SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for use of the Commission only as permitted by Rule
14c-6(e)(2)
[X] Definitive Information Statement
MANAGED ASSETS TRUST
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
of the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE TRAVELERS SERIES TRUST
CONVERTIBLE SECURITIES PORTFOLIO
TRAVELERS QUALITY BOND PORTFOLIO
U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIO (SERIES 2005)
TRAVELERS MANAGED INCOME PORTFOLIO
MANAGED ASSETS TRUST
HIGH YIELD BOND TRUST
MONEY MARKET PORTFOLIO
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103
JOINT INFORMATION STATEMENT
The primary purpose of this Joint Information Statement ("Information
Statement") is to provide you with information about the retention of a
subadviser for the above-named portfolios ("Portfolios") of The Travelers Series
Trust (the "Trust"), the Managed Assets Trust, the High Yield Bond Trust and the
Money Market Portfolio (such three funds, the "Separate Funds"), and The
Travelers Money Market Account for Variable Annuities and The Travelers Quality
Bond Account for Variable Annuities (such two accounts, the "Accounts," and,
together with the Portfolios and the Separate Funds, the "Funds"). This
Information Statement is being mailed on or about September 19, 2005 to
shareholders and unitholders of record ("shareholders") as of the close of
business on June 30, 2005. The information in this document should be considered
to be an Information Statement for purposes of Schedule 14C under the Securities
Exchange Act of 1934, as amended ("Exchange Act"). THE FUNDS' MOST RECENT ANNUAL
AND SEMI-ANNUAL REPORTS ARE AVAILABLE UPON REQUEST WITHOUT CHARGE BY WRITING THE
FUNDS AT THE ABOVE ADDRESS OR CALLING THE FUNDS TOLL-FREE AT 800-842-9406.
Travelers Asset Management Company LLC ("TAMIC") currently serves as
investment adviser to each of the Funds pursuant to a separate advisory
agreement between TAMIC and each Fund or the Trust on behalf of each of the
Portfolios (the "Advisory Agreements"). TAMIC is located at 242 Trumbull Street,
Hartford, Connecticut 06103.
Travelers Distribution LLC ("Travelers Distribution"), an affiliate of
TAMIC, serves as the distributor to the Accounts. Travelers Distribution is
located at One Tower Square, Hartford, Connecticut 06103. The Trusts and the
Separate Funds currently do not have a distributor.
TAMIC serves as the administrator of the Travelers Managed Income
Portfolio. The Travelers Insurance Company ("TIC") serves as the administrator
of the other Funds. TIC is located at One Cityplace, Hartford, Connecticut
06103. TAMIC and TIC have each entered into a sub-administration agreement with
State Street Bank and Trust Company ("State Street Bank") to perform
administrative, pricing and bookkeeping services for the Trusts and the Separate
Funds. State Street Bank is located at One Federal Street, Boston, Massachusetts
02206.
Section 15(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), requires that all agreements under which persons serve as investment
adviser or subadviser to mutual funds be approved by shareholders. The
Securities and Exchange Commission has granted exemptive relief which applies to
the Funds and TAMIC and which permits TAMIC, subject to certain conditions,
including approval of the Board of Trustees of the Trusts and the Separate Funds
(the "Board of Trustees") and the Board of Managers of the Accounts (the "Board
of Managers," and, together with the Board of Trustees, the "Board of Trustees/
Managers"), to (i) select subadvisers for the Funds; (ii) enter into and
materially modify existing subadvisory agreements between TAMIC and subadvisers;
and (iii) terminate and/or hire unaffiliated subadvisers without
obtaining approval of a Fund's shareholders (the "SEC Exemption"). One of the
conditions of the SEC Exemption is that within 90 days after entering into a new
or amended subadvisory agreement without shareholder approval, the Fund must
provide an information statement to its shareholders setting forth substantially
the information that would be required to be contained in a proxy statement for
a meeting of shareholders to vote on the approval of the agreement. This
Information Statement is being provided to you to satisfy this condition of the
SEC Exemption.
THIS IS FOR YOUR INFORMATION ONLY. YOU DO NOT NEED TO DO ANYTHING IN
RESPONSE TO THIS INFORMATION STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
I. INTRODUCTION
On July 1, 2005, Citigroup Inc. ("Citigroup") completed the sale of its
life and annuity businesses to MetLife, Inc. ("MetLife") (the "Transaction").
