------------------------------------------------------------------------------------
1,782,141
- -----------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 9.0%
42,580 Alliance Data Systems Corp.+................................ 1,799,005
10,860 Apollo Group, Inc., Class A Shares+......................... 958,829
57,900 ARAMARK Corp., Class B Shares............................... 1,665,204
48,000 Career Education Corp.+..................................... 2,186,880
33,770 Ceridian Corp.+............................................. 759,825
80,730 Corinthian Colleges, Inc.+.................................. 1,997,260
14,060 The Corporate Executive Board Co.+.......................... 812,527
42,140 DST Systems, Inc.+.......................................... 2,026,513
484 Employee Solutions, Inc.+................................... 1
14,780 Manpower Inc. .............................................. 750,381
19,180 Monster Worldwide, Inc.+.................................... 493,310
17,480 Paychex, Inc. .............................................. 592,222
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 9.0% (CONTINUED)
21,100 Robert Half International Inc.+............................. $ 628,147
3,510 Strayer Education, Inc. .................................... 391,611
- -----------------------------------------------------------------------------------------
15,061,715
- -----------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 1.2%
57,950 Tyco International Ltd. .................................... 1,920,463
- -----------------------------------------------------------------------------------------
TOTAL INDUSTRIALS........................................... 19,320,676
- -----------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 24.0%
COMMUNICATIONS EQUIPMENT -- 5.8%
75,770 Andrew Corp.+............................................... 1,516,158
139,038 Cisco Systems, Inc.+........................................ 3,295,201
60,130 Comverse Technology, Inc.+.................................. 1,198,992
10,880 F5 Networks, Inc. .......................................... 288,102
13,170 Harris Corp. ............................................... 668,378
21,321 Juniper Networks, Inc.+..................................... 523,857
100,440 Nokia Oyj, Sponsored ADR.................................... 1,460,398
11,350 Research In Motion Ltd.+.................................... 776,794
- -----------------------------------------------------------------------------------------
9,727,880
- -----------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 2.6%
31,770 Apple Computer, Inc.+....................................... 1,033,796
72,200 Dell Inc.+.................................................. 2,586,204
7,040 Lexmark International, Inc., Class A Shares+................ 679,571
- -----------------------------------------------------------------------------------------
4,299,571
- -----------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.0%
34,830 Waters Corp.+............................................... 1,664,177
- -----------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 2.0%
27,560 Akamai Technologies, Inc.+.................................. 494,702
76,710 Yahoo! Inc.+................................................ 2,786,874
- -----------------------------------------------------------------------------------------
3,281,576
- -----------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 3.5%
31,340 Analog Devices, Inc.+....................................... 1,475,487
26,810 Integrated Circuit Systems, Inc.+........................... 728,160
83,140 Marvell Technology Group Ltd.+.............................. 2,219,838
60,710 PMC-Sierra, Inc.+........................................... 871,188
15,230 Xilinx, Inc.+............................................... 507,311
- -----------------------------------------------------------------------------------------
5,801,984
- -----------------------------------------------------------------------------------------
SOFTWARE -- 9.1%
33,560 Adobe Systems Inc. ......................................... 1,560,540
110,280 Amdocs Ltd.+................................................ 2,583,860
35,270 Electronic Arts Inc.+....................................... 1,923,978
26,500 Mercury Interactive Corp.+.................................. 1,320,495
96,650 Microsoft Corp. ............................................ 2,760,324
58,120 Red Hat, Inc.+.............................................. 1,335,016
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
15
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------
SOFTWARE -- 9.1% (CONTINUED)
37,580 Symantec Corp.+............................................. $ 1,645,252
75,180 VERITAS Software Corp.+..................................... 2,082,486
- -----------------------------------------------------------------------------------------
15,211,951
- -----------------------------------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY................................ 39,987,139
- -----------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 6.3%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.4%
39,427 NTL Inc.+................................................... 2,271,784
41,450 SpectraSite, Inc.+.......................................... 1,791,469
- -----------------------------------------------------------------------------------------
4,063,253
- -----------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 3.9%
74,750 Alamosa Holdings, Inc.+..................................... 549,413
30,640 America Movil S.A. de C.V., Sponsored ADR................... 1,114,377
180,490 American Tower Corp., Class A Shares+....................... 2,743,448
18,240 Nextel Communications, Inc., Class A Shares+................ 486,278
69,079 Vodafone Group PLC, Sponsored ADR........................... 1,526,646
- -----------------------------------------------------------------------------------------
6,420,162
- -----------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATION SERVICES............................ 10,483,415
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $131,390,207)................... 157,954,301
- -----------------------------------------------------------------------------------------
FOREIGN STOCK -- 3.1%
- -----------------------------------------------------------------------------------------
CANADA -- 0.5%
5,200 Aber Diamond Corp+.......................................... 153,797
38,700 CoolBrands International, Inc.+............................. 632,202
- -----------------------------------------------------------------------------------------
785,999
- -----------------------------------------------------------------------------------------
GERMANY -- 1.1%
41,100 Bayerische Motoren Werke (BMW) AG........................... 1,820,824
- -----------------------------------------------------------------------------------------
JAPAN -- 0.4%
17,200 SOFTBANK Corp. ............................................. 755,041
- -----------------------------------------------------------------------------------------
SWITZERLAND -- 1.1%
26,290 Novartis AG+................................................ 1,160,254
6,420 Roche Holding AG............................................ 635,898
- -----------------------------------------------------------------------------------------
1,796,152
- -----------------------------------------------------------------------------------------
TOTAL FOREIGN STOCK (Cost -- $4,551,104).................... 5,158,016
- -----------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
MFS EMERGING GROWTH PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 2.2%
$3,756,000 Federal National Mortgage Association, Discount Notes,
0.010% due 7/1/04
(Cost -- $3,756,000)........................................ $ 3,756,000
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $139,697,311*)......... $166,868,317
- ---------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
17
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES -- 96.9%
- ----------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 1.8%
$ 175,000 B Alliant Techsystems Inc., Sr. Sub. Notes, 8.500% due 5/15/11..... $ 189,875
100,000 B Argo Tech Corp., Sr. Notes, 9.250% due 6/1/11 (b)................ 103,500
Hexcel Corp.:
50,000 B Sr. Secured Notes, 9.875% due 10/1/08.......................... 55,125
350,000 CCC+ Sr. Sub. Notes, 9.750% due 1/15/09............................. 368,812
425,000 BB- L-3 Communications Corp., Sr. Sub. Notes, 6.125% due 1/15/14
(b)............................................................ 408,000
225,000 B- Transdigm Inc., Sr. Sub. Notes, 8.375% due 7/15/11............... 229,500
- ----------------------------------------------------------------------------------------------------------
1,354,812
- ----------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 3%
50,000 CCC+ Accuride Corp., Sr. Sub. Notes, Series B, 9.250% due 2/1/08...... 51,250
275,000 CCC+ Advanced Accessory Systems, Sr. Notes, 10.750% due 6/15/11....... 268,125
50,000 BB+ Dana Corp., Notes, 9.000% due 8/15/11............................ 58,750
General Motors Corp.:
325,000 BBB Debentures, 8.375% due 7/15/33................................. 344,980
275,000 BBB Sr. Notes, 7.125% due 7/15/13.................................. 282,906
100,000 BBB- Lear Corp., Sr. Notes, Series B, 7.960% due 5/15/05.............. 104,294
275,000 B+ Stoneridge Inc., Sr. Notes, 11.500% due 5/1/12................... 325,187
225,000 CCC+ Transportation Technologies Industries Inc., Sr. Sub. Notes,
12.500% due 3/31/10 (b)........................................ 223,875
385,000 BB- TRW Automotive Inc., Sr. Sub. Notes, 11.000% due 2/15/13......... 456,225
175,000 B United Components Inc., Sr. Sub. Notes, 9.375% due 6/15/13....... 179,375
- ----------------------------------------------------------------------------------------------------------
2,294,967
- ----------------------------------------------------------------------------------------------------------
BUILDING & MATERIALS -- 2.7%
Associated Materials Inc.:
325,000 B- Sr. Discount Notes, zero-coupon due 3/1/14 (b)................. 219,375
125,000 B- Sr. Sub. Notes, 9.750% due 4/15/12............................. 139,375
200,000 B- Collins & Aikman Floorcovering Inc., Sr. Sub. Notes, 9.750% due
2/15/10........................................................ 204,000
50,000 B- MAAX Corp., Sr. Sub. Notes, 9.750% due 6/15/12 (b)............... 51,750
150,000 CCC MMI Products, Inc., Sr. Sub. Notes, Series B, 11.250% due
4/15/07........................................................ 145,500
175,000 B- Mueller Group Inc., Sr. Sub. Notes, 10.000% due 5/1/12 (b)....... 182,875
225,000 B+ NCI Building Systems, Inc., Sr. Sub. Notes, Series B, 9.250% due
5/1/09......................................................... 237,375
275,000 B- Norcraft Co., Sr. Sub. Notes, 9.000% due 11/1/11 (b)............. 291,500
375,000 B- Nortek Holdings Inc., Sr. Notes, zero coupon, due 5/15/11 (b).... 301,875
200,000 B- Ply Gem Industries Inc., Sr. Sub. Notes, 9.000% due 2/15/12
(b)............................................................ 205,000
125,000 B- U.S. Concrete, Inc., Sr. Sub. Notes, 8.375% due 4/1/14 (b)....... 125,312
- ----------------------------------------------------------------------------------------------------------
2,103,937
- ----------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 5.3%
325,000 B- BCP Caylux Holding LUX SCA, Sr. Sub. Notes, 9.625% due 6/15/14
(b)............................................................ 338,406
225,000 B- Compass Minerals Group Inc., Sr. Sub. Notes, 10.000% due
8/15/11........................................................ 250,875
Compass Minerals International, Inc., Sr. Discount Notes:
150,000 B- Zero-coupon due 12/15/12....................................... 119,250
275,000 B- Zero-coupon due 6/1/13......................................... 210,375
250,000 B+ Equistar Chemical, L.P., Sr. Notes, 10.125% due 9/1/08........... 275,000
125,000 BB+ FMC Corp., Secured Notes, 10.250% due 11/1/09.................... 144,375
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
18
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 5.3% (CONTINUED)
$ 150,000 B Huntsman Advanced Materials, Sr. Secured Notes, 11.000% due
7/15/10 (b).................................................... $ 169,875
425,000 CCC+ Huntsman ICI Chemicals, Sr. Sub Notes, 10.125% due 7/1/09........ 435,625
200,000 B+ Invista, Notes, 9.250% due 5/1/12 (b)............................ 202,000
150,000 B Koppers Inc., Sr. Notes, 9.875% due 10/15/13 (b)................. 165,000
Lyondell Chemical Co.:
Sr. Secured Notes:
75,000 B+ 9.6250% due 5/1/07........................................... 78,750
275,000 B+ 9.500% due 12/15/08.......................................... 288,063
150,000 B+ Series B, 9.875% due 5/1/07.................................. 157,500
250,000 B- Sr. Sub. Notes, 10.875% due 5/1/09............................. 262,500
175,000 B- Nalco Co., Sr. Sub. Notes, 8.875% due 11/15/13 (b)............... 184,187
325,000 B- Nalco Finance Holdings Inc., Sr. Notes, zero coupon due 2/1/14
(b)............................................................ 216,937
250,000 CCC+ Rhodia S.A., Sr. Sub. Notes, 8.875% due 6/1/11 (b)............... 212,500
Union Carbide Chemicals & Plastics:
50,000 BBB- Debentures, 7.875% due 4/1/23.................................. 48,000
200,000 BBB- Sr. Notes, 8.750% due 8/1/22................................... 197,000
Union Carbide Corp., Debentures:
75,000 BBB- 6.790% due 6/1/25.............................................. 76,125
50,000 BBB- 7.500% due 6/1/25.............................................. 47,000
- ----------------------------------------------------------------------------------------------------------
4,079,343
- ----------------------------------------------------------------------------------------------------------
CONSTRUCTION MACHINERY -- 1.7%
175,000 BB- AGCO Corp., Sr. Notes, 9.500% due 5/1/08......................... 191,625
400,000 BB- Case New Holland Inc., Sr. Notes, 9.250% due 8/1/11 (b).......... 422,000
150,000 NR Clark Material Handling Co., Sr. Notes, Series D, 10.750% due
11/15/06 (c)................................................... 0
Columbus McKinnon Corp:
50,000 B- Sr. Secured Notes, 10.000% due 8/1/10.......................... 53,250
225,000 CCC+ Sr. Sub. Notes, 8.500% due 4/1/08.............................. 208,125
300,000 BB- Nationsrent Inc., Secured Sr. Notes, 9.500% due 10/15/10 (b)..... 321,000
125,000 BB- United Rentals (North America), Inc., Sr. Notes, 6.500% due
2/15/12 (b).................................................... 118,750
- ----------------------------------------------------------------------------------------------------------
1,314,750
- ----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 5.1%
325,000 B- Alltrista Corp., Sr. Sub. Notes, 9.750% due 5/1/12............... 355,062
75,000 B- American Achievement Corp., Sr. Sub. Notes, 8.250% due 4/1/12
(b)............................................................ 76,500
175,000 CCC+ Ames True Temper Inc., Sr. Sub. Notes, 10.000% due 7/15/12 (b)... 176,313
175,000 B+ Armkel LLC, Sr. Sub. Notes, 9.500% due 8/15/09................... 192,063
150,000 B- Chattem Inc., Sr. Sub. Notes, 7.000% due 3/1/14.................. 144,750
50,000 D Diamond Brands Operating Corp., Sr. Sub. Notes, 10.125% due
4/15/08 (c).................................................... --
175,000 B- Icon Health & Fitness Inc., Sr. Sub. Notes, 11.250% due 4/1/12... 191,625
475,000 B- Jostens Holding Corp., Sr. Discount Notes, 10.250% due 12/1/13
(b)............................................................ 325,375
200,000 B- Jostens Inc., Sr. Sub. Notes, 12.750% due 5/1/10................. 224,000
50,000 BB K2, Inc., Sr. Notes, 7.375% due 7/1/14 (b)....................... 51,125
150,000 CCC+ Leiner Health Products, Sr. Sub. Notes, 11.000% due 6/1/12 (b)... 155,625
175,000 CCC+ NBC Acquisition Corp., zero coupon due 3/15/13................... 111,125
150,000 CCC+ Nebraska Book Co., Inc., Sr. Sub. Notes, 8.625% due 3/15/12...... 147,750
275,000 CCC+ Playtex Products Inc., Sr. Sub. Notes, 9.375% due 6/1/11......... 268,812
250,000 B- Sealy Mattress Co., Sr. Sub. Notes, 8.250% due 6/15/14 (b)....... 252,500
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
19
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 5.1% (CONTINUED)
$ 350,000 B- Simmons Co., Sr. Sub. Notes, 7.875% due 1/15/14 (b).............. $ 358,750
205,000 B Tempur-Pedic Inc., Sr. Sub. Notes, 10.250% due 8/15/10 (b)....... 232,162
150,000 B- True Temper Sports Inc., Sr. Sub. Notes, 8.375% due 9/15/11
(b)............................................................ 150,750
350,000 B- United Industries Corp., Sr. Sub. Notes, Series D, 9.875% due
4/1/09......................................................... 365,750
150,000 B WH Holdings Limited, Sr. Notes, 9.500% due 4/1/11 (b)............ 156,750
- ----------------------------------------------------------------------------------------------------------
3,936,787
- ----------------------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING -- 1.2%
100,000 B Amsted Industries Inc., Sr. Notes, 10.250% due 10/15/11 (b)...... 109,000
175,000 B- Polypore Inc., Sr. Sub. Notes, 8.750% due 5/15/12 (b)............ 183,312
200,000 B- Thermadyne Holdings Corp., Sr. Secured Notes, 9.250% due
2/1/14......................................................... 198,500
Tyco International Group S.A., Notes:
75,000 BBB 6.375% due 6/15/05............................................. 77,338
375,000 BBB 5.800% due 8/1/06.............................................. 391,277
- ----------------------------------------------------------------------------------------------------------
959,427
- ----------------------------------------------------------------------------------------------------------
ENERGY -- 2.4%
75,000 BB- Chesapeake Energy Corp., Sr. Notes, 7.500% due 6/15/14 (b)....... 77,625
