TRAVELERS SEPARATE ACCOUNT QP FOR VARIABLE ANNUITIES, 497, 1997-05-09

TRAVELERS SEPARATE ACCOUNT QP FOR VARIABLE ANNUITIES
497, 1997-05-09

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<PAGE> 1

THE TRAVELERS INSURANCE COMPANY

THE TRAVELERS SEPARATE ACCOUNT QP (SELECT)
FOR VARIABLE ANNUITIES

The group variable annuity contracts (the "Contracts") described in this
prospectus are designed to fund plans ("Plans") established under certain
sections of the Internal Revenue Code of 1986 (the "Code").

The Contracts are designed for use in conjunction with qualified pension and
profit-sharing plans, tax deferred annuity plans (for public school teachers and
employees of certain other tax exempt and qualifying employers), and deferred
compensation plans for state and local governments. These Plans also allow for
Third Party Administrator involvement. Amounts held under the Plans may be
entitled to tax-deferred treatment under certain sections of the Code.

The Funding Options available under the Contracts are listed below. They may not
all be available under an employer's plan or in all states. This prospectus is
not valid without the current prospectuses for these Funding Options. A Fixed
Account Option is also available and is described in a separate prospectus.
Unless specified otherwise, this prospectus refers to the Funding Options.

<TABLE>
<S> <C>
Managed Assets Trust American Odyssey Funds, Inc.
American Odyssey Core Equity Fund
High Yield Bond Trust American Odyssey Emerging Opportunities Fund
American Odyssey International Equity Fund
Capital Appreciation Fund American Odyssey Long-Term Bond Fund
American Odyssey Intermediate-Term Bond Fund
The Travelers Series Trust American Odyssey Short-Term Bond Fund
U.S. Government Securities Portfolio
Utilities Portfolio Travelers Series Fund, Inc.
Social Awareness Stock Portfolio Smith Barney Income and Growth Portfolio
Lazard International Stock Portfolio Alliance Growth Portfolio
Federated Stock Portfolio Smith Barney International Equity Portfolio
Federated High Yield Portfolio Putnam Diversified Income Portfolio
Large Cap Portfolio Smith Barney High Income Portfolio
Equity Income Portfolio MFS Total Return Portfolio
Smith Barney Money Market Portfolio
</TABLE>

This prospectus sets forth the information that you should know before
investing. Please read it and retain it for future reference. Additional
information about the Separate Account has been filed with the Securities and
Exchange Commission and is available without charge upon request. To obtain the
Statement of Additional Information ("SAI") send a written request to The
Travelers Insurance Company, Attn: Annuity Marketing, One Tower Square,
Hartford, CT 06183 or call 1-800-842-8573. The Table of Contents for the SAI
dated May 1, 1997, appears in Appendix B. The SAI is incorporated by reference
to this prospectus. For more information about the Contract, contact your
registered representative, or write to us at the above address.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE FUNDING OPTIONS. THE PROSPECTUSES FOR THE SEPARATE ACCOUNT AND THE FUNDING
OPTIONS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.

VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.

PROSPECTUS DATED: MAY 1, 1997
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS....................... 3
SUMMARY......................................... 5
FEE TABLE....................................... 6
INTRODUCTION.................................... 9
THE CONTRACTS................................... 9
General....................................... 9
Allocated Contracts........................... 9
Unallocated Contracts......................... 9
Right to Return............................... 9
OPERATION OF THE CONTRACT....................... 10
Crediting Purchase Payments................... 10
Transfers of Cash Value Between Funding
Options..................................... 10
Dollar Cost Averaging (Automated Transfers)... 10
Asset Allocation Advice....................... 10
Contract Exchanges............................ 11
Contract and Participant's Individual Account
Termination................................. 11
Account Value................................. 11
Accumulation Unit Value....................... 12
PAYMENT OF BENEFITS............................. 12
Death Benefits Proceeds Prior to Maturity
Date........................................ 12
Death Proceeds After the Maturity Date........ 13
Election of Settlement Options................ 13
Minimum Amounts............................... 14
Misstatement.................................. 14
Retired Life Certificate...................... 14
Allocation of Cash Surrender Value During the
Annuity Period.............................. 14
Annuity Options............................... 14
Variable Annuity.............................. 15
Amount of First Payment..................... 15
Annuity Unit Value.......................... 15
Initial Payment and Number of Annuity
Units..................................... 15
Amount of Subsequent Payments............... 15
Fixed Annuity................................. 16
CHARGES UNDER THE CONTRACT...................... 16
Sales Charges................................. 16
Free Withdrawal Allowance................... 16
Mortality and Expense Risk Charge............. 17
Funding Option Charges........................ 17
Administrative Charge......................... 17
Premium Tax Deductions........................ 17
TPA Administrative Charges.................... 17
THE COMPANY, THE SEPARATE ACCOUNT AND THE
FUNDING OPTIONS............................... 17
The Company................................... 17
The Separate Account.......................... 18
PERFORMANCE INFORMATION......................... 21
FEDERAL TAX CONSIDERATIONS...................... 21
General Taxation of Annuities................. 21
Types of Contracts: Qualified or
Nonqualified................................ 21
Investor Control.............................. 22
Mandatory Distributions for Qualified Plans... 22
Nonqualified Annuity Contracts................ 22
Qualified Annuity Contracts................... 23
Penalty Tax for Premature Distributions....... 23
Diversification Requirements.................. 23
MISCELLANEOUS................................... 23
Voting Rights................................. 23
Distribution of the Contracts................. 23
Postponement of Payment (Emergency
Procedure).................................. 24
Contract Modification......................... 24
Legal Proceedings............................. 24
APPENDIX A: CONDENSED FINANCIAL INFORMATION..... A-1
APPENDIX B: CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION........................ B-1
</TABLE>

2
<PAGE> 3

GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------

ACCUMULATION PERIOD: The period before the commencement of Annuity payments.

ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.

ANNUITANT: A Person on whose life the Annuity payments are to be made under a
Contract.

ANNUITY: Payment of income for a stated period or amount.

ANNUITY PERIOD: The period following the commencement of Annuity payments.

BENEFICIARY(IES): The person(s) or trustee designated to receive contract values
in the event of the Participant's or Annuitant's death.

CASH SURRENDER VALUE: The Cash Value less any amounts deducted upon surrender
and any applicable premium tax.

CASH VALUE: The value of the Accumulation Units in Your Account or a
Participant's Individual Account less any reductions for administrative charges.
Sometimes referred to as "Account Value."

CERTIFICATE: The certificate issued to a participant representing his or her
participation in the Contract.

CERTIFICATE YEAR: The 12-month period beginning with the date the Certificate
was issued or any anniversary thereof.

CODE: The Internal Revenue Code of 1986, as amended.