The Transaction included the acquisition by MetLife of TAMIC, and as a result,
TAMIC became an indirect wholly owned subsidiary of MetLife, a New York Stock
Exchange publicly traded company. MetLife, through its subsidiaries and
affiliates, is a leading provider of insurance and other financial services to
individual and institutional customers.
In connection with the Transaction, the shareholders of each Fund approved
the SEC Exemption discussed above, making it applicable to TAMIC and any funds
advised by TAMIC. As a result, TAMIC became able, subject to the approval of the
Board of Trustees/Managers of the Funds, to add or change subadvisers from time
to time without the expense and delays associated with obtaining shareholder
approval of a change.
Subject to the closing of the Transaction and shareholder approval of the
SEC Exemption, MetLife recommended to the Board of Trustees/Managers the
retention of Salomon Brothers Asset Management Inc ("Salomon Brothers") as
subadviser for each Fund to be effective upon the date of the closing. At
meetings of the Board of Trustees/Managers of the Funds held on March 29 and 30,
2005 and April 27 and 28, 2005, the Board of Trustees/Managers (including the
Trustees/Managers who are not "interested persons" of the Funds, TAMIC, Salomon
Brothers or Travelers Distribution (as that term is defined in the 1940 Act)
("Disinterested Trustees/Managers")) approved a subadvisory agreement between
TAMIC and Salomon Brothers for each of the Funds (the "Subadvisory Agreements").
Each Subadvisory Agreement became effective on July 1, 2005, except for the
Subadvisory Agreement for The Travelers Money Market Account for Variable
Annuities which became effective on July 18, 2005 (this Account was advised by
Salomon Brothers pursuant to an interim advisory agreement between July 1 and
July 18, 2005). Prior to July 1, 2005, each Fund, except for Managed Assets
Trust, had been managed directly by TAMIC without a subadviser. For Managed
Assets Trust, TAMIC directly managed the fixed income portion of the Fund and
Travelers Investment Management Company ("TIMCO"), which has not been acquired
by MetLife, served and will continue to serve as subadviser for the equity
portion.
As discussed below, the Funds do not pay a subadvisory fee under the
Subadvisory Agreements. The Advisory Agreements between TAMIC and each Fund or
the Trust on behalf of each of the Portfolios remain in effect and the fees
payable to TAMIC by the Funds under the Advisory Agreements will not change.
THERE IS NO INCREASE IN THE ADVISORY FEES PAID BY THE FUNDS AS A RESULT OF
THE NEW SUBADVISORY AGREEMENTS.
II. THE SUBADVISORY AGREEMENTS
Each Subadvisory Agreement requires Salomon Brothers to manage the
investment and reinvestment of the Fund's assets, subject to the supervision of
TAMIC. Each Subadvisory Agreement requires that Salomon Brothers do so in
conformity with (i) the investment objective, policies and restrictions of the
Fund set forth in the Fund's prospectus and statement of additional information,
(ii) any additional policies or guidelines established by TAMIC or by the Board
of Trustees/Managers, and (iii) other applicable laws and regulations. Subject
to the foregoing, each Subadvisory Agreement authorizes Salomon Brothers to
effect portfolio
2
transactions in its discretion and without prior consultation with TAMIC. Each
Subadvisory Agreement also requires Salomon Brothers to make periodic reports to
TAMIC.
Each Subadvisory Agreement provides that it will remain in effect until
July 1, 2007 and thereafter for successive periods of one year only so long as
such continuance is specifically approved at least annually (i) by the Board of
Trustees/Managers or by vote of a majority of the outstanding voting securities
of the Fund, and (ii) by vote of a majority of the Disinterested
Trustees/Managers, cast in person at a meeting called for the purpose of voting
on such approval. Each Subadvisory Agreement may be terminated at any time on
sixty days' written notice to Salomon Brothers, either by vote of the Board of
Trustees/Managers or by vote of a majority of the outstanding voting securities
of the Fund. Each Subadvisory Agreement automatically terminates in the event of
its assignment or upon the termination of the corresponding Advisory Agreement
between TAMIC and the Fund. Each Subadvisory Agreement may also be terminated by
Salomon Brothers on sixty days' written notice to TAMIC and the Fund, or by
TAMIC on sixty days' written notice to Salomon Brothers.