175,000 BB Citgo Petroleum Corp., Sr. Notes, 11.375% due 2/1/11............. 203,875
225,000 B Compton Petroleum Corp., Sr. Notes, Series A, 9.900% due
5/15/09........................................................ 246,938
200,000 CCC+ Continental Resources, Inc., Sr. Sub. Notes, 10.250% due
8/1/08......................................................... 207,500
150,000 BB- Ferrellgas Escrow LLC, Sr. Notes, 6.750% due 5/1/14 (b).......... 145,500
50,000 B- Lone Star Technologies, Inc., Sr. Sub. Notes, Series B, 9.000%
due 6/1/11..................................................... 52,375
75,000 B+ Magnum Hunter Resources, Inc., Sr. Notes, 9.600% due 3/15/12..... 82,875
150,000 BB- Petroleum Helicopters Inc., Sr. Notes, Series B, 9.375% due
5/1/09......................................................... 158,250
75,000 B Range Resources Corp., Sr. Sub. Notes, 7.375% due 7/15/13 (b).... 75,000
250,000 B Swift Energy Co., Sr. Sub. Notes, 9.375% due 5/1/12.............. 268,125
Tesoro Petroleum Corp.:
100,000 BB Sr. Secured Notes, 8.000% due 4/15/08.......................... 107,500
175,000 B Sr. Sub. Notes, Series B, 9.625% due 11/1/08................... 192,500
- ----------------------------------------------------------------------------------------------------------
1,818,063
- ----------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 2.1%
300,000 CCC+ AMC Entertainment Inc., Sr. Sub. Notes, 9.875% due 2/1/12........ 316,500
350,000 B- Cinemark Inc., Sr. Discount Notes, zero coupon due 3/15/14 (b)... 230,125
150,000 B- Cinemark USA Inc., Sr. Sub. Notes, 9.000% due 2/1/13............. 164,438
225,000 B+ Intrawest Corp., Sr. Notes, 10.500% due 2/1/10................... 244,406
Six Flags Inc., Sr. Notes:
150,000 B- 9.750% due 4/15/13............................................. 151,500
50,000 B- 9.625% due 6/1/14 (b).......................................... 50,000
425,000 B- Universal City Development Partners, Sr. Notes, 11.750% due
4/1/10 (b)..................................................... 494,062
- ----------------------------------------------------------------------------------------------------------
1,651,031
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
20
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
ENVIRONMENTAL -- 1.8%
Allied Waste North America Inc., Series B:
$ 275,000 BB- 9.250% due 9/1/12.............................................. $ 309,375
625,000 BB- Sr. Notes, 7.625% due 1/1/06................................... 658,594
200,000 B Clean Harbors Inc., 11.250% due 7/15/12 (b)...................... 203,000
175,000 B Synagro Technologies Inc., Sr. Sub. Notes, 9.500% due 4/1/09..... 183,750
- ----------------------------------------------------------------------------------------------------------
1,354,719
- ----------------------------------------------------------------------------------------------------------
FINANCIAL INSTITUTIONS -- 0.3%
200,000 B Dollar Financial Group, Sr. Notes, 9.750% due 11/15/11 (b)....... 210,000
- ----------------------------------------------------------------------------------------------------------
FINANCIAL/OTHER -- 1.6%
1,225,000 BB- Targeted Return Index Sector, Trains HY-2004-1, Secured Notes,
8.218% due 8/1/15 (b)(d)....................................... 1,273,249
- ----------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE -- 6.4%
63,000 B- AgriLink Foods Inc., Sr. Sub. Notes, 11.875% due 11/1/08......... 66,938
250,000 B- American Seafood Group LLC, Sr. Sub. Notes, 10.125% due
4/15/10........................................................ 300,000
150,000 CCC+ B&G Foods, Inc., Sr. Sub. Notes, Series D, 9.625% due 8/1/07..... 153,375
150,000 BB Constellation Brands, Inc., Sr. Notes, Series B, 8.000% due
2/15/08........................................................ 162,000
200,000 B+ Cott Beverages Inc., Sr. Sub. Notes, 8.000% due 12/15/11......... 213,500
Del Monte Corp.:
75,000 B Series B, 9.250% due 5/15/11................................... 82,313
400,000 B Sr. Sub. Notes, 8.625% due 12/15/12............................ 433,000
Dole Foods Co., Sr. Notes:
275,000 B+ 8.625% due 5/1/09.............................................. 289,438
175,000 B+ 7.250% due 6/15/10............................................. 173,688
300,000 CCC+ Eagle Family Foods Holdings, Inc., Sr. Sub. Notes, Series B,
8.750% due 1/15/08............................................. 211,500
200,000 B- Gold Kist, Inc., Sr. Notes, 10.250% due 3/15/14 (b).............. 218,000
225,000 B- Land O' Lakes, Inc., Sr. Notes, 8.750% due 11/15/11.............. 208,125
175,000 B- Michael Foods Inc., Sr. Sub. Notes, 8.000% due 11/15/13 (b)...... 181,563
150,000 B- National Beef Packing Co. LLC, Sr. Notes, 10.500% due 8/1/11
(b)............................................................ 159,750
100,000 NR Nebco Evans Holding Co., Sr. Discount Notes, 12.375% due 7/15/07
(c)............................................................ 0
275,000 B- Pierre Foods Inc., Sr. Sub. Notes, 9.875% due 7/15/12 (b)........ 280,156
Pilgrim's Pride Corp.:
275,000 BB- Sr. Notes, 9.625% due 9/15/11.................................. 305,250
225,000 B+ Sr. Sub. Notes, 9.250% due 11/15/13............................ 240,750
200,000 B- Reddy Ice Group, Inc., Sr. Sub. Notes, 8.875% due 8/1/11 (b)..... 212,000
Smithfield Foods Inc., Sr. Notes:
200,000 BB- 7.750% due 5/15/13............................................. 211,000
250,000 BB- Series B, 8.000% due 10/15/09.................................. 270,625
Swift & Co.:
100,000 B+ Sr. Notes, 10.125% due 10/1/09................................. 107,250
125,000 B- Sr. Sub. Notes, 12.500% due 1/1/10............................. 134,375
300,000 CCC+ UAP Holding Corp., Sr. Discount Notes, zero coupon due 7/15/12
(b)............................................................ 241,200
75,000 B- United Agricultural Products Inc., Sr. Notes, 8.250% due 12/15/11
(b)............................................................ 84,000
- ----------------------------------------------------------------------------------------------------------
4,939,796
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
GAMING -- 7.4%
$ 75,000 B American Casino & Entertainment, Sr. Secured Notes, 7.850% due
2/1/12 (b)..................................................... $ 76,500
Boyd Gaming Corp., Sr. Sub. Notes:
100,000 B+ 8.750% due 4/15/12............................................. 107,000
175,000 B+ 7.750% due 12/15/12............................................ 177,625
200,000 NR Coast Hotels & Casino, Inc., Sr. Sub. Notes, 9.500% due 4/1/09... 211,000
225,000 B- Global Cash Access LLC, Sr. Sub. Notes, 8.750% due 3/15/12 (b)... 235,125
500,000 BB+ Harrah's Operating Co., Inc., Sr. Sub. Notes, 7.875% due
12/15/05....................................................... 529,375
225,000 B Isle of Capri Casinos, Inc., Sr. Sub. Notes, 9.000% due
3/15/12........................................................ 243,563
150,000 B Majestic Star Casino LLC, Sr. Secured Notes, 9.500% due 10/15/10
(b)............................................................ 151,500
Mandalay Resort Group:
125,000 BB+ Sr. Notes, 9.500% due 8/1/08................................... 140,625
475,000 BB- Sr. Sub. Notes, Series B, 10.250% due 8/1/07................... 529,625
MGM MIRAGE:
150,000 BB+ Sr. Notes, 8.500% due 9/15/10.................................. 162,750
Sr. Sub. Notes:
600,000 BB- 9.750% due 6/1/07............................................ 658,500
200,000 BB- 8.375% due 2/1/11............................................ 210,000
Mohegan Tribal Gaming Authority, Sr. Sub. Notes:
25,000 BB- 8.375% due 7/1/11.............................................. 27,125
250,000 BB- 8.000% due 4/1/12.............................................. 267,500
225,000 B+ MTR Gaming Group, Sr. Notes, 9.750% due 4/1/10................... 243,000
Park Place Entertainment Corp., Sr. Sub. Notes:
275,000 BB- 7.875% due 3/15/10............................................. 291,500
300,000 BB- 8.125% due 5/15/11............................................. 319,875
Penn National Gaming, Inc., Sr. Sub. Notes:
50,000 B 8.875% due 3/15/10............................................. 54,562
175,000 B Series B, 11.125% due 3/1/08................................... 193,375
200,000 B+ Station Casinos, Inc., Sr. Sub. Notes, 6.500% due 2/1/14......... 193,500
250,000 B Sun International Hotels Ltd., Sr. Sub. Notes, 8.875% due
8/15/11........................................................ 268,125
225,000 B Venetian Casino Resort LLC/Las Vegas Sands Inc., Mortgage Notes,
11.000% due 6/15/10............................................ 261,000
117,000 CCC+ Wynn Las Vegas LLC/Corp., Second Mortgage, 12.000% due 11/1/10... 140,692
- ----------------------------------------------------------------------------------------------------------
5,693,442
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE -- 4.4%
300,000 B- Ameripath Inc., Sr. Sub. Notes, 10.500% due 4/1/13............... 304,500
175,000 B- Ardent Health Services, Sr. Sub. Notes, 10.000% due 8/15/13
(b)............................................................ 188,125
Concentra Operating Corp. Sr. Secured Notes:
175,000 B- 9.500% due 8/15/10............................................. 187,250
50,000 B- 9.125% due 6/1/12 (b).......................................... 52,500
325,000 B+ Fisher Scientific International, Sr. Notes, 8.000% due 9/1/13
(b)............................................................ 349,375
100,000 B- Hanger Orthopedic Group, Sr. Notes, 10.375% due 2/15/09.......... 102,750
HCA Inc., Notes:
350,000 BBB- 6.910% due 6/15/05............................................. 360,457
375,000 BBB- 8.750% due 9/1/10.............................................. 428,717
200,000 BBB- 6.750% due 7/15/13............................................. 205,220
143,382 B+ Magellan Health Services, Inc., Sr. Notes, 9.375% due 11/15/08... 154,494
200,000 BBB Manor Care Inc., Sr. Notes, 8.000% due 3/1/08.................... 222,250
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE -- 4.4% (CONTINUED)
$ 100,000 B- Medical Device Manufacturing, Inc., Sr. Sub. Notes, 10.000% due
7/15/12 (b).................................................... $ 102,500
150,000 BB- Sybron Dental Specialties, Inc., Sr. Sub. Notes, 8.125% due
6/15/12........................................................ 161,250
125,000 B- Universal Hospital Services Inc., Sr. Notes, 10.125% due 11/1/11
(b)............................................................ 127,500
350,000 B- Vanguard Health Systems, Inc., Sr. Sub. Notes, 9.750% due
8/1/11......................................................... 380,625
75,000 B VWR International Inc., Sr. Sub. Notes, 8.000% due 4/15/14 (b)... 77,250
- ----------------------------------------------------------------------------------------------------------
3,404,763
- ----------------------------------------------------------------------------------------------------------
INDUSTRIAL/OTHER -- 4.4%
100,000 B- Aearo Co. I, Sr. Sub. Notes, 8.250% due 4/15/12 (b).............. 102,500
225,000 B- Brand Services, Inc., Sr. Sub. Notes, 12.000% due 10/15/12....... 257,625
400,000 B- Eagle-Picher Inc., Sr. Notes, 9.750% due 9/1/13.................. 432,000
Foamex L.P.:
125,000 B- Sr. Secured Notes, 10.750% due 4/1/09.......................... 124,375
100,000 CCC+ Sr. Sub. Notes, 9.875% due 6/15/07............................. 85,500
50,000 NR Glenoit Corp., Sr. Sub. Notes, 11.000% due 4/15/07 (c)........... 1,000
200,000 B+ Greif Bros. Corp., Sr. Sub. Notes, 8.875% due 8/1/12............. 216,250
175,000 B Hines Nurseries Inc., Sr. Notes, 10.250% due 10/1/11 (b)......... 191,625
225,000 B- Interline Brands Inc., Sr. Sub. Notes, 11.500% due 5/15/11....... 249,750
250,000 CCC+ Milacron Escrow Corp., Sr. Secured Notes, 11.500% due 5/15/11
(b)............................................................ 250,000
Neenah Corp.:
191,000 CCC+ Sr. Secured Notes, 11.000% due 9/30/10 (b)..................... 203,415
159,574 CCC+ Sr. Sub. Notes, 13.000% due 9/30/13 (b)........................ 157,180
250,000 B- Norcross Safety Products, Sr. Sub. Notes, 9.875% due 8/15/11
(b)............................................................ 271,250
200,000 B- Rexnord Corp., Sr. Sub. Notes, 10.125% due 12/15/12.............. 221,000
300,000 B- Sensus Metering Systems, Sr. Sub. Notes, 8.625% due 12/15/13
(b)............................................................ 289,500
150,000 B Superior Essex Communications LLC, Sr. Notes, 9.000% due 4/15/12
(b)............................................................ 144,000
100,000 B+ Valmont Industries, Inc., Sr. Sub. Notes, 6.875% due 5/1/14
(b)............................................................ 98,750
125,000 B- Wesco Distribution Inc., Sr. Sub. Notes, 9.125% due 6/1/08....... 129,219
- ----------------------------------------------------------------------------------------------------------
3,424,939
- ----------------------------------------------------------------------------------------------------------
LODGING -- 2.0%
125,000 CCC+ Courtyard by Marriott, Sr. Secured Notes, Series B, 10.750% due
2/1/08......................................................... 125,938
250,000 B- Florida Panthers Holdings, Sr. Sub. Notes, 9.875% due 4/15/09.... 264,375
Hilton Hotels Corp., Notes:
300,000 BBB- 8.250% due 2/15/11............................................. 335,250
50,000 BBB- 7.625% due 12/1/12............................................. 54,000
133,000 B+ HMH Properties, Inc. Sr. Notes, Series B, 7.875% due 8/1/08...... 136,990
175,000 BB+ Royal Caribbean Cruises Ltd., Sr. Notes, 8.000% due 5/15/10...... 189,437
Starwood Hotels & Resorts Worldwide Inc., Sr. Notes:
350,000 BB+ 7.375% due 5/1/07.............................................. 370,125
100,000 BB+ 7.875% due 5/1/12.............................................. 107,500
- ----------------------------------------------------------------------------------------------------------
1,583,615
- ----------------------------------------------------------------------------------------------------------
MEDIA/CABLE -- 2.4%
250,000 B+ Cablevision Systems Corp., Sr. Notes, 8.000% due 4/15/12 (b)..... 247,500
350,000 CCC- Charter Communications Holdings II, Sr. Notes, 10.250% due
9/15/10 (b).................................................... 354,375
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
MEDIA/CABLE -- 2.4% (CONTINUED)
Charter Communications Holdings LLC, Sr. Discount Notes:
$ 75,000 CCC- Step bond to yield 11.758% due 1/15/11......................... $ 55,313
450,000 CCC- Step bond to yield 10.959% due 4/1/11.......................... 357,750
375,000 BB- CSC Holdings Inc., Sr. Notes, 7.875% due 12/15/07................ 391,875
450,000 B Kabel Deutschland GMBH, Sr. Notes, 10.625% due 7/1/14 (b)........ 464,625
- ----------------------------------------------------------------------------------------------------------
1,871,438
- ----------------------------------------------------------------------------------------------------------
MEDIA/NON-CABLE -- 8.6%
Advanstar Communications Inc.:
125,000 B- Sr. Secured Notes, 10.750% due 8/15/10 (b)..................... 138,906
250,000 CCC+ Sr. Sub. Notes, Series B, 12.000% due 2/15/11.................. 267,500
125,000 NR Advanstar Inc., Sr. Sub. Notes, Series B, step bond to yield
14.993% due 10/15/11 (e)....................................... 101,406
150,000 B- Affinity Group, Inc., Sr. Sub. Note, 9.000% due 2/15/12 (b)...... 154,500
American Media Operations Inc., Sr Sub. Notes:
150,000 B- 8.875% due 1/15/11............................................. 145,875
175,000 B- Series B, 10.250% due 5/1/09................................... 182,438
200,000 B- Block Communications Inc., Sr. Sub. Notes, 9.250% due 4/15/09.... 211,000
100,000 B Cadmus Communication Corp, Sr. Sub. Notes, 8.375% due 6/15/14
(b)............................................................ 100,500
425,000 B Dex Media East, LLC, Sr. Sub. Notes, 12.125% due 11/15/12........ 498,313
275,000 B Dex Media Inc., Notes, 8.000% due 11/15/13 (b)................... 178,750
500,000 B Dex Media West, LLC, Sr. Sub. Notes, 9.875% due 8/15/13 (b)...... 551,250
325,000 BB- DIRECTV Holdings, LLC, Sr. Notes, 8.375% due 3/15/31............. 361,156
Echostar DBS Corp., Sr. Notes:
100,000 BB- 10.375% due 10/1/07............................................ 107,375
225,000 BB- 5.750% due 10/1/08............................................. 223,031
150,000 B Houghton Mifflin Co., Sr. Discount Notes, zero coupon due
10/15/13....................................................... 80,437
50,000 B Inmarsat Finance PLC, Sr. Notes, 7.625% due 6/30/12 (b).......... 48,625
175,000 B Lamar Media Corp., Sr. Sub. Notes, 7.250% due 1/1/13............. 178,938
50,000 CCC+ Liberty Group Operating, Inc., Sr. Sub. Notes, 9.375% due
2/1/08......................................................... 50,000
175,000 B- Lodgenet Entertainment Corp., Sr. Sub. Notes, 9.500% due
6/15/13........................................................ 192,063
400,000 B+ PanAmSat Corp., Sr. Notes, 8.500% due 2/1/12..................... 456,000
300,000 B Quebecor Media, Inc., Sr. Notes, 11.125% due 7/15/11............. 343,875
200,000 BB- Reader's Digest Association, Inc., Sr. Notes, 6.500% due
3/1/11......................................................... 196,250
275,000 B+ R.H. Donnelley Corp., Sr. Sub. Notes, 10.875% due 12/15/12....... 320,375
Sinclair Broadcast Group, Sr. Sub. Notes:
300,000 B 8.750% due 12/15/11............................................ 322,500
50,000 B 8.000% due 3/15/12............................................. 51,375
Vertis, Inc.:
550,000 B- Notes, Series B, 10.875% due 6/15/09........................... 594,000
50,000 B- Sr. Secured Notes, 9.750% due 4/1/09........................... 54,000
XM Satellite Radio Inc.:
186,747 CCC+ Sr. Discount Notes, step bond to yield 21.882%% due 12/31/09... 176,943
94,000 CCC+ Sr. Secured Notes, 12.000% due 6/15/10 (e)..................... 108,217
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
MEDIA/NON-CABLE -- 8.6% (CONTINUED)