COMMISSION: Securities and Exchange Commission.

COMPANY (WE, US, OUR): The Travelers Insurance Company.

COMPETING FUND: Any investment option under the Plan, which in our opinion,
consists primarily of fixed income securities and/or money market instruments.

CONTRACT DATE: The date on which the Contract becomes effective, as shown on the
Contract.

CONTRACT OWNER (YOU, YOUR): The employer or entity owning the Contract.

CONTRACT YEAR: The twelve month period commencing with the Contract Date or with
any anniversary thereof.

DUE PROOF OF DEATH: (i) a copy of a certified death certificate; (ii) a copy of
a certified decree of a court of competent jurisdiction as to the finding of
death; (iii) a written statement by a medical doctor who attended the deceased;
or (iv) any other proof satisfactory to us.

EXCESS PLAN CONTRIBUTIONS: Plan contributions including excess deferrals, excess
contributions, excess aggregate contributions, excess annual additions, and
excess nondeductible contributions that require correction by the Qualified
Plan.

FIXED ANNUITY: An Annuity with payments which remain fixed as to dollar amount
throughout the payment period and which do not vary with the investment
experience of a Separate Account.

FUNDING OPTIONS: The variable investment options to which Purchase Payments
under the Contract may be allocated.

GENERAL ACCOUNT: The Company's General Account in which amounts are held if
directed to the Fixed Account during the Accumulation Period and in which
reserves are maintained for Fixed Annuities during the Annuity Period.

HOME OFFICE: The Travelers Insurance Company, One Tower Square, Hartford, CT
06183

3
<PAGE> 4

MATURITY DATE: The date on which Annuity payments are to begin.

PARTICIPANT: An eligible person who is a member in the Qualified Plan.

PARTICIPANT'S INDIVIDUAL ACCOUNT: An account to which Accumulation Units are
credited to a Participant or Beneficiary under the Contract.

PURCHASE PAYMENTS: Payments made to the Contract.

QUALIFIED PLAN: An employer's voluntary retirement plan which qualifies for
special tax treatment under a particular section of the Internal Revenue Code.

SEPARATE ACCOUNT: The Travelers Separate Account QP for Variable Annuities.

THIRD PARTY ADMINISTRATOR ("TPA"): An entity which has contracted with the
Contract Owner to provide administrative and/or distribution services for the
Plan.

VALUATION DATE: A day on which the New York Stock Exchange is open for business.
The value of the Separate Account is determined at the close of the New York
Stock Exchange on such days.

VALUATION PERIOD: The period between the end of one Valuation Date and the end
of the next Valuation Date.

VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets held in the underlying
securities of the Separate Account.

WRITTEN REQUEST: A written form satisfactory to us and received at the Home
Office.

YOUR ACCOUNT: Accumulation Units credited to you under this Contract.

4
<PAGE> 5

SUMMARY
- --------------------------------------------------------------------------------

CONTRACTS OFFERED

The Contracts are designed for use in conjunction with qualified pension or
profit-sharing plans, tax deferred annuity plans (for public school teachers and
employees and employees of certain other tax exempt and qualifying employers)
and deferred compensation plans for state and local governments. The minimum
Purchase Payment allowed is an average of $1,000 annually, per Participant's
Individual Account or $10,000 annually per Contract.

Because of the size of these Contracts, the possible involvement of TPAs, the
allocated or unallocated nature of the Contract and a competitive bidding
process which may include negotiation, many of the charges imposed in the
Contract are likely to vary from one Contract to the next. The Contract design
allows the Company maximum flexibility, within the limitations imposed by law,
to "custom design" a charge structure which is likely to be acceptable to a
particular prospective Contract Owner.

RIGHT TO RETURN

For Contracts in used with deferred compensation plans, tax-deferred annuity
plans, and combined qualified plan/deferred annuity plans, you may return the
Contract or Certificate, as applicable, and receive a full refund of the Cash
Value (including charges) within ten days after the Contract or Certificate is
delivered to you, unless state law requires a longer period. (See "Right to
Return.")

ASSET ALLOCATION

If available Contract Owners and/or Participants may elect to enter into an
asset allocation investment advisory agreement which is fully described,
including associated fees, in a separate disclosure statement. (See "Asset
Allocation Advice.")

DEATH BENEFITS

A death benefit is provided in the event of death of the Participant under a
Participant's Individual Account prior to the earlier of the Participant's 75th
birthday or the Maturity Date. (See "Death Benefits under an Allocated
Contract.")

ANNUITY OPTIONS

The Contract Owner selects a Maturity Date and an Annuity Option for a
Participant as provided by the Plan. The Contract contains six optional annuity
forms, which may be selected on either a fixed or variable annuity basis, or a
combination thereof. (See "Payment of Benefits.")

CHARGES AND FEES

Maximum levels for sales-related expenses and mortality and expense risk charges
are set forth in this prospectus. These charges, as well as allocation and
transfer fees are subject to negotiation or a competitive bidding process, or
both, with the prospective Contract Owner prior to the issuance of a Contract.

The Company will charge a maximum surrender charge of 5% of the amount
surrendered in the first and second Contract/Certificate Years, up to 4% in
years three and four, up to 3% in years five and six, up to 2% in years seven
and eight, and 0% beginning in year nine.

The Company will make a daily charge against the value of the Contract held in
the Separate Account for the Mortality and Expense Risk Charge. The maximum rate
is 1.20% annually. (See "Mortality and Expense Risk Charge.") An administration
charge of .10% may apply to amounts allocated to the funding options. (See
"Administrative Charge.")

Deductions for the payment of any premium taxes that may be levied against the
Contract will be made as appropriate. (See "Charges Under the Contract.")

5
<PAGE> 6

FEE TABLE
- --------------------------------------------------------------------------------

The purpose of this Fee Table is to assist Contract/Certificate Owners in
understanding the various maximum costs and expenses that Contract/Certificate
Owners or Participants will bear, directly or indirectly, under the
Contract/Certificate. The information listed reflects expenses of the Separate
Account as well as of the Funding Options. Except as noted, the fees are based
on the most recent fiscal year end of each option. For additional information
regarding the charges and deductions assessed under the Contract/Certificate,
including possible waivers or reductions of these expenses, see "Charges Under
the Contract."