Each Subadvisory Agreement provides that Salomon Brothers and its officers,
partners, directors, employees, affiliates and agents shall not be subject to
any liability to TAMIC, the Fund, or the shareholders arising out of any service
rendered under the Subadvisory Agreement, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of any duties or
by reason of reckless disregard of their obligations and duties.
SUBADVISORY FEE
The following table sets forth the subadvisory fee paid by TAMIC to Salomon
Brothers under each Subadvisory Agreement.
<Table>
<Caption>
SUBADVISORY FEE PAID TO SALOMON BROTHERS
FUND (AS A PERCENTAGE OF DAILY NET ASSETS)
- ---- ----------------------------------------
Convertible Securities Portfolio 0.25%
Travelers Quality Bond Portfolio 0.20%
U.S. Government Securities Portfolio 0.20%
Zero Coupon Bond Portfolio (Series 2005) 0.10%
Travelers Managed Income Portfolio 0.30%
Managed Assets Trust 0.25%
High Yield Bond Trust 0.40%
Money Market Portfolio 0.15% on the first $100 million;
0.075% on assets over $100 million
The Travelers Money Market Account for 0.15% on the first $100 million;
Variable Annuities 0.075% on assets over $100 million
The Travelers Quality Bond Account for Variable 0.20%
Annuities
</Table>
The Funds do not pay the subadvisory fee under the Subadvisory Agreements.
The Advisory Agreements between TAMIC and each Fund or the Trust on behalf of
each of the Portfolios remain in effect and the fees payable to TAMIC by the
Funds under the Advisory Agreements will not change. There is no increase in the
advisory fees paid by the Funds as a result of the subadvisory fees paid under
the Subadvisory Agreements.
3
The following table shows what the aggregate subadvisory fee would have
been for the fiscal year ended December 31, 2004 if the subadvisory fees under
Subadvisory Agreements had been in effect:
<Table>
<Caption>
PRO FORMA AGGREGATE SUBADVISORY FEE
PAID UNDER THE SUBADVISORY AGREEMENTS
FUND FOR FISCAL YEAR ENDED DECEMBER 31, 2004
- ---- ---------------------------------------
Convertible Securities Portfolio........................... $222,494.84
Travelers Quality Bond Portfolio........................... $397,048.15
U.S. Government Securities Portfolio....................... $421,447.58
Zero Coupon Bond Portfolio (Series 2005)................... $ 5,282.60
Travelers Managed Income Portfolio......................... $814,280.20
Managed Assets Trust....................................... $721,843.48
High Yield Bond Trust...................................... $390,641.37
Money Market Portfolio..................................... $328,508.58
The Travelers Money Market Account for Variable
Annuities................................................ $116,242.39
The Travelers Quality Bond Account for Variable
Annuities................................................ $212,507.45
</Table>
EFFECTIVE DATE
Each Subadvisory Agreement was approved by the Board of Trustees/Managers,
including by a separate vote, the Disinterested Trustees/Managers, on March 29
and 30, 2005 and April 27 and 28, 2005, and their effective date was as of July
1, 2005, except for the Subadvisory Agreement for The Travelers Money Market
Account for Variable Annuities which became effective on July 18, 2005 (this
Account was advised by Salomon Brothers pursuant to an interim advisory
agreement between July 1 and July 18, 2005).
III. BOARD CONSIDERATIONS
At meetings on March 29 and 30, 2005 and April 27 and 28, 2005, the
Disinterested Trustees/Managers approved the Subadvisory Agreements between
TAMIC and Salomon Brothers for the Funds. In voting to approve the Subadvisory
Agreements, the Disinterested Trustees/Managers considered whether the approval
of the Subadvisory Agreements would be in the best interests of the Funds and
their shareholders, an evaluation largely based on the nature and quality of the
services provided under the Subadvisory Agreements and the overall fairness of
the Subadvisory Agreements to the shareholders.
The Disinterested Trustees/Managers did not identify any one factor, piece
of information or written document as all important or controlling, and each
Disinterested Trustee/Manager attributed different weight to different factors.
Prior to voting, the Disinterested Trustees/Managers reviewed the proposed
Subadvisory Agreements with management and with experienced independent and fund
counsel and received materials from counsel discussing the legal standards for
their consideration of the proposed Subadvisory Agreements. The Disinterested
Trustees/Managers also reviewed the proposed Subadvisory Agreements in private
sessions alone and with their independent counsel at which no representatives of
management were present. Based on an evaluation of all material factors
including those described below, the Disinterested Trustees/Managers concluded
that the Subadvisory Agreements were reasonable and fair and in the best
interest of the Funds and their shareholders.