Yell Finance B.V.:
$ 179,000 BB- Sr. Discount Notes, step bond to yield 13.494% due 8/1/11...... $ 169,155
97,000 BB- Sr. Notes, 10.750% due 8/1/11.................................. 112,278
- ----------------------------------------------------------------------------------------------------------
6,677,031
- ----------------------------------------------------------------------------------------------------------
METALS & MINING -- 1.5%
125,000 BB- California Steel Industries, Inc., Sr. Notes, 6.125% due
3/15/14........................................................ 117,188
75,000 B- Commonwealth Industries, Sr. Sub. Notes, 10.750% due 10/1/06..... 76,125
225,000 B- IMCO Recycling Inc., Secured Sr. Notes, 10.375% due 10/15/10
(b)............................................................ 244,125
150,000 B- Ispat Inland ULC, Sr. Secured Notes, 9.750% due 4/1/14 (b)....... 155,250
150,000 NR Republic Technology Inc., Sr. Secured Notes, 13.750% due 7/15/09
(c)(e)......................................................... 0
150,000 B Ryerson Tull Inc., Notes, 9.125% due 7/15/06..................... 157,500
210,000 BB- United States Steel Corp., Sr. Notes, 9.750% due 5/15/10......... 233,625
150,000 B Wise Metals Group LLC, Sr. Secured Notes, 10.250% due 5/15/12
(b)............................................................ 154,500
- ----------------------------------------------------------------------------------------------------------
1,138,313
- ----------------------------------------------------------------------------------------------------------
PACKAGING -- 3.1%
225,000 B- Berry Plastics, Sr. Sub. Notes, 10.750% due 7/15/12.............. 250,875
250,000 CCC+ Graham Packaging/GPC CAP Co., Sr. Sub. Notes, 8.750% due 1/15/08
(b)............................................................ 252,500
175,000 CCC+ Graham Packaging, Sr. Sub. Notes, Series B, 4.795 due 1/15/08
(d)............................................................ 168,875
Owens-Brockway Glass Containers, Sr. Secured Notes:
250,000 BB- 8.875% due 2/15/09............................................. 271,250
150,000 BB- 7.750% due 5/15/11............................................. 156,750
100,000 B- 8.25% due 5/15/13.............................................. 103,750
350,000 B- Owens Illinois Inc., Sr. Notes, 8.100% due 5/15/07............... 362,250
125,000 B+ Plastipak Holdings, Inc., Sr. Notes, 10.750% due 9/1/11.......... 135,000
Pliant Corp.
50,000 B- Sr. Secured Notes, 11.125% due 9/1/09.......................... 53,750
300,000 B- Sr. Secured Sub. Notes, 13.000% due 6/1/10..................... 270,000
16,707 NR Russell-Stanley Holdings Inc., Sr. Sub. Notes, 9.000% due
11/30/08 (b)................................................... 2
375,000 B- Tekni-Plex Inc., Sr. Sub. Notes, Series B, 12.750% due 6/15/10... 361,875
- ----------------------------------------------------------------------------------------------------------
2,386,877
- ----------------------------------------------------------------------------------------------------------
PAPER -- 4.0%
50,000 BB Boise Cascade Corp., Sr. Notes, 7.000% due 11/1/13............... 51,375
Georgia Pacific Corp.:
500,000 BB+ Notes, 7.500% due 5/15/06...................................... 532,500
Sr. Notes:
250,000 BB+ 8.125% due 5/15/11........................................... 277,500
400,000 BB+ 9.375% due 2/1/13............................................ 460,000
250,000 B- Graphic Packaging International Inc., Sr. Sub. Notes, 9.500% due
8/15/13 (b).................................................... 272,500
MDP Acquisitions PLC, Sr. Notes:
250,000 B 9.625% due 10/1/12............................................. 275,000
205,485 B 15.500% due 10/1/13............................................ 237,336
150,000 B+ Riverside Forest Products Limited, Sr. Notes, 7.875% due 3/1/14
(b)............................................................ 153,750
375,000 B Smurfit-Stone Container Corp., Sr. Notes, 8.250% due 10/1/12..... 391,875
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
PAPER -- 4.0% (CONTINUED)
$ 225,000 B Stone Container Corp., Sr. Notes, 9.750% due 2/1/11.............. $ 248,625
175,000 BB- Tembec Industries Inc., Sr. Notes, 8.500% due 2/1/11............. 177,625
- ----------------------------------------------------------------------------------------------------------
3,078,086
- ----------------------------------------------------------------------------------------------------------
RESTAURANTS -- 0.8%
125,000 CCC- Advantica Restaurant Group, Inc., Sr. Notes, 11.125% due
1/15/08........................................................ 121,250
50,000 CCC+ Buffets Inc., Sr. Sub. Notes, 11.250% due 7/15/10................ 52,500
250,000 B- Carrols Corp., Sr. Sub. Notes, 9.500% due 12/1/08................ 260,000
175,000 B- Dominos Inc., Sr. Sub. Notes, 8.250% due 7/1/11 (b).............. 186,375
- ----------------------------------------------------------------------------------------------------------
620,125
- ----------------------------------------------------------------------------------------------------------
RETAILERS -- 4.1%
325,000 B Buhrmann U.S. Inc., Sr. Sub. Notes, 12.250% due 11/1/09.......... 357,694
200,000 B Couche-Tard US/ Finance, Sr. Sub. Notes, 7.500% due 12/15/13
(b)............................................................ 201,000
125,000 B+ Finlay Fine Jewelry Corp., Sr. Notes, 8.375% due 6/1/12 (b)...... 130,312
200,000 B- FTD, Inc., Sr. Sub Notes, 7.750% due 2/15/14..................... 186,500
125,000 B- General Nutrition Center Inc., Sr. Sub. Notes, 8.500% due 12/1/10
(f)............................................................ 130,312
J.C. Penney Co., Inc., Notes:
50,000 BB+ 7.600% due 4/1/07.............................................. 54,187
476,000 BB+ 9.000% due 8/1/12.............................................. 564,060
200,000 B- Lazydays RV Center Inc., Sr. Notes, 11.750% due 5/15/12 (b)...... 212,000
150,000 BB+ Michaels Stores Inc., Sr. Notes, 9.250% due 7/1/09............... 165,000
250,000 B- PCA LLC/PCA Finance Corp., Sr. Notes, 11.875% due 8/1/09......... 270,000
200,000 B- Petro Stopping Centers LP, Sr. Secured Notes, 9.000% due 2/15/12
(b)............................................................ 199,000
Rite Aid Corp., Sr. Notes:
300,000 B+ 8.125% due 5/1/10.............................................. 317,250
100,000 B+ 9.500% due 2/15/11............................................. 110,750
225,000 B United Auto Group Inc., Sr. Sub. Notes, 9.625% due 3/15/12....... 247,500
400,000 NR US Office Products Co., Sr. Sub. Notes, 9.750% due 6/15/08 (c)... 40
- ----------------------------------------------------------------------------------------------------------
3,145,605
- ----------------------------------------------------------------------------------------------------------
SERVICES -- 1.0%
225,000 B Brickman Group, Ltd., Sr. Sub. Notes, 11.750% due 12/15/09....... 259,875
175,000 B+ CB Richard Ellis Services, Sr. Notes, 9.750% due 5/15/10......... 193,375
Language Line Holdings Inc.:
75,000 CCC+ Sr. Sub. Notes, 11.125% due 6/15/12 (b)........................ 76,500
75,000 CCC+ Sr. Discount Notes, zero coupon due 6/15/13 (b)................ 39,375
175,000 CCC SITEL Corp., Sr. Sub. Notes, 9.250% due 3/15/06.................. 172,390
- ----------------------------------------------------------------------------------------------------------
741,515
- ----------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 2.8%
250,000 B+ Activant Solutions Inc., Sr. Notes, 10.500% due 6/15/11.......... 265,000
155,000 B AMI Semiconductor Inc., Sr. Sub. Notes, 10.750% due 2/1/13....... 181,738
125,000 B- Da-Lite Screen Co., Inc., Sr. Notes, 9.500% due 5/15/11 (b)...... 130,625
125,000 B+ Danka Business Services, Sr. Notes, 11.000% due 6/15/10.......... 130,625
250,000 BB- Ingram Micro Inc., Sr. Sub. Notes, 9.875% due 8/15/08............ 275,000
175,000 BB+ Seagate Technology HDD Holdings, Sr. Notes, 8.000% due 5/15/09... 183,750
225,000 BB+ Unisys Corp., Sr. Notes, 6.875% due 3/15/10...................... 232,875
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 2.8% (CONTINUED)
Xerox Corp., Sr. Notes:
$ 450,000 B+ 9.750% due 1/15/09............................................. $ 514,125
225,000 B+ 7.625% due 6/15/13............................................. 231,188
- ----------------------------------------------------------------------------------------------------------
2,144,926
- ----------------------------------------------------------------------------------------------------------
TEXTILE -- 1.2%
175,000 B3* GFSI Inc., Sr. Sub. Notes, Series B, 9.625% due 3/1/07........... 168,875
125,000 CCC Levi Strauss & Co., Sr. Notes, 11.625% due 1/15/08............... 123,125
150,000 BB- Phillips Van-Heusen, Sr. Notes, 8.125% due 5/1/13................ 157,125
300,000 B Warnaco Inc., Sr. Notes, 8.875% due 6/15/13 (b).................. 324,000
162,000 B+ William Carter Co., Sr. Sub. Notes, Series B, 10.875% due
8/15/11........................................................ 184,275
- ----------------------------------------------------------------------------------------------------------
957,400
- ----------------------------------------------------------------------------------------------------------
TOBACCO -- 0.6%
200,000 NR Commonwealth Brands Inc., 10.625% due 9/1/08 (b)................. 215,000
DIMON Inc., Sr. Notes:
50,000 BB- 7.750% due 6/1/13 (b).......................................... 46,750
150,000 BB- Series B, 9.625% due 10/15/11.................................. 152,250
75,000 BB+ Standard Commercial Corp., Sr. Notes, 8.000% due 4/15/12 (b)..... 73,875
- ----------------------------------------------------------------------------------------------------------
487,875
- ----------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.7%
150,000 B- Allied Holdings Inc., Sr. Notes, Series B, 8.625% due 10/1/07.... 137,250
100,000 C* Holt Group, Sr. Sub. Notes, 9.750% due 1/15/06 (c)............... 0
Stena AB, Sr. Notes:
250,000 BB- 9.625% due 12/1/12............................................. 278,750
150,000 BB- 7.500% due 11/1/13 (b)......................................... 149,062
- ----------------------------------------------------------------------------------------------------------
565,062
- ----------------------------------------------------------------------------------------------------------
UTILITY/ELECTRIC -- 3.3%
238,691 BB+ Caithness Coso Fund Corp., Secured Notes, Series B, 9.050% due
12/15/09....................................................... 261,367
375,000 CCC+ Calpine Corp., Sr. Notes, 8.500% due 2/15/11..................... 246,563
325,000 B+ CMS Energy Corp., Sr. Notes, 8.900% due 7/15/08.................. 342,063
300,000 B+ Illinois Power, 11.500% due 12/15/10............................. 356,250
Nevada Power Co.:
50,000 BB 6.500% due 4/15/12 (b)......................................... 47,750
325,000 BB 2nd Mortgage, 9.000% due 8/15/13............................... 355,062
175,000 B+ NRG Energy Inc., Sr. Secured Notes, 8.000% due 12/15/13 (b)...... 177,625
PSEG Energy Holdings:
250,000 BB- Notes 10.000% due 10/1/09...................................... 283,750
200,000 BB- Sr. Notes, 8.625% due 2/15/08.................................. 216,000
Reliant Resources Inc., Sr. Secured Notes:
125,000 B 9.250% due 7/15/10 (b)......................................... 134,062
125,000 B 9.500% due 7/15/13 (b)......................................... 135,312
- ----------------------------------------------------------------------------------------------------------
2,555,804
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
UTILITY/NATURAL GAS -- 3.9%
El Paso Corp.:
Medium-Term Notes:
$ 175,000 CCC+ 6.95% due 12/15/07........................................... $ 170,188
325,000 Caa1-* 8.050% due 10/15/30.......................................... 266,500
450,000 CCC+ 7.800% due 8/1/31............................................ 363,375
225,000 CCC+ Sr. Notes, 6.750% due 5/15/09.................................. 204,750
175,000 B- El Paso Production Holding Co., 7.750% due 6/1/13................ 161,438
175,000 BB Pacific Energy Partners L.P., Sr. Notes, 7.125% due 6/15/14
(b)............................................................ 178,500
125,000 BB- Semco Energy Inc., Sr. Notes, 7.125% due 5/15/08................. 128,750
Tennessee Gas Pipeline:
150,000 B- Debentures, 7.500% due 4/1/17.................................. 147,000
450,000 B- Notes, 8.375% due 6/15/32...................................... 441,000
150,000 B+ Transcontinental Gas Pipeline Corp., Sr. Notes, Series B, 8.875%
due 7/15/12.................................................... 170,250
The Williams Cos., Inc.:
Notes:
200,000 B+ 7.625% due 7/15/19........................................... 193,500
425,000 B+ 7.875% due 9/1/21............................................ 411,187
125,000 B+ Sr. Notes, 8.625% due 6/1/10................................... 138,125
- ----------------------------------------------------------------------------------------------------------
2,974,563
- ----------------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 1.7%
225,000 B- American Cellular Corp., Sr. Notes, Series B, 10.000% due
8/1/11......................................................... 195,188
Nextel Communications, Inc.:
475,000 BB 7.375% due 8/1/15.............................................. 482,125
300,000 BB Sr. Notes, 9.375% due 11/15/09................................. 322,125
Nextel Partners Inc., Sr. Notes:
120,000 B- 12.500% due 11/15/09........................................... 140,400
50,000 B- 8.125% due 7/1/11.............................................. 51,250
100,000 CCC- U.S. Unwired Inc., Sr. Secured Notes, 10.000% due 6/15/12 (b).... 101,500
- ----------------------------------------------------------------------------------------------------------
1,292,588
- ----------------------------------------------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 3.6%
225,000 B- Alaska Communications Holdings Inc., Sr. Notes, 9.875% due
8/15/11 (b).................................................... 235,688
Cincinnati Bell Inc.:
250,000 B- Sr. Notes, 7.250% due 7/15/13 (b).............................. 235,000
200,000 B- Sr. Sub. Notes, 8.375% due 1/15/14 (b)......................... 179,000
125,000 BB- Eircom Funding, Sr. Sub. Notes, 8.250% due 8/15/13............... 130,625
175,000 CCC Primus Telecommunications Group, Inc., Sr. Notes, 8.000% due
1/15/14 (b).................................................... 154,875
100,000 B Qwest Capital Funding, Inc., 7.250% due 2/15/11.................. 86,000
850,000 BB- Qwest Corp., Notes, 8.875% due 3/15/12 (b)....................... 922,250
725,000 B Qwest Services Corp., Sr. Sub. Secured Notes, 13.500% due
12/15/10 (b)................................................... 846,437
- ----------------------------------------------------------------------------------------------------------
2,789,875
- ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES (Cost -- $72,638,755).............. 74,824,723
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
28
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK (g) -- 0.1%
- ----------------------------------------------------------------------------------------------------------
CHEMICALS -- 0.0%
45 General Chemical Industrial Products, Inc........................ $ 8,349
- ----------------------------------------------------------------------------------------------------------
CONTAINER & PACKAGING -- 0.0%
2,000 Russell-Stanley Holdings, Inc. (b)............................... 20
- ----------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 0.1%
710 NTL Inc. ........................................................ 40,910
- ----------------------------------------------------------------------------------------------------------
MEDIA/CABLE -- 0.0%
1,237 Viatel Holding Bermuda Ltd. ..................................... 1,515
- ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $502,527) 50,794
- ----------------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.6%
- ----------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.3%
PRIMEDIA Inc.:
1,150 Series F, 9.200%............................................... 102,350
1,500 Series H, 8.625%............................................... 129,750
- ----------------------------------------------------------------------------------------------------------
232,100
- ----------------------------------------------------------------------------------------------------------
RETAIL -- 0.3%
200 General Nutrition Centers Holding Co., Series A (b).............. 216,000
- ----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- 0.0%
1,878 McLeodUSA Inc., Series A (e)..................................... 4,885
- ----------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $915,704)......................... 452,985
- ----------------------------------------------------------------------------------------------------------
<Caption>
WARRANTS SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
WARRANTS (G) -- 0.1%
30,652 ACP Holdings Corp., Expire 10/7/13 (b)........................... 34,483
75 Advanstar Holdings Corp., Expire 10/15/11 (b).................... 2
901 AMF Bowling Worldwide, Inc., Class B Shares, Expire 3/9/09....... 0
26 General Chemical Industrial Products, Inc., Series A, Expire
4/30/11........................................................ 0
19 General Chemical Industrial Products, Inc., Series B, Expire
4/30/11........................................................ 0
4,162 McLeodUSA Inc., Class A Shares, Expire 4/16/07................... 583
100 MDP Acquisitors PLC, Expire 10/1/13 (b).......................... 2,800
100 Pliant Corp., Expire 6/1/10...................................... 1
150 Republic Technologies International LLC, Class D Shares, Expire
7/15/09 (b)(c)................................................. 2
125 XM Satellite Radio Holdings Inc., Expire 3/15/10 (b)............. 6,937