MAXIMUM CONTRACT/CERTIFICATE OWNER TRANSACTION CHARGES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
CONTRACT/
SURRENDER CHARGE CERTIFICATE PERCENTAGE
----------------------------------------------------------------------------------
<S> <C> <C>
As a percentage of amount surrendered 1-2 5%
3-4 4
5-6 3
7-8 2
9+ 0
</TABLE>

MAXIMUM SEPARATE ACCOUNT ANNUAL EXPENSES

<TABLE>
<S> <C> <C>
Mortality and Expense Risk Fees 1.20%
</TABLE>

(As a percentage of average daily net assets of the Separate Account)

MAXIMUM CONTRACT/CERTIFICATE ADMINISTRATIVE CHARGE

<TABLE>
<S> <C> <C>
Funding Option Administrative Charge 0.10%
</TABLE>

(As a percentage of amounts allocated to the variable funding options under the
contracts)

6
<PAGE> 7

FUNDING OPTION EXPENSES
(as a percentage of average net assets of the Funding Option based on most
recent fiscal year end of each)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
OTHER TOTAL
MANAGEMENT FEE EXPENSES UNDERLYING
UNDERLYING FUNDS (AFTER REIMBURSEMENT) (AFTER REIMBURSEMENT) FUND EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund 0.75% 0.08%(1) 0.83%
High Yield Bond Trust 0.50% 0.47%(1) 0.97%
Managed Assets Trust 0.50% 0.08%(1) 0.58%
U.S. Government Securities Portfolio 0.32% 0.30%(1) 0.62%
Social Awareness Stock Portfolio 0.65% 0.60%(1) 1.25%
Utilities Portfolio 0.65% 0.42%(1) 1.07%
Lazard International Stock 0.83% 0.42%(2) 1.25%
Federated Stock 0.63% 0.32%(2) 0.95%
Federated High Yield 0.65% 0.30%(2) 0.95%
Large Cap (Sub-Adv. Fidelity) 0.75% 0.20%(3) 0.95%
Equity Income (Sub-Adv. Fidelity) 0.75% 0.20%(3) 0.95%
American Odyssey International Equity Fund 0.65% 0.21%(4) 0.86%
1.46%* 2.11%*
American Odyssey Emerging Opportunities Fund 0.60% 0.12%(4) 0.72%
1.37%* 1.97%*
American Odyssey Core Equity Fund 0.57% 0.11%(4) 0.68%
1.36%* 1.93%*
American Odyssey Long-Term Bond Fund 0.50% 0.13%(4) 0.63%
1.38%* 1.88%*
American Odyssey Intermediate-Term Bond Fund 0.50% 0.16%(4) 0.66%
1.41%* 1.91%*
American Odyssey Short-Term Bond Fund 0.50% 0.25%(4) 0.75%
1.50%* 2.00%*
Smith Barney Income and Growth Portfolio 0.65% 0.08%(5) 0.73%
Alliance Growth Portfolio 0.80% 0.07%(5) 0.87%
Putnam Diversified Income Portfolio 0.75% 0.21%(5) 0.96%
Smith Barney High Income Portfolio 0.60% 0.24%(5) 0.84%
MFS Total Return Portfolio 0.80% 0.11%(5) 0.91%
Smith Barney International Equity Portfolio 0.90% 0.20%(6) 1.10%
Smith Barney Money Market Portfolio 0.60% 0.05%(7) 0.65%
</TABLE>

(1) Other Expenses take into account the current expense reimbursement
arrangement with the Company. The Company has agreed to reimburse each Fund
for the amount by which its aggregate expenses (including the management
fee, but excluding brokerage commissions, interest charges and taxes)
exceeds 1.25%. Without such arrangement, Other Expenses would have been
1.69% for the Social Awareness Stock Portfolio. None of the other portfolios
were affected. The Other Expenses figure includes a .06% Sub-Administrator
Charge.

(2) The Travelers has waived all of its fees for the period ended December 31,
1996. In addition, the Travelers has agreed to reimburse the Portfolios'
expenses for the same period. Without such arrangements, Other Expenses for
the Travelers Series Trust, Lazard International Stock Portfolio, Federated
High Yield Portfolio, and Federated Stock Portfolios would have been 2.87%,
2.19%, and 3.03%, respectively. The Other Expenses figure includes a
Sub-Administrator Charge of .06%.

(3) Other Expenses take into account the current expense reimbursement
arrangement with the Company. The Company has agreed to reimburse the Fund
for the amount by which its aggregate expenses (including the management
fee, but excluding brokerage commissions, interest charges and taxes)
exceeds 0.95%. Without such arrangements, Other Expenses for the Travelers
Series Trust Large Cap Portfolio and Equity Income Portfolios would have
been 1.55%.

(4) The Short-Term Bond Fund is required to repay the Manager for any fees the
Manager previously waived or expenses the Manager previously reimbursed,
provided that this repayment by the Fund does not cause the total expense
ratio to exceed 0.75%. Without these repayments, Total Underlying Fund
Expenses for the Short-Term Bond Fund for 1996 would have been 0.68%
(5) Other Expenses are as of October 31, 1996 (the Fund's fiscal year end).
There were no fees waived or expenses reimbursed for these funds in 1996.
(6) During the fiscal year ended October 31, 1996, the Smith Barney
International Equity Portfolio earned credits from the Custodian which
reduced the service fees incurred. When these credits are taken into
consideration, Total Underlying Fund Expenses for this Portfolio are 1.05%.
(7) Other Expenses are as of October 31, 1996, taking into account the current
expense limitations agreed to by the Manager. The Manager waived all of its
fees for the period and reimbursed the Fund for their expenses. If such fees
were not waived and expenses were not reimbursed, Total Underlying Expenses
for the Smith Barney Money Market Portfolio would have been 0.74%.
* Includes CHART Asset Allocation Fee of 1.25%.

7
<PAGE> 8

EXAMPLE WITH SURRENDER CHARGES (PERCENTAGE OF AMOUNT SURRENDERED)

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assuming a 5% annual return on assets, a $1,000 investment would be subject to the following expenses:
(b) If the
Contract/Certificate is NOT
surrendered at the end of
(a) if the Contract/Certificate is
surrendered at the end of the
the period shown*: period shown:
- ------------------------------------------------------------------------------------------------------------------------------
1 YEAR(A) 3 YEARS(A) 5 YEARS(A) 10 YEARS(A) 1 YEAR(B) 3 YEARS(B)
- ------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $ 73 $ 110 $ 149 $246 $ 22 $ 67
High Yield Bond Trust 74 114 156 261 23 71
Managed Assets Trust 71 103 137 220 19 59
U.S. Government Securities Portfolio 71 104 139 225 20 60
Social Awareness Stock Portfolio 77 122 169 289 26 79
Utilities Portfolio 75 117 161 271 24 74
Lazard International Stock 77 122 169 289 26 79
Federated Stock 74 114 155 258 23 70
Federated High Yield 74 114 155 258 23 70
Large Cap 74 114 155 258 23 70
Equity Income 74 114 155 258 23 70
American Odyssey Funds(1):
International Equity Fund 73 111 150 249 22 68
Emerging Opportunities Fund 72 107 144 235 21 63
Core Equity Fund 72 106 142 231 20 62
Long-Term Bond Fund 71 104 139 225 20 61
Intermediate-Term Bond Fund 71 105 141 229 20 62
Short-Term Bond Fund 72 108 145 238 21 64
American Odyssey Funds(2):
International Equity Fund 85 147 210 369 34 105
Emerging Opportunities Fund 84 143 203 357 33 101
Core Equity Fund 83 142 202 353 33 100
Long-Term Bond Fund 83 140 199 348 32 98
Intermediate-Term Bond Fund 83 141 201 351 32 99
Short-Term Bond Fund 84 144 205 359 33 102
Smith Barney Income and Growth
Portfolio 72 107 144 236 21 64
Alliance Growth Portfolio 73 111 151 250 22 68
Putnam Diversified Income Portfolio 74 114 155 260 23 71
Smith Barney High Income Portfolio 73 111 149 247 22 67
MFS Total Return Portfolio 74 113 153 254 22 69
Smith Barney International Equity
Portfolio 76 118 162 274 24 75
Smith Barney Money Market Portfolio 71 105 140 227 20 61