The Disinterested Trustees/Managers met in executive session and
considered: (a) the nature, extent and quality of the services to be provided by
Salomon Brothers under the Subadvisory Agreements; (b) the investment
performance of the Funds and Salomon Brothers; (c) the cost of services to be
provided and the profit realized by Salomon Brothers and its affiliates, which
information was to be reviewed in depth at the July, 2005 Board meeting; (d) the
extent to which Salomon Brothers realizes economies of scale as each Fund grows;
and (e) whether the fee levels reflect these economies of scale for the benefit
of the shareholders.
MetLife recommended and the Disinterested Trustees/Managers approved the
retention of Salomon Brothers, which was an affiliate of TAMIC before the
Transaction, as subadviser for each Fund to be effective upon the closing of the
Transaction. For each of the Funds, except for the High Yield Bond Trust and the
4
Convertible Securities Portfolio, the portfolio manager employed by Salomon
Brothers was also an employee of TAMIC and the then current portfolio manager.
With respect to these Funds, there would be no change in the day-to-day
portfolio management. For the High Yield Bond Trust and the Convertible
Securities Portfolio, the retention of Salomon Brothers would result in a change
of the portfolio mangers responsible for the day-to-day management of the Funds
after the closing of the Transaction. The new Salomon Brothers portfolio
managers for the High Yield Bond Trust and the Convertible Securities Portfolio
made presentations to the Disinterested Trustees/Managers and answered their
questions about their experience and qualifications to manage those Funds. The
Disinterested Trustees/Managers noted that MetLife may in the future recommend
to the Disinterested Trustees/Managers such additional changes to a Fund,
including changes to the investment objectives, policies and restrictions of the
Funds or merging one or more Funds into other MetLife-sponsored funds, as it
determines are appropriate and as permitted by applicable law.
As part of the process, legal counsel to the Funds requested certain
information from Salomon Brothers and in response Salomon Brothers provided
certain written and oral information that addressed certain factors designed to
inform the Disinterested Trustees/Managers regarding their consideration of the
Subadvisory Agreements. With respect to the nature, scope and quality of the
services to be provided by Salomon Brothers after the Transaction, the
Disinterested Trustees/Managers considered the experience and commitment of
Salomon Brothers' personnel and its nature and quality of its investment
process. The Disinterested Trustees/ Managers noted that the performance of the
Funds had generally been satisfactory but the performance of the Travelers
Managed Income Portfolio was disappointing. The Disinterested Trustees/Managers
determined to further review its performance as part of the annual review at the
next Scheduled Board Meeting. In determining whether the terms of the
Subadvisory Agreements are reasonable and fair, the Disinterested
Trustees/Managers considered the terms and structure of the corresponding
advisory agreements. In evaluating the subadvisory fees, the Disinterested
Trustees/Managers considered that the investment subadvisory fees were paid by
TAMIC out of the investment advisory fees it received under the corresponding
advisory agreements. So the cost of the services to be provided by Salomon
Brothers, the profitability of Salomon Brothers with regard to the Funds along
with the economies of scale in its management of the Funds were not material to
the consideration of the Subadvisory Agreements by the Disinterested Trustees/
Managers. The Disinterested Trustees/Managers noted that the overall fee
schedule was not changing. The Disinterested Trustees/Managers considered their
plans to perform the annual review of the Subadvisory Agreements pursuant to
Section 15(c) of the 1940 Act at their regularly scheduled Board meeting which
was scheduled to occur three weeks after the closing of the Transaction. In
light of the continuity of portfolio management under the Subadvisory
Agreements, except for the High Yield Bond Trust and the Convertible Securities
Portfolio, the Disinterested Trustees/Managers opportunity to interview the new
Salomon Brothers portfolio managers with respect to the High Yield Bond Trust
and the Convertible Securities Portfolio, the short period between the effective
date of those Subadvisory Agreements and the upcoming annual review, the
information provided by Salomon Brothers, and MetLife's plans to conduct a
search for a subadviser for the Funds, the Disinterested Trustees/Managers
considered the information provided to it sufficient for their consideration of
the Subadvisory Agreements at this time.