- ----------------------------------------------------------------------------------------------------------
TOTAL WARRANTS (Cost -- $105,613) 44,808
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.3%
$1,792,000 State Street Bank and Trust Co. dated 6/30/04, 1.1500% due
7/1/04; Proceeds at maturity -- $1,792,057; (Fully
collateralized by U.S. Treasury Notes, 6.500% due 10/15/06;
Market value -- $1,832,089) (Cost -- $1,792,000)............... $ 1,792,000
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $75,954,599**)..................... $77,165,310
- --------------------------------------------------------------------------------------------------------
</Table>
<Table>
(a) All ratings are by Standard & Poor's Ratings Service, except
for those that are identified by an asterisk (*) or a double
dagger (++), which are rated by Moody's Investors Service
and Fitch Ratings, respectively.
(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.
(c) Security is currently in default.
(d) Interest rate shown reflects current rate on instrument
which is a floater or has variable rate.
(e) Security has been issued with attached warrants.
(f) Payment-in-kind security for which all or part of the
dividend earned is paid by the issuance of additional stock.
(g) Non-income producing security.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See pages 45 and 46 for definitions of ratings.
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------
COMMON STOCK -- 96.4%
- ------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 11.8%
AUTO COMPONENTS -- 1.6%
9,700 Johnson Controls, Inc. ..................................... $ 517,786
- ------------------------------------------------------------------------------------
AUTOMOBILES -- 1.8%
26,757 Ford Motor Co. ............................................. 418,747
3,290 General Motors Corp. ....................................... 153,281
- ------------------------------------------------------------------------------------
572,028
- ------------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.2%
13,875 Koninklijke Philips Electronics N.V., Sponsored ADR......... 377,400
- ------------------------------------------------------------------------------------
MEDIA -- 3.8%
22,900 The Interpublic Group of Cos., Inc. ........................ 314,417
12,000 Viacom Inc., Class B Shares................................. 428,640
18,700 The Walt Disney Co. ........................................ 476,663
- ------------------------------------------------------------------------------------
1,219,720
- ------------------------------------------------------------------------------------
MULTI-LINE RETAIL -- 0.7%
4,300 Federated Department Stores, Inc. .......................... 211,130
- ------------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.7%
15,900 The Gap, Inc. .............................................. 385,575
13,300 The Home Depot, Inc. ....................................... 468,160
- ------------------------------------------------------------------------------------
853,735
- ------------------------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY................................ 3,751,799
- ------------------------------------------------------------------------------------
CONSUMER STAPLES -- 3.3%
FOOD PRODUCTS -- 1.1%
17,300 Tyson Foods, Inc., Class A Shares........................... 362,435
- ------------------------------------------------------------------------------------
TOBACCO -- 2.2%
13,800 Altria Group, Inc. ......................................... 690,690
- ------------------------------------------------------------------------------------
TOTAL CONSUMER STAPLES...................................... 1,053,125
- ------------------------------------------------------------------------------------
ENERGY -- 10.9%
ENERGY EQUIPMENT & SERVICES -- 1.1%
12,000 Halliburton Co. ............................................ 363,120
- ------------------------------------------------------------------------------------
OIL & GAS -- 9.8%
11,200 BP PLC, Sponsored ADR....................................... 599,984
8,351 ChevronTexaco Corp. ........................................ 785,913
8,600 ConocoPhillips.............................................. 656,094
15,600 Exxon Mobil Corp. .......................................... 692,796
9,800 Marathon Oil Corp. ......................................... 370,832
- ------------------------------------------------------------------------------------
3,105,619
- ------------------------------------------------------------------------------------
TOTAL ENERGY................................................ 3,468,739
- ------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------
x
FINANCIALS -- 28.4%
BANKS -- 8.5%
14,700 Bank of America Corp. ...................................... $ 1,243,914
21,700 U.S. Bancorp................................................ 598,052
6,700 Wachovia Corp. ............................................. 298,150
10,000 Wells Fargo & Co. .......................................... 572,300
- ------------------------------------------------------------------------------------
2,712,416
- ------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 12.1%
5,080 The Bear Stearns Cos., Inc. ................................ 428,295
5,600 Capital One Financial Corp. ................................ 382,928
4,400 Fannie Mae.................................................. 313,984
2,600 Freddie Mac................................................. 164,580
4,300 The Goldman Sachs Group, Inc. .............................. 404,888
27,700 J.P. Morgan Chase & Co. .................................... 1,073,929
15,200 MBNA Corp. ................................................. 392,008
13,000 Morgan Stanley.............................................. 686,010
- ------------------------------------------------------------------------------------
3,846,622
- ------------------------------------------------------------------------------------
INSURANCE -- 7.8%
7,400 ACE Ltd. ................................................... 312,872
13,200 The Allstate Corp. ......................................... 614,460
8,400 American International Group, Inc. ......................... 598,752
8,600 Aon Corp. .................................................. 244,842
6,800 The Hartford Financial Services Group, Inc. ................ 467,432
6,500 Nationwide Financial Services............................... 244,465
- ------------------------------------------------------------------------------------
2,482,823
- ------------------------------------------------------------------------------------
TOTAL FINANCIALS............................................ 9,041,861
- ------------------------------------------------------------------------------------
HEALTHCARE -- 4.0%
HEALTHCARE PROVIDERS & SERVICES -- 2.5%
10,300 McKesson Corp. ............................................. 353,599
18,800 Tenet Healthcare Corp.++.................................... 252,108
2,800 UnitedHealth Group Inc. .................................... 174,300
- ------------------------------------------------------------------------------------
780,007
- ------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.5%
2,800 Johnson & Johnson........................................... 155,960
9,700 Pfizer Inc. ................................................ 332,516
- ------------------------------------------------------------------------------------
488,476
- ------------------------------------------------------------------------------------
TOTAL HEALTHCARE............................................ 1,268,483
- ------------------------------------------------------------------------------------
INDUSTRIALS -- 14.8%
AEROSPACE & DEFENSE -- 1.1%
6,234 Northrop Grumman Corp. ..................................... 334,766
- ------------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.1%
11,400 Masco Corp. ................................................ 355,452
- ------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------
x
COMMERCIAL SERVICES & SUPPLIES -- 6.4%
39,170 Cendant Corp. .............................................. $ 958,882
6,700 H&R Block, Inc. ............................................ 319,456
7,900 Pitney Bowes, Inc. ......................................... 349,575
12,790 Waste Management, Inc. ..................................... 392,013
- ------------------------------------------------------------------------------------
2,019,926
- ------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.5%
5,000 Textron, Inc. .............................................. 296,750
33,891 Tyco International Ltd. .................................... 1,123,148
- ------------------------------------------------------------------------------------
1,419,898
- ------------------------------------------------------------------------------------
MACHINERY -- 0.5%
2,500 Eaton Corp. ................................................ 161,850
- ------------------------------------------------------------------------------------
ROAD & RAIL -- 1.2%
6,400 Union Pacific Corp. ........................................ 380,480
- ------------------------------------------------------------------------------------
TOTAL INDUSTRIALS........................................... 4,672,372
- ------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 10.5%
COMMUNICATIONS EQUIPMENT -- 0.9%
15,400 Motorola, Inc. ............................................. 281,050
- ------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 5.2%
33,093 Hewlett-Packard Co. ........................................ 698,262
5,800 International Business Machines Corp. ...................... 511,270
15,600 Storage Technology Corp.++.................................. 452,400
- ------------------------------------------------------------------------------------
1,661,932
- ------------------------------------------------------------------------------------
IT CONSULTING & SERVICES -- 1.7%
4,900 Computer Sciences Corp.+.................................... 227,507
11,700 SunGard Data Systems Inc.+.................................. 304,200
- ------------------------------------------------------------------------------------
531,707
- ------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 0.6%
9,600 Applied Materials, Inc.++................................... 188,352
- ------------------------------------------------------------------------------------
SOFTWARE -- 2.1%
17,800 BMC Software, Inc.++........................................ 329,300
11,900 Microsoft Corp. ............................................ 339,864
- ------------------------------------------------------------------------------------
669,164
- ------------------------------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY................................ 3,332,205
- ------------------------------------------------------------------------------------
MATERIALS -- 6.5%
CHEMICALS -- 4.1%
8,500 Air Products & Chemicals, Inc. ............................. 445,825
8,200 E.I. du Pont de Nemours & Co. .............................. 364,244
7,800 PPG Industries, Inc. ....................................... 487,422
- ------------------------------------------------------------------------------------
1,297,491
- ------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
FEDERATED STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------
METALS & MINING -- 1.2%
11,800 Alcoa, Inc. ................................................ $ 389,754
- ------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.2%
8,700 International Paper Co. .................................... 388,890
- ------------------------------------------------------------------------------------
TOTAL MATERIALS............................................. 2,076,135
- ------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.8%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.8%
5,700 BellSouth Corp. ............................................ 149,454
10,100 SBC Communications, Inc. ................................... 244,925
18,100 Sprint Corp. (FON Group).................................... 318,560
13,250 Verizon Communications, Inc. ............................... 479,517
- ------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATION SERVICES............................ 1,192,456
- ------------------------------------------------------------------------------------
UTILITIES -- 2.4%
ELECTRIC UTILITIES -- 2.4%
5,700 FirstEnergy Corp. .......................................... 213,237
4,300 FPL Group, Inc. ............................................ 274,985
6,900 Public Service Enterprise Group Inc. ....................... 276,207
- ------------------------------------------------------------------------------------
TOTAL UTILITIES............................................. 764,429
- ------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $26,964,000).................... 30,621,604
- ------------------------------------------------------------------------------------
PREFERRED STOCK -- 1.9%
MEDIA -- 1.9%
18,400 The News Corp. Ltd., Sponsored ADR.......................... 604,992
- ------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $495,529).................... 604,992
- ------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
$526,000 State Street Bank & Trust Co. dated 6/30/04, 1.150% due
7/1/04; Proceeds at maturity -- $526,017; (Fully
collateralized by U.S. Treasury Bond, 10.375% due
11/15/09; Market value -- $538,175) (Cost -- $526,000).... 526,000
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $27,985,529*).......... $31,752,596
- ------------------------------------------------------------------------------------
</Table>
++ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
-----------------------------------
ADR -- American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
34
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
COMMON STOCK -- 96.2%
- ------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 18.9%
AUTO COMPONENTS -- 1.5%
7,344 Bandag, Inc. ............................................... $ 327,028
33,170 BorgWarner, Inc. ........................................... 1,451,851
16,978 Lear Corp. ................................................. 1,001,532
- ------------------------------------------------------------------------------------------
2,780,411
- ------------------------------------------------------------------------------------------
AUTOMOBILES -- 0.7%
35,148 Thor Industries, Inc. ...................................... 1,176,052
- ------------------------------------------------------------------------------------------
DISTRIBUTORS -- 0.3%
25,238 CarMax, Inc.++.............................................. 551,955
- ------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 2.9%
43,966 Brinker International, Inc.+++.............................. 1,500,120
50,944 Caesars Entertainment, Inc.++............................... 764,160
19,152 CBRL Group, Inc. ........................................... 590,839
8,958 GTECH Holdings Corp. ....................................... 414,845
11,307 Mandalay Resort Group....................................... 776,112
42,626 Ruby Tuesday, Inc. ......................................... 1,170,084
- ------------------------------------------------------------------------------------------
5,216,160
- ------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 4.7%
22,797 Blyth, Inc. ................................................ 786,269
45,615 D.R. Horton, Inc. .......................................... 1,295,466
11,030 Harman International Industries, Inc. ...................... 1,003,730
22,627 HNI Corp. .................................................. 957,801
10,242 Hovnanian Enterprises, Inc., Class A Shares++............... 355,500
26,917 Lennar Corp., Class A Shares................................ 1,203,728
18,368 Mohawk Industries Inc.+++................................... 1,346,925
991 NVR, Inc.*.................................................. 479,842
5,969 Pulte Homes, Inc. .......................................... 310,567
2,818 The Ryland Group, Inc. ..................................... 220,368
12,691 Toll Brothers, Inc.++....................................... 537,083
- ------------------------------------------------------------------------------------------
8,497,279
- ------------------------------------------------------------------------------------------
MEDIA -- 2.5%
23,943 Belo Corp., Class A Shares.................................. 642,870
23,016 Emmis Communications Corp., Class A Shares++................ 482,876
9,626 Entercom Communications Corp., Class A Shares++............. 359,050
22,113 Harte-Hanks, Inc. .......................................... 539,778
32,879 Macrovision Corp.++......................................... 822,961
6,947 Media General, Inc., Class A Shares......................... 446,136
1,200 Washington Post Co., Class B Shares......................... 1,116,012
- ------------------------------------------------------------------------------------------
4,409,683
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
MULTI-LINE RETAIL -- 0.6%
14,151 Dollar Tree Stores, Inc.++.................................. $ 388,162
13,160 The Neiman Marcus Group, Inc., Class A Shares++............. 732,354
- ------------------------------------------------------------------------------------------
1,120,516
- ------------------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.6%
12,891 Abercrombie & Fitch Co., Class A Shares..................... 499,526
15,992 American Eagle Outfitters, Inc.++........................... 462,329
12,462 AnnTaylor Stores Corp.++.................................... 361,149
11,274 CDW Corp. .................................................. 718,830
22,216 Chico's FAS, Inc.++......................................... 1,003,275
66,484 Claire's Stores, Inc.+...................................... 1,442,703