<CAPTION>
Assuming a 5% annual return on assets,

- --------------------------------------
5 YEARS(B) 10 YEARS(B)
- --------------------------------------
Capital Appreciation Fund $ 114 $246
High Yield Bond Trust 122 261
Managed Assets Trust 102 220
U.S. Government Securities Portfolio 104 225
Social Awareness Stock Portfolio 136 289
Utilities Portfolio 127 271
Lazard International Stock 136 289
Federated Stock 120 258
Federated High Yield 120 258
Large Cap 120 258
Equity Income 120 258
American Odyssey Funds(1):
International Equity Fund 116 249
Emerging Opportunities Fund 109 235
Core Equity Fund 107 231
Long-Term Bond Fund 104 225
Intermediate-Term Bond Fund 106 229
Short-Term Bond Fund 110 238
American Odyssey Funds(2):
International Equity Fund 177 369
Emerging Opportunities Fund 171 357
Core Equity Fund 169 353
Long-Term Bond Fund 166 348
Intermediate-Term Bond Fund 168 351
Short-Term Bond Fund 172 359
Smith Barney Income and Growth
Portfolio 109 236
Alliance Growth Portfolio 116 250
Putnam Diversified Income Portfolio 121 260
Smith Barney High Income Portfolio 115 247
MFS Total Return Portfolio 118 254
Smith Barney International Equity
Portfolio 128 274
Smith Barney Money Market Portfolio 105 227
</TABLE>

- ---------------

* The applicable sales charge may be waived upon annuitization. (See "Charges
Under the Contract.")
(1) Reflects expenses that would be incurred for those who DO NOT participate
in the CHART Asset Allocation program.
(2) Reflects expenses that would be incurred for those who DO participate in
the CHART Asset Allocation program.

CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

See Appendix A, page A-1.

8
<PAGE> 9

INTRODUCTION
- --------------------------------------------------------------------------------

This prospectus has been designed to provide all the necessary information to
make a decision on purchasing Contracts issued in conjunction with qualified
pension and profit-sharing plans, tax deferred annuity plans (for public school
teachers and employees and employees of certain other tax exempt and qualifying
employers) and deferred compensation plans for state and local governments. This
prospectus describes only the elements of the variable Contracts. Please read
the Glossary of Special Terms prior to reading this prospectus to become
familiar with the terms being used.

THE CONTRACTS
- --------------------------------------------------------------------------------

GENERAL

The Contracts, issued on a group basis, are designed for use only with plans
which qualify for special tax treatment under the Internal Revenue Code, such as
tax deferred annuity plans for public school teachers and employees and
employees of certain other tax-exempt organizations; pension and profit-sharing
plans; and deferred compensation plans for state and local governments.

Purchase Payments may be allocated to your choice of one or more Funding
Options. Purchase Payments (net of any premium taxes due) are applied to
purchase Separate Account Accumulation Units of the appropriate Funding Option.
The Accumulation Unit value will be determined as of the end of the Valuation
Period during which the payments were received. The value of your investment
during the Accumulation Period will vary in accordance with the net income and
performance of each Funding Option's individual investments. While you will not
receive any distributions from the Funding Options, any such distributions would
be reflected in the value of that Funding Option's corresponding Accumulation
Unit. During the Variable Annuity payout period, both your Annuity payments and
reserve values will vary in accordance with these factors.

The Contracts may be issued on either an allocated or an unallocated basis. Both
the allocated and unallocated contracts provide for fixed (Fixed Acccount
Option) and variable (Separate Account) accumulations and annuity payouts. The
Fixed Account Option is described in a separate prospectus.

ALLOCATED CONTRACTS

A group allocated Contract will cover all present and future Participants under
the Contract. A Participant under an allocated Contract may receive a
certificate which evidences participation in the Contract.

UNALLOCATED CONTRACTS

We offer an unallocated annuity Contract, designed for use with certain
Qualified Plans where the employer has secured the services of a TPA.

The Contracts will be issued to an employer or the trustee(s) or custodian of an
employer's Qualified Plan. All Purchase Payments are held under the Contract, as
directed by the Contract Owner. There are no individual allocations under the
unallocated Contracts for individual participants in the Qualified Plan.

RIGHT TO RETURN

For Contracts in use with deferred compensation plans, tax-deferred annuity
plans, and combined qualified plans/tax deferred annuity plans, you may return
the Contract for a full refund of the Cash Value (including charges) within ten
days after you receive it (the "right to return period"). Where state law
requires a longer right to return period, or the return of Purchase Payments,
the Company will comply. The Contract Owner bears the investment risk during the
right to return period; therefore, the Cash Value returned may be greater or
less than your Purchase Payment. All Cash Values will be determined as of the
next valuation following the Company's receipt of your written request for
refund.

9
<PAGE> 10

OPERATION OF THE CONTRACT
- --------------------------------------------------------------------------------

CREDITING PURCHASE PAYMENTS

The Purchase Payments to Your Account or to a Participant's Individual Account
under a Contract are applied to purchase Accumulation Units of the selected
Funding Options. With respect to an initial Purchase Payment, the Purchase
Payment is credited to the applicable account within two business days of our
receipt of a properly completed application or purchase order form and the
initial Purchase Payment. If an application or any other information provided is
incomplete when received, the Purchase Payment will be credited to the
applicable account within five business days. If an initial Purchase Payment is
not credited within five business days, it will be immediately returned unless
you have been informed of the delay and request that the Purchase Payment not be
returned.

Any subsequent payment is credited at the end of the business day on which it is
received. For subsequent Purchase Payments, the number of Accumulation Units
credited is determined by dividing the Purchase Payment by the appropriate
Accumulation Unit value next computed after we receive the payment at our Home
Office.