OTHER BUSINESS RELATIONSHIPS
The Disinterested Trustees/Managers considered other business relationships
that MetLife and TAMIC would enter into with Citigroup, including its affiliate
Salomon Brothers. In connection with the closing of the Transaction, MetLife,
Citigroup and certain of their affiliates entered into a Distribution Agreements
under which Citigroup-affiliated broker-dealers will continue to offer certain
TIC and MetLife insurance contracts until July 1, 2015. In addition, MetLife,
Citigroup and certain of their affiliates entered into an Investment Products
Agreements under which certain TIC and MetLife insurance products will include
certain Citigroup-sponsored funds as investment options including Salomon
Brothers advised mutual funds until July 1, 2010.
5
CONCLUSION
Based on the deliberations of the Disinterested Trustees/Managers and their
evaluation of the information described above, the Disinterested
Trustees/Managers unanimously concluded that (a) the terms of the Subadvisory
Agreements are fair and reasonable; (b) the fees are reasonable in light of the
services to be provided by Salomon Brothers to the Funds and their shareholders;
(d) Salomon Brothers possesses the capabilities to perform the duties required
of it under the Subadvisory Agreements; (e) the investment performance of the
Funds is satisfactory except as discussed above; and (f) the Subadvisory
Agreements are approved.
IV. SALOMON BROTHERS ASSET MANAGEMENT INC
Salomon Brothers is an indirect wholly owned subsidiary of Citigroup.
Salomon Brothers and Citigroup are located at 399 Park Avenue, New York, New
York 10022. Salomon Brothers was established in 1987 and together with Salomon
Brothers affiliates in London, Tokyo and Hong Kong, provides a broad range of
fixed income and equity investment services to individuals and institutional
clients throughout the world. As of June 30, 2005, Salomon Brothers had over
$82.8 billion in assets under management.
On June 23, 2005, Citigroup entered into a definitive agreement with Legg
Mason under which Citigroup will sell substantially all of its asset management
business, Citigroup Asset Management ("CAM"), to Legg Mason in exchange for the
broker-dealer business of Legg Mason, a number of shares of Legg Mason common
stock and a number of shares of non-voting, convertible preferred stock
representing approximately 3.9% and 10.5%, respectively, of the pro-forma common
stock of Legg Mason (on an as converted basis) and, subject to certain
adjustments, approximately $550 million in the form of a five-year loan facility
provided to Legg Mason by Citigroup Corporate and Investment Banking (the "Legg
Mason Transaction"). Subject to certain adjustments, the total value of the Legg
Mason Transaction (based on the average price of Legg Mason common stock prior
to June 23, 2005) is approximately $3.7 billion. As a result of the Legg Mason
Transaction, Salomon Brothers will become a wholly owned subsidiary of Legg
Mason.
Consummation of the Legg Mason Transaction is subject to certain customary
terms and conditions, including, among others: (1) Citigroup and Legg Mason
obtaining certain required regulatory approvals, (2) consent by certain advisory
clients of CAM representing no less than 75% of the revenue attributable to the
assets under management for such clients to continue their advisory relationship
with CAM following the consummation of the Legg Mason Transaction and (3)
conversion of Legg Mason's subsidiary, Legg Mason Trust, fsb, from a federal
thrift charter to a trust company chartered under state law or the National Bank
Act that is not a bank, thrift or savings association under the Bank Holding
Company Act. Although there is no assurance that the Legg Mason Transaction will
be completed, if each of the terms and conditions is satisfied or waived, the
closing of the Legg Mason Transaction is expected to take place during the
fourth quarter of 2005.
The mailing address of each principal executive officer and director of
Salomon Brothers is 399 Park Avenue, New York, New York 1022. The principal
executive officers and directors of Salomon Brothers and their principal
occupations are as follows:
<Table>
<Caption>
NAME PRINCIPAL OCCUPATION
- ---- --------------------
Michael Even.............................. Director
Evan L. Merberg........................... Director
Michael F. Rosenbaum...................... General Counsel, Citigroup Asset Management
Jeffrey S. Scott.......................... Chief Compliance Officer
Peter J. Wilby............................ Director
</Table>
Salomon Brothers acts as adviser or subadviser to the following other
mutual funds that have similar investment objectives to that of the Funds.