21,089 Michaels Stores, Inc. ...................................... 1,159,895
7,892 O'Reilly Automotive, Inc.++................................. 356,718
14,956 PETsMART, Inc. ............................................. 485,322
18,333 Ross Stores, Inc. .......................................... 490,591
39,343 Williams-Sonoma, Inc.++..................................... 1,296,745
- ------------------------------------------------------------------------------------------
8,277,083
- ------------------------------------------------------------------------------------------
TEXTILES & APPAREL -- 1.1%
37,267 Coach, Inc.+++.............................................. 1,684,096
4,539 The Timberland Co., Class A Shares++........................ 293,174
- ------------------------------------------------------------------------------------------
1,977,270
- ------------------------------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY................................ 34,006,409
- ------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 4.7%
BEVERAGES -- 0.6%
4,062 Constellation Brands, Inc., Class A Shares++................ 150,822
39,756 PepsiAmericas Inc. ......................................... 844,417
- ------------------------------------------------------------------------------------------
995,239
- ------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING -- 0.8%
37,200 Ruddick Corp. .............................................. 835,140
7,244 Whole Foods Market, Inc. ................................... 691,440
- ------------------------------------------------------------------------------------------
1,526,580
- ------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 2.8%
19,548 Dean Foods Co.++............................................ 729,336
27,722 Hormel Foods Corp. ......................................... 862,154
19,382 The J.M. Smucker Co. ....................................... 889,828
20,431 Sensient Technologies Corp. ................................ 438,858
18,335 Smithfield Foods, Inc.++.................................... 539,049
71,233 Tyson Foods, Inc., Class A Shares+.......................... 1,492,331
- ------------------------------------------------------------------------------------------
4,951,556
- ------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.2%
8,436 Church & Dwight, Inc. ...................................... 386,200
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
36
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
TOBACCO -- 0.3%
11,338 Universal Corp. ............................................ $ 577,558
- ------------------------------------------------------------------------------------------
TOTAL CONSUMER STAPLES...................................... 8,437,133
- ------------------------------------------------------------------------------------------
ENERGY -- 6.7%
ENERGY EQUIPMENT & SERVICES -- 3.0%
7,743 Cooper Cameron Corp.++...................................... 377,084
25,395 ENSCO International Inc. ................................... 738,995
10,609 FMC Technologies, Inc.++.................................... 305,539
17,350 Grant Prideco, Inc.++....................................... 320,281
8,672 Helmerich & Payne, Inc. .................................... 226,773
12,062 National-Oilwell, Inc.++.................................... 379,832
24,320 Smith International, Inc.++................................. 1,356,083
10,713 Tidewater, Inc. ............................................ 319,247
17,310 Varco International, Inc.++................................. 378,916
22,085 Weatherford International Ltd.++............................ 993,383
- ------------------------------------------------------------------------------------------
5,396,133
- ------------------------------------------------------------------------------------------
OIL & GAS -- 3.7%
214 Cross Timbers Royalty Trust. ............................... 5,919
11,933 Devon Energy Corp. ......................................... 787,578
17,768 Forest Oil Corp.++.......................................... 485,422
7,319 Kerr-McGee Corp. ........................................... 393,543
14,871 Murphy Oil Corp. ........................................... 1,095,993
9,529 Newfield Exploration Co.++.................................. 531,146
9,625 Noble Energy, Inc. ......................................... 490,875
16,891 Pioneer Natural Resources Co. .............................. 592,536
10,361 Pogo Producing Co. ......................................... 511,833
8,991 Valero Energy Corp. ........................................ 663,176
36,102 XTO Energy, Inc. ........................................... 1,075,479
- ------------------------------------------------------------------------------------------
6,633,500
- ------------------------------------------------------------------------------------------
TOTAL ENERGY................................................ 12,029,633
- ------------------------------------------------------------------------------------------
FINANCIALS -- 17.1%
BANKS -- 7.9%
27,210 Associated Banc-Corp........................................ 806,232
13,384 Astoria Financial Corp. .................................... 489,587
9,195 Bank of Hawaii Corp. ....................................... 415,798
29,581 Banknorth Group, Inc. ...................................... 960,791
5,887 City National Corp. ........................................ 386,776
53,867 The Colonial BancGroup, Inc. ............................... 978,763
22,243 Commerce Bancorp, Inc. ..................................... 1,223,587
15,232 Compass Bancshares, Inc. ................................... 654,976
10,797 First Horizon National Corp. ............................... 490,940
7,517 Greater Bay Bancorp......................................... 217,241
29,738 Greenpoint Financial Corp. ................................. 1,180,599
8,071 Hibernia Corp., Class A Shares.............................. 196,125
27,605 Independence Community Bank Corp. .......................... 1,004,822
16,211 Investors Financial Services Corp. ......................... 706,475
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
BANKS -- 7.9% (CONTINUED)
13,461 Mercantile Bankshares Corp. ................................ $ 630,244
17,059 National Commerce Financial Corp. .......................... 554,418
37,309 New York Community Bancorp. Inc. ........................... 732,376
11,387 North Fork Bancorp, Inc. ................................... 433,275
11,734 Regions Financial Corp. .................................... 428,878
46,590 Sovereign Bancorp, Inc. .................................... 1,029,639
15,422 Webster Financial Corp. .................................... 725,142
- ------------------------------------------------------------------------------------------
14,246,684
- ------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS -- 2.0%
13,697 A.G. Edwards, Inc. ......................................... 466,109
3,600 Affiliated Managers Group++................................. 181,332
20,790 E*TRADE Financial Corp.++................................... 231,808
8,609 Franklin Resources, Inc. ................................... 431,139
26,391 IndyMac Bancorp., Inc. ..................................... 833,956
9,192 Jefferies Group, Inc. ...................................... 284,217
9,109 Legg Mason, Inc. ........................................... 829,010
16,254 Raymond James Financial, Inc. .............................. 429,918
- ------------------------------------------------------------------------------------------
3,687,489
- ------------------------------------------------------------------------------------------
INSURANCE -- 6.0%
7,137 Ambac Financial Group, Inc. ................................ 524,141
20,890 American Financial Group, Inc. ............................. 638,607
7,788 AmerUs Group Co. ........................................... 322,423
14,387 Brown & Brown, Inc. ........................................ 620,080
12,607 Everest Re Group, Ltd. ..................................... 1,013,099
44,093 Fidelity National Financial, Inc. .......................... 1,646,433
15,283 First American Corp. ....................................... 395,677
11,014 HCC Insurance Holdings, Inc. ............................... 367,978
26,170 Horace Mann Educators Corp. ................................ 457,452
10,702 Leucadia National Corp. .................................... 531,889
12,466 The PMI Group, Inc. ........................................ 542,520
24,376 Protective Life Corp. ...................................... 942,620
5,974 Reinsurance Group of America, Inc. ......................... 242,843
16,252 Stancorp Financial Group, Inc. ............................. 1,088,884
17,926 Unitrin, Inc. .............................................. 763,648
14,404 W.R. Berkley Corp. ......................................... 618,652
- ------------------------------------------------------------------------------------------
10,716,946
- ------------------------------------------------------------------------------------------
REAL ESTATE -- 1.2%
14,264 AMB Property Corp. ......................................... 493,962
3,718 Hospitality Properties Trust................................ 157,271
15,207 Liberty Property Trust...................................... 611,473
20,745 New Plan Excel Realty Trust, Inc. .......................... 484,603
18,448 United Dominion Realty Trust, Inc. ......................... 364,901
- ------------------------------------------------------------------------------------------
2,112,210
- ------------------------------------------------------------------------------------------
TOTAL FINANCIALS............................................ 30,763,329
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
HEALTHCARE -- 10.5%
BIOTECHNOLOGY -- 1.3%
15,310 Charles River Laboratories International, Inc.++............ $ 748,200
7,270 Gilead Sciences, Inc.++..................................... 487,090
53,096 Millennium Pharmaceuticals, Inc.++.......................... 732,725
15,307 Protein Design Labs, Inc.++................................. 292,823
12,398 Vertex Pharmaceuticals Inc.++............................... 134,394
- ------------------------------------------------------------------------------------------
2,395,232
- ------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES -- 3.2%
21,754 Beckman Coulter, Inc. ...................................... 1,326,994
56,124 Cytyc Corp.++............................................... 1,423,866
6,035 DENTSPLY International Inc. ................................ 314,424
17,496 Edwards Lifesciences Corp.++................................ 609,736
9,135 Hillenbrand Industries, Inc. ............................... 552,211
23,317 Steris Corp.++.............................................. 526,032
11,716 Varian Medical Systems, Inc.++.............................. 929,665
- ------------------------------------------------------------------------------------------
5,682,928
- ------------------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES -- 4.3%
2,913 Aetna, Inc. ................................................ 247,605
12,045 Coventry Health Care, Inc.++................................ 589,000
27,217 First Health Group Corp.++.................................. 424,857
23,503 Health Net, Inc.++.......................................... 622,830
3,632 Henry Schein, Inc.++........................................ 229,324
28,033 LifePoint Hospitals, Inc.++................................. 1,043,388
46,742 Lincare Holdings, Inc.++.................................... 1,535,942
9,868 Oxford Health Plans, Inc.++................................. 543,135
28,265 PacifiCare Health Systems, Inc.++........................... 1,092,725
11,121 Patterson Dental Co.++...................................... 850,645
10,086 Triad Hospitals, Inc.++..................................... 375,502
21,133 WebMD Corp.++............................................... 196,960
- ------------------------------------------------------------------------------------------
7,751,913
- ------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.7%
4,912 Eon Labs, Inc.++............................................ 201,048
36,375 IVAX Corp.++................................................ 872,636
21,306 Sepracor, Inc.++............................................ 1,127,087
42,447 Valeant Pharmaceuticals International....................... 848,940
- ------------------------------------------------------------------------------------------
3,049,711
- ------------------------------------------------------------------------------------------
TOTAL HEALTHCARE............................................ 18,879,784
- ------------------------------------------------------------------------------------------
INDUSTRIALS -- 14.1%
AEROSPACE & DEFENSE -- 1.5%
20,433 L-3 Communications Holdings, Inc. .......................... 1,364,924
24,579 Precision Castparts Corp. .................................. 1,344,226
- ------------------------------------------------------------------------------------------
2,709,150
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
AIR FREIGHT & COURIERS -- 0.8%
21,361 CNF Inc. ................................................... $ 887,763
11,458 Expeditors International of Washington, Inc. ............... 566,140
- ------------------------------------------------------------------------------------------
1,453,903
- ------------------------------------------------------------------------------------------
AIRLINES -- 0.1%
5,960 JetBlue Airways Corp.++..................................... 175,105
- ------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 6.1%
9,221 Alliance Data Systems Corp.++............................... 389,587
27,780 Banta Corp. ................................................ 1,233,710
32,926 The Brink's Co. ............................................ 1,127,716
12,252 Career Education Corp.++.................................... 558,201
28,602 Ceridian Corp.++............................................ 643,545
20,976 CheckFree Corp.++........................................... 629,280
13,908 ChoicePoint Inc.++.......................................... 635,039
10,298 Corinthian Colleges, Inc.++................................. 254,773
10,055 D&B Corp.++................................................. 542,065
14,750 DeVry, Inc.++............................................... 404,445
6,601 DST Systems, Inc.++......................................... 317,442
28,456 Education Management Corp.++................................ 935,064
10,837 H&R Block, Inc. ............................................ 516,708
34,967 Korn/Ferry International++.................................. 677,311
17,024 Laureate Education, Inc++................................... 650,998
22,518 Manpower Inc. .............................................. 1,143,239
7,013 Republic Services, Inc. .................................... 202,956
6,996 West Corp.++................................................ 182,945
- ------------------------------------------------------------------------------------------
11,045,024
- ------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 0.5%
7,076 Granite Construction, Inc. ................................. 128,995
15,239 Jacobs Engineering Group Inc.++............................. 600,112
38,046 Quanta Services, Inc.++..................................... 236,646
- ------------------------------------------------------------------------------------------
965,753
- ------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.1%
38,789 Ametek, Inc. ............................................... 1,198,580
17,547 Energizer Holdings, Inc.++.................................. 789,615
- ------------------------------------------------------------------------------------------
1,988,195
- ------------------------------------------------------------------------------------------
MACHINERY -- 1.9%
23,204 AGCO Corp.++................................................ 472,665
9,531 Flowserve Corp.++........................................... 237,703
21,056 Kennametal Inc. ............................................ 964,365
49,690 Pentair, Inc. .............................................. 1,671,572
- ------------------------------------------------------------------------------------------
3,346,305
- ------------------------------------------------------------------------------------------
MARINE -- 0.5%
20,236 Overseas Shipholding Group, Inc. ........................... 893,015
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
40
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
ROAD & RAIL -- 1.6%
14,234 C.H. Robinson Worldwide, Inc. .............................. $ 652,487
32,428 GATX Corp. ................................................. 882,042
32,712 J.B. Hunt Transport Services, Inc. ......................... 1,262,029
- ------------------------------------------------------------------------------------------
2,796,558
- ------------------------------------------------------------------------------------------
TOTAL INDUSTRIALS........................................... 25,373,008
- ------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 12.9%
COMMUNICATIONS EQUIPMENT -- 1.6%
57,075 3Com Corp.++................................................ 356,719
11,440 Adtran, Inc. ............................................... 381,753
22,804 Brocade Communications Systems, Inc.++...................... 136,368
25,294 Harris Corp. ............................................... 1,283,670
13,110 Juniper Networks, Inc.++.................................... 322,113
8,568 Plantronics, Inc............................................ 360,713
- ------------------------------------------------------------------------------------------
2,841,336
- ------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.4%
15,115 Imation Corp. .............................................. 644,050