TRANSFERS OF CASH VALUE BETWEEN FUNDING OPTIONS

You may transfer Cash Values from one or more Funding Options to other Funding
Options, subject to the terms and conditions of the Contract (and your Plan). If
authorized by the Contract Owner, Participants under allocated Contracts may
transfer all or any of their Cash Value from one Funding Option to another up to
30 days before the due date of the first Annuity Payment.

DOLLAR COST AVERAGING (AUTOMATED TRANSFERS)*

Dollar cost averaging permits the Contract Owner or Participant to transfer a
fixed dollar amount to other Funding Options on a monthly or quarterly basis so
that more Accumulation Units are purchased if the value per unit is low and
fewer Accumulation Units are purchased if the value per unit is high. Therefore,
a lower-than-average value per unit may be achieved over the long run.

You may elect automated transfers through written request or other method
acceptable to the Company. Certain minimums apply to amounts transferred and/or
to enroll in the program.

You may start or stop participation in the Dollar Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Contract, including
provisions relating to the transfer of money between funding options. The
Company reserves the right to suspend or modify transfer privileges at any time
and to assess a processing fee for this service.

Before transferring any part of the Cash Value, Contract Owners should consider
the risks involved in switching between investments available under this
Contract. Dollar cost averaging requires regular investments regardless of
fluctuating price levels, and does not guarantee profits or prevent losses in a
declining market. Potential investors should consider their financial ability to
continue purchases through periods of low price levels.

* Automated transfers are subject to the terms and conditions of the Contract
(and your plan).

ASSET ALLOCATION ADVICE

Owners may elect to enter into a separate advisory agreement with Copeland
Financial Services, Inc. ("Copeland"), an affiliate of the Company, if the
program is available. Copeland provides asset allocation advice under its CHART
program, which is fully described in a separate disclosure statement. Under the
CHART Program, Purchase Payments and Cash Values are allocated among the
specified asset allocation funds. Copeland's charge for this advisory service is
equal to a maximum of 1.50% of the assets subject to the CHART Program. The
CHART Program fee will be paid by quarterly withdrawals from the Cash Values
allocated to the asset allocation funds. The fee is in addition to the Contract
charges described in "Charges Under the Contract." The Company

10
<PAGE> 11

will not treat these withdrawals as taxable distributions. The CHART Program may
not be available in all marketing programs through which this Contract is sold.

CONTRACT EXCHANGES

a) You may transfer all or any part of Your Account's Cash Surrender Value from
any Funding Option to any contract not issued by us. Such transfers may be
subject to a sales charge, as described in the Contract. If authorized by the
Contract Owner, a Participant may transfer all or any part of the Individual
Account's Cash Surrender Value from one Funding Option to any contract not
issued by us.

b) Under specific conditions, we may allow you to transfer to this Contract
funds held by you in another group annuity contract issued by us or to
transfer amounts from this Contract to another Contract issued by us without
applying a sales charge to the funds being transferred. Once the transfer is
complete and we have established an account for you at your direction, a new
sales charge may apply, as described in the new Contract.

c) Under specific conditions, when authorized by state insurance law, we may
credit a Plan up to 4% of the amount transferred to us from another group
annuity not issued by us as reimbursement to the Plan for any exit penalty
assessed by the other issuer. We may recover this credit through reduced
compensation paid to the servicing agent or broker.

CONTRACT AND PARTICIPANT'S INDIVIDUAL ACCOUNT TERMINATION

Under the allocated Contracts, if the Cash Value in a Participant's Individual
Account is less than the termination amount as stated in your Contract, we
reserve the right to terminate that Account and move the Cash Value of that
Participant's Individual Account to Your Account.

Any Cash Value to which a terminating Participant is not entitled under the Plan
will be moved to Your Account at your direction.

You may discontinue this Contract by Written Request at any time for any reason.
We reserve the right to discontinue this Contract if:

a) the Cash Value of the Contract is less than the termination amount; or

b) We determine within our sole discretion and judgment that the Plan or
administration of the Plan is not in conformity with applicable law; or

c) We receive notice that is satisfactory to us of plan termination.

If we discontinue this Contract or we receive your Written Request to
discontinue the Contract, we will, in our sole discretion and judgment:

a) accept no further payments for this Contract; and

b) pay you the Cash Surrender Value of the Funding Options within 7 days of
the date of our written notice to you, or distribute the Cash Surrender
Value of each Participant's Individual Account as described in the
Settlement Provisions section at your direction; and

c) pay you an amount as described in the Fixed Account Prospectus.

If the Contract is discontinued, we will distribute the Cash Surrender Value to
you no later than 7 days following our mailing the written notice of
discontinuance to you at the most current address available on our records.
Discontinuance of the Contract will not affect payments we are making under
Annuity options which began before the date of discontinuance.

ACCOUNT VALUE

During the Accumulation Period, the Account Value can be determined by
multiplying the total number of Funding Option Accumulation Units credited to
that account by the current Accumulation Unit value for the appropriate Funding
Option and adding the sums for each Funding Option. There is no assurance that
the value in any of the Funding Options will equal or exceed the Purchase
Payments made to such Funding Options.

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<PAGE> 12

ACCUMULATION UNIT VALUE

The Accumulation Unit value for each Funding Option will vary to reflect the
investment experience of the applicable Funding Option and will be determined on
each by multiplying the Accumulation Unit value of the particular Funding Option
on the preceding Valuation Date by a net investment factor for that Funding
Option for the Valuation Period then ended. The value of the Accumulation Unit
for each Funding Option was initially established at $1.00 on the date that
Purchase Payments were first allocated to that Funding Option. The net
investment factor is described in the Statement of Additional Information.

You should refer to the Funding Option prospectuses which accompany this
prospectus for a description of how the net assets of each Funding Option are
valued since this valuation has a direct bearing on the Accumulation Unit value
of the Funding Option and therefore the Contract and Account values.

PAYMENT OF BENEFITS
- --------------------------------------------------------------------------------

DEATH BENEFIT PROCEEDS PRIOR TO MATURITY DATE

ALLOCATED CONTRACT. The allocated Contract provides that, in the event the
Participant dies before the selected Maturity Date or the Participant's age 75
(whichever occurs first), the death benefit payable will be the greater of (a)
the Cash Value of the Participant's Individual Account or (b) the total Purchase
Payments under that Participant's Individual Account, less any applicable
premium tax, minus outstanding loan amounts and prior surrenders not previously
deducted as of the date we receive Due Proof of Death.

If the Participant dies on or after age 75 and before the Annuity Commencement
Date, we will pay the Beneficiary the Cash Value of the Participant's Individual
Account, less any applicable Premium Tax or outstanding loan amounts as of the
date we receive Due Proof of Death.