6
<Table>
<Caption>
RELATIONSHIP
NET ASSETS TO OTHER
(MILLIONS) FUND
AS OF ANNUAL FEE RATE AS A PERCENTAGE (ADVISER OR
FUND SIMILAR FUND 6/30/05 OF AVERAGE ANNUAL NET ASSETS SUBADVISER)
- ---- ------------------------------- ---------- ------------------------------- ------------
CONVERTIBLE SECURITIES Smith Barney Mutual Fund $ 113.8 0.70% Adviser
PORTFOLIO Family: SB Convertible Fund
TRAVELERS QUALITY BOND N/A
PORTFOLIO
U.S. GOVERNMENT SECURITIES Salomon Brothers Short/ $ 117.5 0.65% Adviser
PORTFOLIO Intermediate U.S. Government
Income Fund
JNL Salomon Brothers U.S. $ 206.3 0.20% on the first $500 Subadviser
Government Bond and Quality million;
Bond Series 0.10% over $500 million
JHT U.S. Government Securities $ 738.2 0.20% on the first $500 Subadviser
Trust million;
0.10% over $500 million
Metropolitan Series Fund, Inc. $ 601.5 0.225% on the first $200 Subadviser
Salomon Brothers U.S. million;
Government Portfolio 0.150% on the next $300
million;
0.10% over $500 million
ZERO COUPON BOND PORTFOLIO N/A
(SERIES 2005)
TRAVELERS MANAGED INCOME N/A
PORTFOLIO
MANAGED ASSETS TRUST N/A
HIGH YIELD BOND TRUST SB High Income $1,011.0 0.60% Adviser
SB High Income -- VA $ 285.3 0.60% Adviser
Maxim Salomon High Yield Fund $ 130.7 0.40% Subadviser
JNL Salomon Brothers High Yield $ 263.9 0.35% on the first $50 million; Subadviser
Bond Series 0.30% on the next $50 million;
0.25% over $100 million
JHT High Yield Trust $1,540.7 0.275% on the first $500 Subadviser
million;
0.200% over $500 million
Heritage Income Trust High $ 77.7 0.30% Subadviser
Yield Bond Fund
MONEY MARKET PORTFOLIO N/A
THE TRAVELERS MONEY MARKET N/A
ACCOUNT FOR VARIABLE
ANNUITIES
THE TRAVELERS QUALITY BOND N/A
ACCOUNT FOR VARIABLE
ANNUITIES
</Table>
There are no fee waivers or expense limitations in effect with respect to
any of the advisory fees listed above.
V. CHANGES IN PORTFOLIO MANAGEMENT
For each of the Funds, except for the High Yield Bond Trust and the
Convertible Securities Portfolio, the addition of Salomon Brothers as subadviser
does not have any effect on the day-to-day management of the Funds. For these
Funds, the portfolio managers remain the same since the portfolio managers had
been dual employees of TAMIC and Salomon Brothers prior to the Transaction. The
High Yield Bond Trust and the Convertible Securities Portfolio do have new
portfolio managers. Information on these new portfolio managers is provided
below.
7
<Table>
<Caption>
FUND PORTFOLIO MANAGERS
- ---- ------------------
High Yield Bond Trust The Fund is co-managed by Peter Wilby and Beth Semmel. Mr.
Wilby is a Managing Director and the Chief Investment
Officer for North American Fixed Income at Salomon Brothers.
He is the Senior Portfolio Manager responsible for directing
investment policy and strategy for all emerging markets debt
and high yield fixed income portfolios and a Salomon
Brothers Asset Management Investment Policy Committee
Member. Mr. Wilby has 22 years of industry experience, and
he joined Salomon Brothers in 1989. Mr. Wilby is also a
Certified Public Accountant. Ms. Semmel is a Senior
Portfolio Manager with 23 years of industry experience. She
is a Salomon Brothers Asset Management Investment Policy
Committee Member, and she joined Salomon Brothers in May
1993.
Convertible Securities Portfolio The Fund is co-managed by Peter Luke and Kent Bailey. Mr.
Luke is a director of Salomon Brothers and is the senior
portfolio manager for convertible strategies and a sector
manager for balanced strategies. He has 38 years of industry
experience. Prior to joining Salomon Brothers in July 2001,
he was the convertibles portfolio manager at General Motors
Investment Management Corp. Mr. Bailey is a vice president
at Salomon Brothers and is a co-manager for convertible
strategies and a sector manager for balanced strategies. He
has seven years of industry experience and joined Salomon
Brothers in April 2001. Prior to joining Salomon Brothers in
April 2001, he worked as a convertible analyst at Morgan
Stanley.