94,818 Quantum Corp.++............................................. 293,936
30,442 SanDisk Corp.++............................................. 660,287
31,394 Storage Technology Corp.++.................................. 910,426
- ------------------------------------------------------------------------------------------
2,508,699
- ------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.3%
4,008 Amphenol Corp., Class A Shares++............................ 133,547
29,492 Arrow Electronics, Inc.++................................... 790,975
20,587 Avnet, Inc.++............................................... 467,325
9,403 Diebold, Inc. .............................................. 497,137
11,775 Jabil Circuit, Inc.++....................................... 296,494
12,649 Vishay Intertechnology, Inc.++.............................. 235,018
- ------------------------------------------------------------------------------------------
2,420,496
- ------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.2%
58,370 RealNetworks, Inc.++........................................ 399,251
- ------------------------------------------------------------------------------------------
IT CONSULTING & SERVICES -- 0.8%
43,042 Acxiom Corp.++.............................................. 1,068,733
27,810 Keane, Inc.++............................................... 380,719
- ------------------------------------------------------------------------------------------
1,449,452
- ------------------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.5%
11,213 Zebra Technologies Corp., Class A Shares++.................. 975,531
- ------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 4.9%
246,686 Atmel Corp.++............................................... 1,460,381
3,577 Cabot Microelectronics Corp.++.............................. 109,492
24,240 Credence Systems Corp.++.................................... 334,512
12,578 Cree, Inc.++................................................ 292,816
11,906 Integrated Circuit Systems, Inc.++.......................... 323,367
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 4.9% (CONTINUED)
32,251 Integrated Device Technology, Inc.++........................ $ 446,354
25,520 International Rectifier Corp.++............................. 1,057,038
28,643 Lam Research Corp.++........................................ 767,632
20,981 Micrel, Inc.++.............................................. 254,919
24,625 Microchip Technology Inc. .................................. 776,672
42,503 MPS Group, Inc.++........................................... 515,136
35,334 RF Micro Devices, Inc.++.................................... 265,005
13,267 Semtech Corp.++............................................. 312,305
29,518 Silicon Laboratories Inc.++................................. 1,368,159
11,625 Teradyne, Inc.++............................................ 263,888
35,191 Triquint Semiconductor, Inc.++.............................. 192,143
- ------------------------------------------------------------------------------------------
8,739,819
- ------------------------------------------------------------------------------------------
SOFTWARE -- 2.2%
31,922 Cadence Design Systems, Inc.++.............................. 467,019
16,512 Jack Henry and Associates, Inc. ............................ 331,891
9,365 Macromedia, Inc.++.......................................... 229,911
19,200 National Instruments Corp. ................................. 588,480
8,006 The Reynolds and Reynolds Co., Class A Shares............... 185,179
37,059 Sybase, Inc.++.............................................. 667,062
19,503 Synopsys, Inc.++............................................ 554,470
39,653 Transaction Systems Architects, Inc., Class A Shares++...... 853,729
- ------------------------------------------------------------------------------------------
3,877,741
- ------------------------------------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY................................ 23,212,325
- ------------------------------------------------------------------------------------------
MATERIALS -- 4.4%
CHEMICALS -- 2.6%
20,021 Airgas, Inc. ............................................... 478,702
8,821 Albemarle Corp. ............................................ 279,185
3,682 Cabot Corp. ................................................ 149,857
25,642 Crompton Corp. ............................................. 161,545
10,252 Cytec Industries, Inc. ..................................... 465,953
9,625 FMC Corp.++................................................. 414,934
21,607 IMC Global, Inc. ........................................... 289,534
8,528 Lubrizol Corp. ............................................. 312,295
26,554 Lyondell Chemical Co. ...................................... 461,774
18,213 RPM International, Inc. .................................... 276,838
18,582 The Scotts Co.++............................................ 1,187,018
3,806 Valspar Corp. .............................................. 191,784
- ------------------------------------------------------------------------------------------
4,669,419
- ------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.2%
8,914 Martin Marietta Materials, Inc. ............................ 395,158
- ------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
24,952 Longview Fibre Co. ......................................... 367,543
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
42
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
METALS & MINING -- 0.6%
8,578 Arch Coal, Inc. ............................................ $ 313,869
8,141 Freeport-McMoRan Copper & Gold, Inc., Class B Shares........ 269,874
9,332 Peabody Energy Corp. ....................................... 522,499
- ------------------------------------------------------------------------------------------
1,106,242
- ------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.8%
10,129 Bowater Inc. ............................................... 421,265
12,481 Glatfelter.................................................. 175,732
4,790 Potlatch Corp. ............................................. 199,456
7,339 Rayonier, Inc. ............................................. 326,219
19,552 Wausau-Mosinee Paper Corp. ................................. 338,250
- ------------------------------------------------------------------------------------------
1,460,922
- ------------------------------------------------------------------------------------------
TOTAL MATERIALS............................................. 7,999,284
- ------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 0.6%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.1%
50,993 Cincinnati Bell, Inc.++..................................... 226,409
- ------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
11,499 Telephone & Data Systems, Inc. ............................. 818,729
- ------------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATION SERVICES............................ 1,045,138
- ------------------------------------------------------------------------------------------
UTILITIES -- 6.3%
ELECTRIC UTILITIES -- 3.3%
21,717 Allete, Inc. ............................................... 723,176
33,275 Alliant Energy Corp. ....................................... 867,812
20,988 Black Hills Corp. .......................................... 661,122
29,906 Energy East Corp. .......................................... 725,220
9,897 Great Plains Energy, Inc. .................................. 293,941
3,835 NSTAR....................................................... 183,620
13,216 OGE Energy Corp. ........................................... 336,612
32,966 Puget Energy, Inc. ......................................... 722,285
34,776 Wisconsin Energy Corp. ..................................... 1,134,045
6,260 WPS Resources Corp. ........................................ 290,151
- ------------------------------------------------------------------------------------------
5,937,984
- ------------------------------------------------------------------------------------------
GAS UTILITIES -- 1.9%
34,302 AGL Resources, Inc. ........................................ 996,473
40,190 MDU Resources Group, Inc. .................................. 965,766
37,372 National Fuel Gas Co. ...................................... 934,300
19,495 WGL Holdings Inc. .......................................... 559,896
- ------------------------------------------------------------------------------------------
3,456,435
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
43
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2004
DISCIPLINED MID CAP STOCK PORTFOLIO
<Table>
<Caption>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------
MULTI-UTILITIES -- 1.0%
22,698 Questar Corp. .............................................. $ 877,051
13,624 SCANA Corp. ................................................ 495,505
23,979 Westar Energy, Inc. ........................................ 477,422
- ------------------------------------------------------------------------------------------
1,849,978
- ------------------------------------------------------------------------------------------
TOTAL UTILITIES............................................. 11,244,397
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $143,369,148)................... 172,990,440
- ------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.8%
U.S. TREASURY BILLS -- 0.1%
$ 265,000 U.S. Treasury Bills due 9/16/04 (a) (Cost -- $264,266)...... 264,297
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.7%
6,578,000 State Street Bank & Trust Co. dated 6/30/04, 1.150% due
7/1/04; Proceeds at maturity -- $6,578,210; (Fully
collateralized by U.S. Treasury Bonds, 12.750% due 11/15/10;
Market value -- $6,710,876) (Cost -- $6,578,000)............ 6,578,000
- ------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost -- $6,842,266)........... 6,842,297
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $150,211,414*)......... $179,832,737
- ------------------------------------------------------------------------------------------
</Table>
++ Non-income producing security.
+ All or a portion of this security is segregated as collateral for open
futures contracts.
(a) All or a portion of this security is held as collateral for open futures
contracts.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
44
- --------------------------------------------------------------------------------
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
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differ from the highest rated issue
only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than in higher
rated categories.
BB, B, CCC and CC -- Bonds rated "BB" and "B" 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.
C -- Bonds rated "C" are bonds on which no interest is being
paid.
D -- Bonds rated "D" are in default, and payment of interest
and/or repayment of principal is in arrears.
</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 such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa -- Bonds rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate, and therefore 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.
</Table>
45
- --------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED) (CONTINUED)
Fitch Ratings ("Fitch") -- Ratings from "AA" to "B" 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 lowest expectation of credit
risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This
capacity is highly unlikely to be adversely affected by
foreseeable events.
AA -- Bonds rated "AA" have a very low expectation of credit risk.
They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A -- Bonds rated "A" have a low expectation of credit risk. The
capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
BBB -- Bonds rated "BBB" have a low expectation of credit risk. The
capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this
capacity.
BB -- Bonds rated "BB" indicate that there is a possibility of
credit risk developing, particularly as the result of
adverse economic change over time; however, business of
financial alternatives may be available to allow financial
commitments to be met.
B -- Bonds rated "B" indicate that significant credit risk is
present, but a limited margin of safety remains. Financial
Commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favourable
business and economic environment.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
</Table>
46
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2004
<Table>
<Caption>
TRAVELERS LAZARD MFS FEDERATED DISCIPLINED
QUALITY INTERNATIONAL EMERGING HIGH FEDERATED MID CAP
BOND STOCK GROWTH YIELD STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost............ $196,230,659 $147,651,557 $ 139,697,311 $ 75,954,599 $27,985,529 $150,211,414
Loaned securities collateral, at
cost.......................... -- 29,910,541 -- -- -- --
Foreign currency, at cost....... -- 12,595 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Investments, at value........... $195,405,161 $162,415,540 $ 166,868,317 $ 77,165,310 $31,752,596 $179,832,737
Loaned securities collateral, at
value (Note 8)................ -- 29,910,541 -- -- -- --
Foreign currency, at value...... -- 12,480 -- -- -- --
Cash............................ 738 22 400 354 564 343
Dividends and interest
receivable.................... 2,005,658 319,014 53,442 1,586,326 35,367 114,176
Receivable for securities
sold.......................... 1,779,918 2,273,115 977,502 495,885 318,607 8,971,998
Receivable for Fund shares
sold.......................... -- -- 19,599 28,242 49 58,151
Receivable for open forward
foreign currency contracts
(Note 6)...................... -- 7,086 -- -- -- --
Receivable from
broker -- variation margin.... -- -- -- -- -- 38,436
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS.................... 199,191,475 194,937,798 167,919,260 79,276,117 32,107,183 189,015,841
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities
purchased..................... 1,006,870 743,376 938,278 554,740 349,344 8,023,424
Payable for Fund shares
reacquired.................... 229,287 718,954 581,129 47,453 26,389 106,936
Investment advisory fees
payable....................... 52,654 109,761 93,002 41,668 16,029 101,142
Administration fees payable..... 9,715 8,873 16,564 3,846 1,541 8,679
Payable for loaned securities
collateral (Note 8)........... -- 29,910,541 -- -- -- --
Payable for open forward foreign
currency contracts (Note 6)... -- 1,566 -- -- -- --
Accrued expenses................ 41,995 53,418 45,801 33,754 17,766 45,924
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES............... 1,340,521 31,546,489 1,674,774 681,461 411,069 8,286,105
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................. $197,850,954 $163,391,309 $ 166,244,486 $ 78,594,656 $31,696,114 $180,729,736
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital................. $197,385,810 $188,129,684 $ 336,222,688 $ 87,797,508 $29,076,927 $151,126,624
Undistributed net investment
income........................ 2,906,478 1,126,749 -- 2,742,944 200,221 273,297
Accumulated net investment
loss.......................... -- -- (377,568) -- -- --
Accumulated net realized loss
from investment transactions
and futures contracts......... (1,615,836) (40,619,574) (196,772,013) (13,156,507) (1,348,101) (387,691)
Net unrealized appreciation
(depreciation) of investments,
futures contracts and foreign
currencies.................... (825,498) 14,754,450 27,171,379 1,210,711 3,767,067 29,717,506
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................. $197,850,954 $163,391,309 $ 166,244,486 $ 78,594,656 $31,696,114 $180,729,736
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING................ 17,673,920 16,072,388 16,925,739 9,156,179 2,023,098 9,689,230
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE........ $11.19 $10.17 $9.82 $8.58 $15.67 $18.65
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2004
<Table>
<Caption>
TRAVELERS LAZARD MFS FEDERATED DISCIPLINED
QUALITY INTERNATIONAL EMERGING HIGH FEDERATED MID CAP
BOND STOCK GROWTH YIELD STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (Note 8)...................... $ 4,078,978 $ 71,317 $ 19,412 $ 3,215,558 $ 14,185 $ 22,070
Dividends.............................. -- 2,455,716 382,350 12,851 327,765 922,287
Less: Foreign withholding tax.......... -- (294,047) (15,538) -- (1,717) --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................ 4,078,978 2,232,986 386,224 3,228,409 340,233 944,357
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)...... 326,937 591,015 630,923 252,315 98,518 603,782
Administration fees (Note 2)........... 60,675 42,983 50,474 23,291 9,458 51,753
Audit and legal........................ 25,763 22,764 19,886 18,996 16,725 23,140
Shareholder communications............. 13,901 13,108 15,866 2,380 3,190 16,026
Custody................................ 13,209 53,785 35,817 35,653 7,031 10,794
Trustees' fees......................... 3,469 4,094 3,066 1,995 1,995 5,256
Transfer agency services............... 2,493 2,611 2,494 2,891 2,493 2,501
Other.................................. 731 9,203 3,177 339 499 873
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES......................... 447,178 739,563 761,703 337,860 139,909 714,125
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)........... 3,631,800 1,493,423 (375,479) 2,890,549 200,324 230,232
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCIES
(NOTES 3, 5 AND 6):
Realized Gain (Loss) From:
Investment transactions.............. 46,818 7,680,502 10,826,120 423,416 707,178 7,076,648
Futures contracts.................... -- -- -- -- -- 286,881
Foreign currency transactions........ -- (116,612) (2,089) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN...................... 46,818 7,563,890 10,824,031 423,416 707,178 7,363,529
- ---------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) From:
Investments.......................... (3,765,711) (6,729,073) (2,101,066) (1,733,182) 87,506 3,526,577