We must be notified of a Participant's death no later than six months after the
Participant's date of death in order for the Beneficiary to receive the death
proceeds as described. If notification is received more than six months after
the Participant's death, the Beneficiary shall receive the Cash Value of the
Participant's Individual Account less any outstanding loan amounts as of the
date we receive Due Proof of Death.

The death benefit may be taken by the beneficiary in one of three ways: 1) in a
single sum, in which case payment will be made within seven days of our receipt
of Due Proof of Death, unless subject to postponement as explained in
"Postponement of Payment," 2) applied to a nonlifetime Annuity option, in which
case the proceeds must be distributed within 5 years of the Participant's date
of death, or 3) applied to a lifetime Annuity.

An election to receive death benefits under a form of Annuity must be made
within one year after the death. The election must be made by written notice to
us at our Home Office. The beneficiary may choose to have Annuity payments made
on a variable basis, fixed basis, or a combination of the two.

No election to provide Annuity payments will become operative unless the amount
placed under the Annuity Option is at least $2,000. The manner in which the
Annuity payments are determined and in which they may vary from month to month
are the same as applicable to a Participant's Individual Account after
retirement.

UNALLOCATED CONTRACT. The unallocated Contract provides that, in the event the
Participant dies before the selected Maturity Date, or the Participant's
attainment of age 75 (whichever occurs first), the death benefit payable will be
the greater of (a) the Cash Value attributable to the Participant under the
contract or (b) the Total Purchase Payments attributable to the Participant
under the contract, less any applicable Premium Tax, prior surrenders not
previously deducted and any outstanding loan balance (if applicable) as of the
date we receive Due Proof of Death.

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<PAGE> 13

If the Participant dies on or after attainment of age 75 and before the Maturity
Date, we will pay the Beneficiary the Cash Value Attributable to the Participant
under the contract, less any applicable Premium Tax, prior surrenders not
previously deducted and any outstanding loan balance (if applicable) as of the
date we receive Due Proof of Death.

We will pay this benefit upon receiving Due Proof of Death along with a Written
Request noting the Cash Value and the total Purchase Payments attributable to
the Participant under the Contract. In addition, we will require copies of
records and any other reasonable proof we find necessary to verify the Cash
Value and total Purchase Payments attributable to the Participant under the
unallocated Contract.

We must be notified of a Participant's death no later than six months after the
Participant's date of death in order for the Beneficiary to receive the death
benefits as described. If notification is received more than six months after
the Participant's death, the Beneficiary shall receive the Cash Value
attributable to the Participant under the contract as of the date we receive Due
Proof of Death. The death benefit may be taken by the Beneficiary in one of
three ways: 1) in a single sum, in which case payment will be made within seven
days of our receipt of Due Proof of Death, unless subject to postponement as
explained below; 2) applied to a Fixed Period Annuity Option, in which case the
proceeds must be distributed within five years of the Participant's date of
death, or; 3) applied to a Life Annuity Option available under the Contract.

A Written Request electing the distribution of death proceeds in the form of an
Annuity Option must be received by Us within one year from the date of death.
The Minimum Amount that can be placed under an Annuity Option is $2,000.

The death proceeds may be received in the form of Annuity payments made on a
variable basis, a fixed basis, or a combination of the two. Annuity payments
will be determined as described in the "Payment of Benefits" section.

The death benefit described above is available by Endorsement to the Contract
and may not be available in all jurisdictions.

DEATH PROCEEDS AFTER THE MATURITY DATE

If the Annuitant dies on or after the Maturity Date, we will pay the Beneficiary
a death benefit consisting of any benefit remaining under the Annuity Option
then in effect.

ELECTION OF SETTLEMENT OPTIONS

Any amount distributed from the Contract may be applied to any one of the
Annuity options described below.

Election of any of these options must be made by Written Request to our Home
Office at least 30 days prior to the date such election is to become effective.
The form of such Annuity option shall be determined by the Contract/Certificate
Owner. The following information must be provided with any such request:

a) the Participant's name, address, date of birth, social security number;

b) the amount to be distributed;

c) the Annuity option which is to be purchased;

d) the date the Annuity option payments are to begin;

e) if the form of the Annuity provides a death benefit in the event of the
Participant's death, the name, relationship and address of the
beneficiary as designated by you; and

f) any other data that we may require.

The beneficiary, as specified in item (e) above, may be changed by you or the
Annuitant as long as we are notified by Written Request while the Annuitant is
alive and before payments have begun. If the beneficiary designation is
irrevocable, such designation cannot be changed or revoked without the consent
of the beneficiary. After we receive the Written Request and the

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<PAGE> 14

written consent of the beneficiary (if required), the new beneficiary
designation will take effect as of the date the notice is signed. We have no
further responsibility for any payment we made before the Written Request.

MINIMUM AMOUNTS

The minimum amount that can be placed under an Annuity option is $2,000 unless
we consent to a lesser amount. If any periodic payments due are less than $100,
we reserve the right to make payments at less frequent intervals.

MISSTATEMENT

If an Annuitant's sex or age was misstated, all benefits of this Contract are
what the Cash Values would have purchased on the date of issue at the correct
sex and age.

RETIRED LIFE CERTIFICATE

We will issue to each person to whom annuity benefits are being paid under this
Contract a certificate setting forth a statement in substance of the benefits to
which such person is entitled under this Contract.

ALLOCATION OF CASH SURRENDER VALUE DURING THE ANNUITY PERIOD

At the time an Annuity Option is elected, you also may elect to have the
Participant's Cash Surrender Value applied to provide a Variable Annuity, a
Fixed Annuity, or a combination of both.

If no election is made to the contrary, the Cash Surrender Value will provide an
Annuity which varies with the investment experience of the corresponding Funding
Option(s) at the time of election. You or the Participant, if you so authorize,
may elect to transfer Cash Value from one Funding Option to another, as
described in the provision "Transfers of Cash Value Between Funding Options," in
order to reallocate the basis on which Annuity payments will be determined. Once
Annuity payments have begun, no further transfers are allowed.

ANNUITY OPTIONS

OPTION 1 -- LIFE ANNUITY/NO REFUND. A Life Annuity is an Annuity payable during
the lifetime of the Annuitant and terminating with the last monthly payment
preceding the death of the Annuitant.

OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS ASSURED. An
Annuity payable monthly during the lifetime of an Annuitant with the provision
that if, at the death of the Annuitant, payments have been made for less than
120,180 or 240 months, as elected, then we will continue to make payments to the
designated beneficiary during the remainder of the period.