</Table>
The change in portfolio managers for the High Yield Bond Trust and the
Convertible Securities Portfolio may involve certain portfolio transaction costs
as the new portfolio managers restructure the portfolios. Restructuring costs
consist primarily of brokerage fees and dealer spreads or markups related to
purchasing and selling securities for a Fund's portfolio. The Funds anticipate
that these restructuring costs will not be substantial.
VI. PORTFOLIO TRANSACTIONS
Subject to the approval of the Board of Trustees/Managers, the policy of
Salomon Brothers in executing transactions in the Funds' portfolio securities,
is to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including, without limitation:
- the overall direct net economic result to the Funds, involving both price
paid or received and any commissions and other cost paid;
- the efficiency with which the transaction is effected;
- the ability to effect the transaction at all where a large block is
involved;
- the availability of the broker to stand ready to execute potentially
difficult transactions in the future; and
- the financial strength and stability of the broker.
Such considerations are subjective and are weighed by Salomon Brothers in
determining the overall reasonableness of brokerage commissions paid. Subject to
the foregoing, one factor in the selection of brokers is the receipt of research
services, analyses and reports concerning issuers, industries, securities,
economic factors and trends, and other statistical and factual information. Any
such research and other statistical and factual information provided by brokers
to the Funds and Salomon Brothers is considered to be in addition to and not in
lieu of services required to be performed by Salomon Brothers under the
Subadvisory Agreement. The brokerage commission paid by a Fund for a transaction
may be greater than the commission that would have been charged by another
broker if the difference is determined in good faith to be justified in light of
the
8
brokerage and information provided. The cost, value and specific application of
such information are indeterminable, and it is not practical to allocate these
costs, values or specific applications among the Funds and other clients of
Salomon Brothers. Accordingly, Salomon Brothers or its other clients may
indirectly benefit from the availability of such information. This situation may
create a conflict of interest for Salomon Brothers. Similarly, the Funds may
indirectly benefit from information made available as a result of transactions
for other clients of Salomon Brothers.
Purchases and sales of bonds and money market instruments usually are
principal transactions and normally are purchased directly from the issuer or
from the underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases. Purchases from the underwriters
include the underwriting commission or concession, and purchases from dealers
serving as market makers include the spread between the bid and asked prices.
Where transactions are made in the over-the-counter market, Salomon Brothers
generally deals with primary market makers unless more favorable prices are
otherwise obtainable.
Brokerage fees are in connection with futures transactions and the Funds
are required to deposit and maintain funds with brokers as margin to guarantee
performance of future obligations.
For the fiscal year ended December 31, 2004, the Funds paid no commissions
to any affiliated broker of TAMIC and Salomon Brothers.
Salomon Brothers' policies with respect to brokerage are reviewed by the
Board of Trustees/Managers periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, or due to other appropriate factors, the foregoing
practices may be changed, modified or eliminated.
VII. FUND OWNERSHIP INFORMATION
The chart below lists the number of shares or units of each Fund that were
outstanding as of June 30, 2005.
<Table>
<Caption>
TOTAL NUMBER OF SHARES OR UNITS
OUTSTANDING
FUND AS OF JUNE 30, 2005
- ---- ----------------------------------
Convertible Securities Portfolio............................ 8,305,153
Travelers Quality Bond Portfolio............................ 16,590,963
U.S. Government Securities Portfolio........................ 19,254,644
Zero Coupon Bond Portfolio (Series 2005).................... 477,257
Travelers Managed Income Portfolio.......................... 24,582,198
Managed Assets Trust........................................ 17,009,471()
High Yield Bond Trust....................................... 11,537,031
Money Market Portfolio...................................... 323,838,513
The Travelers Money Market Account for Variable Annuities... 23,558,450
The Travelers Quality Bond Account for Variable Annuities... 12,936,526
</Table>
Metropolitan Life Insurance Company, a New York life insurance company, and
its insurance company affiliates, (individually an "Insurance Company" and
collectively the "Insurance Companies"), are the record owners, through their
separate accounts, of all of the Trust's and Separate Funds' shares.
As of June 30, 2005, the officers and Trustees/Managers of the Funds as a
group beneficially owned less than 1% of each Fund. To the Funds' knowledge, no
person, as of June 30, 2005 owned more than 5% of an Account or was entitled to
give voting instructions to an Insurance Company with respect to 5% or more of a
Portfolio's or Separate Funds' shares.
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