Futures contracts.................... -- -- -- -- -- 4,894
Foreign currencies................... -- (21,524) (123) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION)....................... (3,765,711) (6,750,597) (2,101,189) (1,733,182) 87,506 3,531,471
- ---------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS, FUTURES
CONTRACTS AND FOREIGN CURRENCIES....... (3,718,893) 813,293 8,722,842 (1,309,766) 794,684 10,895,000
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $ (87,093) $ 2,306,716 $ 8,347,363 $ 1,580,783 $995,008 $11,125,232
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
48
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
TRAVELERS QUALITY LAZARD INTERNATIONAL MFS EMERGING
BOND PORTFOLIO STOCK PORTFOLIO GROWTH PORTFOLIO
---------------------------- ----------------------------- ----------------------------
2004 2003 2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss).... $ 3,631,800 $ 8,841,220 $ 1,493,423 $ 1,877,744 $ (375,479) $ (468,854)
Net realized gain (loss)........ 46,818 (813,388) 7,563,890 (4,181,788) 10,824,031 3,125,140
Change in net unrealized
appreciation (depreciation)... (3,765,711) 6,204,698 (6,750,597) 30,563,454 (2,101,189) 36,792,310
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS........ (87,093) 14,232,530 2,306,716 28,259,410 8,347,363 39,448,596
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income........... (74,339) (10,103,492) (12,923) (2,035,977) -- --
Net realized gains.............. -- (474,419) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO
SHAREHOLDERS.................. (74,339) (10,577,911) (12,923) (2,035,977) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of
shares........................ 8,301,184 43,240,349 41,762,732 104,649,317 2,757,953 8,640,718
Net asset value of shares issued
for reinvestment of
dividends..................... 74,339 10,577,911 12,923 2,035,977 -- --
Cost of shares reacquired....... (19,436,258) (54,268,288) (8,553,054) (102,506,397) (12,918,820) (24,103,589)
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS.................. (11,060,735) (450,028) 33,222,601 4,178,897 (10,160,867) (15,462,871)
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS............................ (11,222,167) 3,204,591 35,516,394 30,402,330 (1,813,504) 23,985,725
NET ASSETS:
Beginning of period............. 209,073,121 20,586,530 127,874,915 97,472,585 168,057,990 144,072,265
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*.................. $197,850,954 $209,073,121 $163,391,309 $ 127,874,915 $166,244,486 $168,057,990
- ---------------------------------------------------------------------------------------------------------------------------------
*Includes undistributed
(overdistributed) net
investment income of:......... $2,906,478 $(650,983) $1,126,749 $(237,139) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
*Includes accumulated net
investment loss of:........... -- -- -- -- $(377,568) --
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
FEDERATED HIGH FEDERATED DISCIPLINED MID CAP
YIELD PORTFOLIO STOCK PORTFOLIO STOCK PORTFOLIO
--------------------------- -------------------------- ----------------------------
2004 2003 2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income............... $ 2,890,549 $ 4,932,912 $ 200,324 $ 421,055 $ 230,232 $ 492,767
Net realized gain (loss)............ 423,416 (800,373) 707,178 27,649 7,363,529 3,281,954
Change in net unrealized
appreciation (depreciation)....... (1,733,182) 8,350,883 87,506 6,552,918 3,531,471 35,315,211
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS........................ 1,580,783 12,483,422 995,008 7,001,622 11,125,232 39,089,932
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............... (47,634) (5,110,185) (6,889) (414,269) (26,158) (426,728)
- ---------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS..... (47,634) (5,110,185) (6,889) (414,269) (26,158) (426,728)
- ---------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares.... 7,378,843 45,580,198 1,438,651 2,031,831 11,379,716 27,684,956
Net asset value of shares issued for
reinvestment of dividends......... 47,634 5,110,185 6,889 414,269 26,158 426,728
Cost of shares reacquired........... (6,161,112) (30,064,428) (2,540,931) (4,280,218) (6,691,900) (12,959,405)
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS...... 1,265,365 20,625,955 (1,095,391) (1,834,118) 4,713,974 15,152,279
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS..... 2,798,514 27,999,192 (107,272) 4,753,235 15,813,048 53,815,483
NET ASSETS:
Beginning of period................. 75,796,142 47,796,950 31,803,386 27,050,151 164,916,688 111,101,205
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*...................... $78,594,656 $ 75,796,142 $31,696,114 $31,803,386 $180,729,736 $164,916,688
- ---------------------------------------------------------------------------------------------------------------------------------
*Includes undistributed
(overdistributed) net investment
income of:........................ $2,742,944 $(99,971) $200,221 $6,786 $273,297 $69,223
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Quality Bond, Lazard International Stock, MFS Emerging
Growth, Federated High Yield, Federated Stock and Disciplined Mid Cap Stock
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 ten other separate
investment funds: U.S. Government Securities, Social Awareness Stock, Pioneer
Fund, Large Cap, Equity Income, Convertible Securities, Merrill Lynch Large Cap
Core, MFS Mid Cap Growth, Zero Coupon Bond Fund Series 2005 and MFS Value
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 following are significant accounting policies consistently followed by
the Funds and are in conformity with U.S. generally accepted accounting
principles ("GAAP"): (a) security transactions are accounted for on trade date;
(b) securities traded on national securities markets are valued at the closing
price on such markets or, if there were no sales during the day, at the mean
between the last reported bid and asked prices or on the basis of quotations
received from unaffiliated reputable brokers or other recognized sources;
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
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 and under the
direction of the Board of Trustees; securities traded in the over-the-counter
market are valued on the basis of the bid price at the close of business on each
day; U.S. government agencies and obligations are valued at the mean between the
last reported bid and asked prices; (c) securities for which market quotations
are not available will be valued in good faith at fair value by and under the
direction of the Board of Trustees; (d) securities maturing within 60 days are
valued at cost plus accreted discount or minus amortized premium, which
approximates value; (e) securities that have a maturity of more than 60 days are
valued at prices based on market quotations for securities of similar type,
yield and maturity; (f) 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 a Fund determines the existence
of a dividend declaration after exercising reasonable due diligence; (g) gains
or losses on the sale of securities are calculated by using the specific
identification method; (h) dividends and distributions to shareholders are
recorded on the ex-dividend date; the Funds distribute dividends and capital
gains, if any, at least annually; (i) 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; (j) the character of income and capital
gains to be distributed is determined in accordance with income tax regulations
which may differ from GAAP; (k) each 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 (l)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
The Federated High Yield Portfolio invests in high yield instruments that
are subject to certain credit and market risks. The yields of high yield debt
obligations reflect, among other things, perceived credit risk. The Federated
High Yield Portfolio's investment in securities rated below investment-grade
typically involves risks not associated with higher rated securities including,
among others, greater risk of timely and ultimate payment of interest and
principal, greater market price volatility and less liquid secondary market
trading.
In addition, the Lazard International Stock and MFS Emerging Growth
Portfolios may from time to time enter into forward exchange contracts in order
to hedge against foreign currency risk. These contracts are marked to market
daily, by recognizing the difference between the contract exchange rate and the
current market rate as an unrealized gain or loss. Realized gains or losses are
recognized when the contracts are settled or offset by entering into another
forward exchange contract.
51
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 Travelers Quality Bond ("TQB"), Lazard International Stock
("LIS"), MFS Emerging Growth ("MEG"), Federated High Yield ("FHY"), Federated
Stock ("FSP") and Disciplined Mid Cap Stock ("DMCS") Portfolios. TQB, LIS, MEG,
FHY, FSP and DMCS each pay TAMIC an investment advisory fee calculated at the
annual rate of 0.3233%, 0.825%, 0.75%, 0.65%, 0.625% and 0.70%, respectively, of
each Fund's respective average daily net assets. These fees are calculated daily
and paid monthly.
TAMIC has entered into sub-advisory agreements with Lazard Asset Management
LLC ("Lazard"), Massachusetts Financial Services ("MFS"), Federated Investment
Management Company ("Federated") and The Travelers Investment Management Company
("TIMCO"), another indirect wholly-owned subsidiary of Citigroup. Pursuant to
each sub-advisory agreement, Lazard, MFS and TIMCO are responsible for the
day-to-day fund operations and investment decisions for LIS, MEG and DMCS,
respectively. Federated is responsible for the day-to-day fund operations and
investment decisions for FHY and FSP. As a result, the following fees are paid
and calculated at an annual rate:
- TAMIC pays Lazard 0.475% of LIS's average daily net assets.
- TAMIC pays MFS 0.375% of MEG's average daily net assets.
- TAMIC pays Federated 0.40% and 0.375% of the average daily net
assets of FHY and FSP, respectively.
- TAMIC pays TIMCO 0.35% of DMCS's average daily net assets.
The Travelers Insurance Company ("TIC"), another indirect 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 Fund's
respective average daily net assets. This fee is calculated daily and paid
monthly. TIC has entered into a sub-administrative service agreement with Smith
Barney Fund Management LLC ("SBFM"), another indirect wholly-owned subsidiary of
Citigroup. TIC pays SBFM, as sub-administrator, a fee calculated at an annual
rate of 0.02% of the 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.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts 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 six months ended June
30, 2004, each Fund paid transfer agent fees of $2,500 to CTB.
For the six months ended June 30, 2004, Citigroup Global Markets Inc.,
another indirect wholly-owned subsidiary of Citigroup, 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 six months ended June 30, 2004, 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
- ----------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio............................ $87,104,694 $ 88,913,122
Lazard International Stock Portfolio........................ 80,953,474 46,987,456
MFS Emerging Growth Portfolio............................... 95,254,780 109,085,877
Federated High Yield Portfolio.............................. 15,467,699 15,358,857
Federated Stock Portfolio................................... 4,291,248 5,444,640
Disciplined Mid Cap Stock Portfolio......................... 46,750,773 41,870,806
- ----------------------------------------------------------------------------------------
</Table>
52
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At June 30, 2004, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
Travelers Quality Bond Portfolio............................ $ 2,159,662 $(2,985,160) $ (825,498)
Lazard International Stock Portfolio........................ 16,829,887 (2,065,904) 14,763,983
MFS Emerging Growth Portfolio............................... 29,432,937 (2,261,931) 27,171,006
Federated High Yield Portfolio.............................. 4,234,453 (3,023,742) 1,210,711
Federated Stock Portfolio................................... 5,088,436 (1,321,369) 3,767,067
Disciplined Mid Cap Stock Portfolio......................... 35,704,020 (6,082,697) 29,621,323
- ----------------------------------------------------------------------------------------------------------
</Table>
4. REPURCHASE AGREEMENTS
When entering into repurchase agreements, it is the Fund's policy that a
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market to
ensure the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
At June 30, 2004, MEG did not have any repurchase agreements outstanding.
5. FUTURES CONTRACTS
TQB, LIS, MEG, FSP and DMCS may from time to time enter into futures
contracts. Securities or cash equal to the initial margin amount are either
deposited with the broker or segregated by the custodian upon entering into the
futures contract. Additional securities are also segregated up to the current
market value of the futures contracts. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Funds record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Funds' basis in the contract.
The Funds enter into such contracts typically to hedge a portion of their
respective portfolios. The Funds bear the market risk that arises from changes
in the value of the financial instruments and securities indices.
At June 30, 2004, DMCS had the following open futures contracts:
<Table>
<Caption>
NUMBER OF BASIS MARKET UNREALIZED
EXPIRATION CONTRACTS VALUE VALUE GAIN
- --------------------------------------------------------------------------------------------------------
PURCHASED CONTRACTS:
S&P Midcap 400........................... 9/04 22 $6,594,567 $6,690,750 $96,183
- --------------------------------------------------------------------------------------------------------
</Table>
At June 30, 2004, TQB, LIS, MEG and FSP did not have any open futures
contracts.
6. FORWARD FOREIGN CURRENCY CONTRACTS
LIS and MEG may from time to time 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 Funds bear
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.
53
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At June 30, 2004, LIS had open forward foreign currency contracts as
described below. The unrealized gain (loss) on the contracts reflected in the
financial statements were as follows:
<Table>
<Caption>
LOCAL MARKET SETTLEMENT UNREALIZED
FOREIGN CURRENCY CURRENCY VALUE DATE GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO BUY:
Euro........................................................ 68,166 $ 83,032 7/1/04 $ 586
Euro........................................................ 312,272 380,378 7/1/04 (281)
Euro........................................................ 13,124 15,986 7/2/04 14
Euro........................................................ 20,892 25,448 7/2/04 23
Norwegian Krone............................................. 288,473 41,621 7/1/04 (156)
Norwegian Krone............................................. 157,940 22,788 7/2/04 (19)
- --------------------------------------------------------------------------------------------------------------
167
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL:
Euro........................................................ 86,950 105,913 7/1/04 (443)
Euro........................................................ 38,554 46,962 7/1/04 (389)
Euro........................................................ 17,681 21,537 7/1/04 (179)
Euro........................................................ 19,002 23,146 7/2/04 (49)
Euro........................................................ 19,185 23,370 7/2/04 (50)
Euro........................................................ 83,970 102,283 7/2/04 75
Japanese Yen................................................ 21,627,912 197,795 7/1/04 2,260
Japanese Yen................................................ 55,930,718 511,507 7/1/04 3,461
Japanese Yen................................................ 388,740 3,555 7/1/04 --
Japanese Yen................................................ 45,511,317 416,218 7/2/04 667
- --------------------------------------------------------------------------------------------------------------
5,353
- --------------------------------------------------------------------------------------------------------------
NET UNREALIZED GAIN ON OPEN FORWARD
FOREIGN CURRENCY CONTRACTS.................................................................... $5,520
- --------------------------------------------------------------------------------------------------------------
</Table>
At June 30, 2004, MEG did not have any open forward foreign currency
contracts.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves additional risks and considerations not typically associated with
investing in U.S. companies and the U.S. government. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
8. LENDING OF PORTFOLIO SECURITIES
The Funds have an agreement with their custodian whereby the custodian may
lend securities owned by a Fund to brokers, dealers and other financial
organizations. Fees earned by the Funds on securities lending are recorded as
interest income. Loans of securities by the Funds are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the securities loaned, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Funds maintain exposure for the risk of any losses in
the investments of amounts received as collateral.
At June 30, 2004, LIS loaned securities having a market value of
$28,375,327. LIS received cash collateral amounting to $29,910,541 which was
invested in the State Street Navigator Securities Lending Trust Prime Portfolio.
Income earned by LIS from securities lending for the six months ended June
30, 2004 was $48,834.
At June 30, 2004, TQB, MEG, FHY, FSP, and DMCS did not have any securities
on loan.