OPTION 3 -- LIFE ANNUITY -- CASH REFUND. We will make monthly Annuity payments
during the lifetime of the Annuitant, ceasing with the last payment due prior to
the death of the Annuitant, provided that, at the death of the Annuitant, the
Beneficiary will receive an additional payment equal to the dollar value, if
any, of (a) minus (b) where, for a Variable Annuity:

(a) is the total amount applied under the option divided by the Annuity
Unit Value on the due date of the first Annuity payment;

(b) and is

(1) the number of Annuity Units represented by each payment;
times

(2) the number of payments made;

and for a Fixed Annuity:

(a) is the Cash Value applied on the Maturity Date under this option; and

(b) is the dollar amount of Annuity payments already paid.

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<PAGE> 15

OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY. Monthly Annuity payments
based upon the joint lifetime of two persons selected: payments made first to
the Annuitant, and upon his/her death, paid to the survivor. No more payments
will be made after the death of the survivor.

OPTION 5 -- JOINT AND LAST SURVIVOR ANNUITY -- ANNUITY REDUCED ON DEATH OF
PRIMARY PAYEE. Monthly Annuity payments to the Annuitant during the joint
lifetime of the two persons selected. One of the two persons will be designated
as the primary payee. The other will be designated as the secondary payee. On
the death of the secondary payee, if survived by the primary payee, we will
continue to make monthly Annuity payments to the primary payee in the same
amount that would have been payable during the joint lifetime of the two
persons.

On the death of the primary payee, if survived by the secondary payee, we will
continue to make monthly Annuity payments to the secondary payee in an amount
equal to 50% of the payments which would have been made during the lifetime of
the primary payee. No further payments will be made following the death of the
survivor.

OPTION 6 -- FIXED PAYMENTS FOR A FIXED PERIOD OF 120, 180, OR 240 MONTHS. We
will make monthly payments for the period selected. If at the death of the
Annuitant, payments have been made for less than 120, 180, or 240 months, as
elected, we will continue to make payments to the designated beneficiary during
the remainder of the period.

OPTION 7 -- OTHER ANNUITY OPTIONS. We will make other arrangements for Annuity
payments as may be mutually agreed upon by you and us.

VARIABLE ANNUITY

AMOUNT OF FIRST PAYMENT. The Life Annuity Tables are used to determine the
first monthly Annuity payment. They show the dollar amount of the basic first
monthly Annuity payment which can be purchased with each $1,000 applied. The
amount applied to an Annuity will be the Cash Surrender Value of a Participant's
Individual Account as of 14 days before the date Annuity payments start. We
reserve the right to require satisfactory proof of the age of any persons on
whose life Annuity payments are based before making the first payment under any
of these options.

ANNUITY UNIT VALUE. The initial value of an Annuity Unit of each Funding Option
was set at $1.00. On any Valuation Date, the Annuity Unit Value for a Funding
Option equals the Annuity Unit Value on the immediately preceding Valuation
Date, multiplied by the net investment factor for that Funding Option for the
Valuation Period just ended, divided by the Assumed Daily Net Investment Factor.
The Assumed Daily Net Investment Factor is given in the Contract.

The value of an Annuity Unit as of any date other than a Valuation Date will be
equal to its value as of the succeeding Valuation Date.

INITIAL PAYMENT AND NUMBER OF ANNUITY UNITS. We determine the number of Annuity
Units credited to the Annuitant's Individual Account in each Funding Option by
dividing the basic first monthly Annuity payment attributable to that Funding
Option by the Funding Option's Annuity Unit Value as of 14 days before the due
date of the first Annuity payment.

AMOUNT OF SUBSEQUENT PAYMENTS. The dollar amount of any subsequent payments
made to an Annuitant after the first payment date may change from month to month
based on the net investment results of the Funding Option(s). The total amount
of each Annuity payment will be equal to the sum of the payments in each Funding
Option allocated to that Annuitant's Individual Account.

The amount of the payments made to an Annuitant is determined by multiplying,
for each Funding Option, the number of Annuity Units credited to that Annuitant
by the Annuity Unit Value of the Funding Option as of the date 14 days prior to
the date on which payment is due and by adding the sums.

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<PAGE> 16

FIXED ANNUITY

A Fixed Annuity provides for payments which do not vary during the Annuity
Period. The minimum guaranteed amount of the Fixed Annuity payments will be
calculated as described under "Variable Annuity: Determination of First Annuity
Payment" except that the Cash Surrender Value will be determined as of the day
annuity payments commence. If it would produce a larger payment, the Fixed
Annuity Payments will be determined using the Life Annuity Tables in effect on
the Maturity Date.

CHARGES UNDER THE CONTRACT
- --------------------------------------------------------------------------------

SALES CHARGES

Purchase Payments made under the Contract pursuant to the terms of the contracts
are not subject to a front-end sales load. However, upon redemption, the Company
will charge a surrender charge. Any sales charge, penalty tax and withholding
will be deducted from either the amount surrendered or from the remaining
Contract balance, as requested by the Contract Owner or Participant. The Company
will charge a maximum surrender charge of 5% of the amount surrendered in the
first and second Contract/Certificate Years, up to 4% in years three and four,
up to 3% in years five and six, up to 2% in years seven and eight, and 0%
beginning in year nine. Any applicable sales charge will not exceed 8.5% of the
aggregate amount of the Purchase Payments made.

The sales charges can be changed if the Company anticipates it will incur
decreased sales-related expenses due to the nature of the Plan to which the
Contract is issued or the involvement of TPAs. When considering a change in the
sales charges, the Company will take into account:

(a) The expected level of initial agent or the Company involvement during
the establishment and maintenance of the Contract including the amount
of enrollment activity required, and the amount of service required by
the Contract Owner in support of the Plan, and

(b) Contract Owner, agent or TPA involvement in conducting ongoing
enrollment of subsequently eligible Participants, and

(d) Any other factors which the Company anticipates will increase or
decrease the sales-related expenses associated with the sale of the
Contract in connection with the Plan.

The surrender charge will not be assessed for withdrawals made under the
following circumstances: retirement, separation from service, loans (if
available in your Plan), hardship (as defined by the Code), death, disability as
defined in Code section 72(m)(7), return of Excess Plan Contributions, minimum
required distributions generally at age 70 1/2, transfers to an Employer Stock
Fund, certain Plan expenses as mutually agreed upon and annuitization under this
Contract or another contract issued by us.

For unallocated Contracts, we make the deductions described above pursuant to
the terms of the various agreements among the custodian, the principal
underwriter, and us.

FREE WITHDRAWAL ALLOWANCE. For Contracts in use with deferred compensation
plans, the tax deferred annuity plans and combined qualified plans/tax-deferred
annuity plans, there is a 10% free withdrawal allowance available each year
after the first Contract/Certificate Year. The available withdrawal amount will
be calculated as of the first Valuation Date of any given Contract/Certificate
Year. The free withdrawal allowance applies to partial surrenders of any amount
and to full surrenders, except those full surrenders transferred directly to
annuity contracts not issued by us.