54
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. 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>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
- -----------------------------------------------------------------------------------------------------
TRAVELERS QUALITY BOND PORTFOLIO
Shares sold................................................. 735,291 3,799,891
Shares issued on reinvestment............................... 6,649 943,628
Shares reacquired........................................... (1,723,870) (4,753,702)
- -----------------------------------------------------------------------------------------------------
Net Decrease................................................ (981,930) (10,183)
- -----------------------------------------------------------------------------------------------------
LAZARD INTERNATIONAL STOCK PORTFOLIO
Shares sold................................................. 4,128,810 13,041,118
Shares issued on reinvestment............................... 1,266 204,469
Shares reacquired........................................... (831,789) (12,799,010)
- -----------------------------------------------------------------------------------------------------
Net Increase................................................ 3,298,287 446,577
- -----------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH PORTFOLIO
Shares sold................................................. 284,968 1,024,938
Shares reacquired........................................... (1,330,333) (2,951,286)
- -----------------------------------------------------------------------------------------------------
Net Decrease................................................ (1,045,365) (1,926,348)
- -----------------------------------------------------------------------------------------------------
FEDERATED HIGH YIELD PORTFOLIO
Shares sold................................................. 865,973 5,705,531
Shares issued on reinvestment............................... 5,552 607,710
Shares reacquired........................................... (724,760) (3,792,186)
- -----------------------------------------------------------------------------------------------------
Net Increase................................................ 146,765 2,521,055
- -----------------------------------------------------------------------------------------------------
FEDERATED STOCK PORTFOLIO
Shares sold................................................. 93,704 152,214
Shares issued on reinvestment............................... 443 27,308
Shares reacquired........................................... (164,549) (328,610)
- -----------------------------------------------------------------------------------------------------
Net Decrease................................................ (70,402) (149,088)
- -----------------------------------------------------------------------------------------------------
DISCIPLINED MID CAP STOCK PORTFOLIO
Shares sold................................................. 628,743 1,842,815
Shares issued on reinvestment............................... 1,411 24,260
Shares reacquired........................................... (369,390) (913,912)
- -----------------------------------------------------------------------------------------------------
Net Increase................................................ 260,764 953,163
- -----------------------------------------------------------------------------------------------------
</Table>
10. ADDITIONAL INFORMATION
Citigroup has been notified by the Staff of the Securities and Exchange
Commission (SEC) that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
(CAM), including its applicable investment advisory companies and Citigroup
Trust Bank (CTB), an internal transfer agent, relating to the creation and
operation of the internal transfer agent unit to serve certain CAM-managed
funds, including the Funds. This notification arises out of a previously
disclosed investigation by the SEC and the U.S. Attorney and relates to CTB's
entry in 1999 into the transfer agency business, CAM's retention of, and
agreements with an unaffiliated sub-transfer agent, the adequacy of the
disclosures made to the fund boards that approved the transfer agency
arrangements, (including CAM's failure to disclose a related revenue guarantee
agreement benefiting CAM and its affiliates), and CAM's operation of and
compensation for the transfer agency business. The revenue guarantee described
above was terminated in 1999 and CAM will be paying the applicable funds,
primarily through fee waivers, a total of approximately $17 million (plus
interest) that is the amount of the revenue received by Citigroup relating to
the revenue guarantee. Citigroup is cooperating fully in the investigation and
will seek to resolve the matter in
55
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
discussions with the SEC Staff. Although there can be no assurance, Citigroup
does not believe that this matter will have a material adverse effect on the
Funds. On August 12, 2004, CAM paid each Fund their allocable share of the
amount described on the previous page through a waiver of their fees. The amount
paid to each Fund is as follows:
<Table>
<Caption>
- ----------------------------------------------------------------------
Travelers Quality Bond Portfolio............................ $1,726
Lazard International Stock Portfolio........................ 1,726
MFS Emerging Growth Portfolio............................... 1,689
Federated High Yield Portfolio.............................. 1,726
Federated Stock Portfolio................................... 1,726
Disciplined Mid Cap Stock Portfolio......................... 1,726
- ----------------------------------------------------------------------
</Table>
11. SUBSEQUENT EVENT
The Board of Trustees of the Trust, on behalf of LIS, has approved an
amendment to the investment advisory agreement between LIS and TAMIC, and an
amendment to the sub-advisory agreement between TAMIC and Lazard.
Effective September 1, 2004, the investment advisory fee and sub-advisory
fee for LIS will be revised from the annual rates of 0.825% and 0.475%,
respectively, of the average daily net assets of LIS, to a fee calculated at the
annual rates in accordance with the following schedule.
<Table>
<Caption>
INVESTMENT ADVISORY SUB-ADVISORY
AVERAGE DAILY NET ASSETS FEE RATE FEE RATE
- ---------------------------------------------------------------------------------------------------
First $100 million.......................................... 0.825% 0.475%
Next $400 million........................................... 0.775 0.425
Next $500 million........................................... 0.725 0.375
Over $1 billion............................................. 0.700 0.350
- ---------------------------------------------------------------------------------------------------
</Table>
The Board of Trustees of the Trust, on behalf of MEG, has approved an
amendment to the investment advisory agreement between MEG and TAMIC, and an
amendment to the sub-advisory agreement between TAMIC and MFS.
Effective September 1, 2004, the investment advisory fee and sub-advisory
fee for MEG will be revised from the annual rate of 0.750% and 0.375%,
respectively, of the average daily net assets of MEG, to a fee calculated at the
annual rates in accordance with the following schedule:
<Table>
<Caption>
INVESTMENT ADVISORY SUB-ADVISORY
AVERAGE DAILY NET ASSETS FEE RATE FEE RATE
- ---------------------------------------------------------------------------------------------------
First $600 million.......................................... 0.750% 0.370%
Next $300 million........................................... 0.725 0.350
Next $600 million........................................... 0.700 0.325
Next $1 billion............................................. 0.675 0.300
Over $2.5 billion........................................... 0.625 0.250
- ---------------------------------------------------------------------------------------------------
</Table>
56
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
TRAVELERS QUALITY BOND PORTFOLIO 2004(1) 2003(2) 2002(2) 2001(2) 2000(2) 1999(2)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $11.21 $11.03 $11.39 $11.00 $10.82 $10.76
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3)................. 0.20 0.48 0.51 0.59 0.73 0.64
Net realized and unrealized gain
(loss)(3)............................. (0.22) 0.29 0.14 0.20 0.00* (0.51)
- -------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........ (0.02) 0.77 0.65 0.79 0.73 0.13
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... (0.00)* (0.56) (0.85) (0.40) (0.55) (0.00)*
Net realized gains....................... -- (0.03) (0.16) -- -- (0.07)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions........................ (0.00)* (0.59) (1.01) (0.40) (0.55) (0.07)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $11.19 $11.21 $11.03 $11.39 $11.00 $10.82
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4)............................ (0.14)%++ 6.98% 5.81% 7.13% 6.97% 1.09%
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)....... $198 $209 $206 $152 $73 $59
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(5).............................. 0.44%+ 0.43% 0.44% 0.45% 0.49% 0.54%
Net investment income(3)................. 3.59+ 4.15 4.48 5.14 6.81 5.86
- -------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 45% 191% 176% 225% 157% 357%
- -------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the six months ended June 30, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Effective January 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended December
31, 2001, those amounts would have been $0.61, $0.18 and 5.31% for net
investment income, net realized and unrealized gain and the ratio of net
investment income to average net assets, respectively. Per share
information, ratios and supplemental data for the periods prior to January
1, 2001 have not been restated to reflect this change in presentation.
(4) 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.
(5) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.75%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
57
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
LAZARD INTERNATIONAL STOCK PORTFOLIO 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000(2) 1999(2)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $10.01 $7.91 $9.30 $13.15 $15.65 $12.88
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.................... 0.11 0.15 0.11 0.11 0.13 0.17
Net realized and unrealized gain
(loss)................................ 0.05 2.11 (1.31) (3.50) (1.88) 2.63
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........ 0.16 2.26 (1.20) (3.39) (1.75) 2.80
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... (0.00)* (0.16) (0.19) (0.02) (0.32) (0.03)
Net realized gains....................... -- -- -- (0.44) (0.43) (0.00)*
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions........................ (0.00)* (0.16) (0.19) (0.46) (0.75) (0.03)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $10.17 $10.01 $7.91 $ 9.30 $13.15 $15.65
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3)............................ 1.61%++ 28.60% (12.96)% (26.19)% (11.50)% 21.78%
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)....... $163 $128 $97 $120 $141 $119
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4).............................. 1.03%+ 1.00% 1.06% 1.01% 1.02% 1.06%
Net investment income.................... 2.08+ 1.79 1.32 1.01 0.92 1.25
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 34% 44% 55% 81% 39% 35%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MFS EMERGING GROWTH PORTFOLIO 2004(1) 2003 2002(2) 2001(2) 2000(2) 1999(2)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $9.35 $7.24 $11.00 $22.60 $29.82 $16.87
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss...................... (0.02) (0.03) (0.03) (0.02) (0.05) (0.06)
Net realized and unrealized gain
(loss)................................ 0.49 2.14 (3.73) (8.20) (5.70) 13.01
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........ 0.47 2.11 (3.76) (8.22) (5.75) 12.95
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net realized gains....................... -- -- -- (3.38) (1.47) --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions........................ -- -- -- (3.38) (1.47) --
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $9.82 $9.35 $7.24 $11.00 $22.60 $29.82
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3)............................ 5.03%++ 29.14% (34.18)% (36.18)% (20.13)% 76.76%
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)....... $166 $168 $144 $258 $420 $413
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(5).............................. 0.91%+ 0.89% 0.89% 0.89% 0.90% 0.87%
Net investment loss...................... (0.45)+ (0.30) (0.32) (0.12) (0.18) (0.29)
- -----------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 58% 106% 114% 266% 203% 168%
- -----------------------------------------------------------------------------------------------------------------
</Table>
(1) For the six months ended June 30, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 1.25%.
(5) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets (excluding interest expense) will not exceed 0.95%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
58
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
FEDERATED HIGH YIELD PORTFOLIO 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000 1999
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD..... $8.41 $7.37 $8.55 $9.50 $11.44 $11.11
- ----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3)............... 0.32 0.65 0.74 0.97 1.25 1.01
Net realized and unrealized gain
(loss)(3)........................... (0.14) 1.00 (0.46) (0.77) (2.11) (0.67)
- ----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations...... 0.18 1.65 0.28 0.20 (0.86) 0.34
- ----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................. (0.01) (0.61) (1.46) (1.15) (1.08) (0.00)*
Net realized gains..................... -- -- -- -- -- (0.01)
- ----------------------------------------------------------------------------------------------------------------
Total Distributions...................... (0.01) (0.61) (1.46) (1.15) (1.08) (0.01)
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $8.58 $8.41 $7.37 $8.55 $9.50 $11.44
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4).......................... 2.08%++ 22.39% 3.72% 1.94% (8.15)% 3.10%
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)..... $79 $76 $48 $40 $39 $50
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(5)............................ 0.87%+ 0.90% 0.89% 0.89% 0.88% 0.84%
Net investment income(3)............... 7.45+ 7.93 9.09 10.45 10.61 9.15
- ----------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................. 21% 57% 58% 44% 19% 23%
- ----------------------------------------------------------------------------------------------------------------
</Table>
(1) For the six months ended June 30, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Effective January 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the six months ended
June 30, 2004, those amounts would have been $0.98, $0.78 and 10.51% for net
investment income, net realized and unrealized loss and the ratio of net
investment income to average net assets, respectively. Per share
information, ratios and supplemental data for the periods prior to January
1, 2001 have not been restated to reflect this change in presentation.
(4) 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.
(5) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.95%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
59
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
FEDERATED STOCK PORTFOLIO 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $15.19 $12.06 $15.40 $15.99 $16.34 $15.66
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.................... 0.10 0.20 0.16 0.16 0.21 0.16
Net realized and unrealized gain
(loss)................................ 0.38 3.13 (3.13) 0.11 0.33 0.68
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........ 0.48 3.33 (2.97) 0.27 0.54 0.84
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... (0.00)* (0.20) (0.37) (0.20) (0.18) --
Net realized gains....................... -- -- -- (0.66) (0.71) (0.16)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions........................ (0.00)* (0.20) (0.37) (0.86) (0.89) (0.16)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $15.67 $15.19 $12.06 $15.40 $15.99 $16.34
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3)............................ 3.18%++ 27.61% (19.32)% 1.67% 3.77% 5.34%
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)....... $32 $32 $27 $44 $45 $50
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4).............................. 0.89%+ 0.91% 0.84% 0.81% 0.82% 0.82%
Net investment income.................... 1.27+ 1.50 1.14 0.99 1.23 1.14
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 14% 41% 13% 14% 24% 23%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the six months ended June 30, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(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 0.95%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
60
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:
<Table>
<Caption>
DISCIPLINED MID CAP STOCK PORTFOLIO 2004(1) 2003 2002 2001(2) 2000(2) 1999(2)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........ $17.49 $13.11 $15.41 $17.26 $15.61 $14.34
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3).................. 0.02 0.05 0.03 0.06 0.08 0.02
Net realized and unrealized gain (loss)... 1.14 4.38 (2.23) (0.78) 2.46 1.84
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations......... 1.16 4.43 (2.20) (0.72) 2.54 1.86
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................... (0.00)* (0.05) (0.08) (0.04) (0.03) (0.02)
Net realized gains........................ -- -- (0.02) (1.09) (0.86) (0.57)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions......................... (0.00)* (0.05) (0.10) (1.13) (0.89) (0.59)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. $18.65 $17.49 $13.11 $15.41 $17.26 $15.61
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4)............................. 6.65%++ 33.75% (14.32)% (4.02)% 16.61% 13.47%
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (MILLIONS)........ $181 $165 $111 $113 $95 $45
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(5)............................ 0.83%+ 0.82% 0.85% 0.83% 0.88% 0.95%
Net investment income..................... 0.27+ 0.38 0.23 0.37 0.49 0.28
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE..................... 25% 61% 67% 40% 67% 71%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the six months ended June 30, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The Travelers Insurance Company has waived all or a portion of its fees for
the year ended December 31, 1999. In addition, The Travelers Insurance
Company has reimbursed the Fund for $13,500 of the Fund's expenses for the
year ended December 31, 1999. If such expenses were not reimbursed, the per
share decreases to net investment income and the actual expense ratio would
have been $0.01 and 0.99%, respectively.
(4) Total returns do no 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.
(5) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.95%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
61
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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
Senior Vice President and Citicorp Trust Bank, fsb.
Chief Administrative
Officer
Andrew Beagley
Chief Anti-Money
Laundering
Compliance Officer
William D. Wilcox*
Chief Compliance Officer
Kaprel Ozsolak
Controller
Kathleen McGah
Secretary
Ernest J. Wright
Assistant Secretary
- ---------------
* As of July 23, 2004.
</Table>
The Funds are separate investment funds of The Travelers Series Trust, a
Massachusetts business trust.
This report is prepared for the general information of variable annuity or life
contract owners and is not an offer of shares of the Travelers Quality Bond
Portfolio, Lazard International Stock Portfolio, MFS Emerging Growth Portfolio,
Federated High Yield Portfolio, Federated Stock Portfolio, and Disciplined Mid
Cap Stock Portfolio. All the Funds contained in this report may not be available
under our variance annuity or life contract.
Beginning August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 will be
available (1) without charge, upon request, by calling 1-800-842-9368 and (2) on
the SEC's website at www.sec.gov.
A description of the policies and procedures that the funds use to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the funds (toll-free) at 1-800-842-9368 and by
visiting the SEC's website at www.sec.gov.
Series Trust (Semi-Annual) (8-04) Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10.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 11.EXHIBITS.
(a) Not applicable.
(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: September 9, 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: September 9, 2004
By: /s/ Andrew B. Shoup
Andrew B. Shoup
Chief Administrative Officer of
THE TRAVELERS SERIES TRUST
Date: September 9, 2004