16
<PAGE> 17

MORTALITY AND EXPENSE RISK CHARGE

A mortality and expense risk charge is deducted on each Valuation Date from
amounts held in the Separate Account. This charge is equivalent, on an annual
basis, to a maximum of 1.20% of the amounts allocated to each Funding Option.
The mortality risk portion compensates the Company for guaranteeing to provide
Annuity Payments according to the terms of the Contract regardless of how long
the Annuitant lives and for guaranteeing to provide the death benefit if a
Participant dies prior to the Maturity Date. The expense risk charge compensates
the Company for the risk that the charges under the Contract, which cannot be
increased during the duration of the Contract, will be insufficient to cover
actual costs.

In determining the level of the mortality and expense risk charge, the Company
will consider the size of the Plan, the number of employees, Plan Participants,
the demographics of the Participants, which may reduce mortality and expenses of
the Plan, and any other factors which the Company considers relevant.

Although variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of each Funding Option's investment
portfolio, payments will not be affected by (a) the Company's actual mortality
experience among Annuitants after retirement or (b) the Company's actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by the Company.

FUNDING OPTION CHARGES

There are certain deductions from and expenses paid out of the assets of each
Funding Option. These are described in the applicable prospectus for each
Funding Option.

ADMINISTRATIVE CHARGES

This charge is deducted on each Valuation Date from the variable Funding Options
in order to compensate the Company for certain administrative and operating
expenses of the Funding Options. The charge is equivalent on an annual basis to
a maximum of 0.10% of the daily net asset value of each Funding Option. This
charge is assessed during the Accumulation and Annuity Periods from each
Participant's Individual Account.

PREMIUM TAX DEDUCTIONS

Certain states or municipalities impose a premium tax, ranging from 0% to 5%. A
premium tax is made, if applicable, on purchase payments or contract values. On
any Contract subject to a premium tax, the tax will be deducted, as provided
under applicable law, either from Purchase Payments when received or from the
amount applied to effect an Annuity at the time Annuity payments commence.
However, we reserve the right to deduct from the Contract the state or
municipality premium tax upon our determination of when such tax is due.

TPA ADMINISTRATIVE CHARGES

The Company may be directed by the Contract Owner to deduct charges from
Purchase Payments or account values for payment to the Contract Owner and/or the
TPA. These charges are not levied by the Contract. Such charges may include
maintenance fees and transaction fees.

THE COMPANY, THE SEPARATE ACCOUNT
AND THE FUNDING OPTIONS
- --------------------------------------------------------------------------------

THE COMPANY

The Travelers Insurance Company is a stock insurance company chartered in 1864
in Connecticut and continuously engaged in the insurance business since that
time. It is licensed to conduct life insurance business in all states of the
United States, the District of Columbia, Puerto Rico, Guam,

17
<PAGE> 18

the U.S. and British Virgin Islands and the Bahamas. The Company is an indirect
wholly owned subsidiary of Travelers Group Inc., a financial services holding
company. The Company's Home Office is located at One Tower Square, Hartford,
Connecticut 06183.

THE SEPARATE ACCOUNT

The Separate Account was established on December 26, 1995, in accordance with
authorization by the Board of Directors of the Company. It is the Separate
Account in which the Company sets aside and invests the assets attributable to
the Contracts sold under this prospectus. The Separate Account is registered as
a unit investment trust under the Investment Company Act of 1940. This
registration does not, however, involve Securities and Exchange Commission
supervision of the management or the investment practices or policies of the
Separate Account or the Company.

Under Connecticut law, the assets of the Separate Account attributable to the
Contracts offered under this prospectus are held for the benefit of the owners
of, and the persons entitled to payments under, those Contracts. The assets in
the Separate Account are not chargeable with liabilities arising out of any
other business the Company may conduct. Therefore, you will not be affected by
the rate of return of the Company's General Account, nor by the investment
performance of any of the Company's other separate accounts.

The Company does not guarantee the investment results of the Separate Account or
the Funding Options. There is no assurance that the Account Value on the
Maturity Date or the aggregate amount of the Variable Annuity payments will
equal the sum of Purchase Payments made under the Contract. Since each Funding
Option has different investment objectives, each is subject to different risks.
These risks are more fully described in the prospectuses for the Funding Options
which must accompany this prospectus. Additional copies of the prospectuses may
be requested from your sales representative or from the Home Office.

The Company reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Funding Option held by the Separate Account. Substitution may occur if
shares of the Funding Option(s) become unavailable or due to changes in
applicable law or interpretations of law. Current law requires approval of the
Securities and Exchange Commission and notification to you of any such
substitution. The Company also reserves the right, subject to compliance with
the law, to offer additional Funding Options.

The Funding Options and their investment objectives and advisers are as follows:

18
<PAGE> 19

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FUNDING INVESTMENT INVESTMENT
OPTION OBJECTIVE ADVISER SUBADVISER
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities Portfolio current income by investing in SBMFM
equity and debt securities of
companies in the utility
industries
Lazard International Stock Portfolio capital appreciation through TAMIC Lazard Asset
investing primarily in the Management
equity securities of non-United
States companies
Federated Stock Portfolio growth of capital and income TAMIC Federated
Investment
Counseling, Inc.
Federated High Yield Portfolio* high current income TAMIC Federated
Investment
Counseling, Inc.
Large Cap Portfolio long-term growth of capital TAMIC Fidelity Management
& Research
Company
Equity Income Portfolio total investment return in excess TAMIC Fidelity Management
of The S&P 500 Inc. Index over & Research
a given market cycle Company
American Odyssey International maximum long-term total return by American Odyssey Funds Bank of Ireland
Equity Fund investing primarily in common Management, Inc. Asset Management
stocks of established non-U.S. (U.S.) Limited
companies
American Odyssey Emerging maximum long-term total return by American Odyssey Funds Wilke/Thompson
Opportunities Fund investing primarily in common Management, Inc. Capital
stocks of small, rapidly Management, Inc.
growing companies and Cowen Asset
Management
American Odyssey Core Equity Fund maximum long-term total return by American Odyssey Funds Equinox Capital
investing primarily in common Management, Inc. Management, Inc.
stocks of well-established
companies
American Odyssey Long-Term Bond maximum long-term total return by American Odyssey Funds Western Asset
Fund* investing primarily in long- Management, Inc. Management
term debt securities Company
American Odyssey Intermediate-Term maximum long-term total return by American Odyssey Funds TAMIC
Bond Fund* investing primarily in Management, Inc.
intermediate-term corporate
debt securities
American Odyssey Short-Term Bond maximum long-term total return by American Odyssey Funds Smith Graham & Co.
Fund* investing primarily in Management, Inc. Asset Managers,
investment-grade, short-term L.P.
debt securities
Smith Barney Income and Growth current income and long-term SBMFM
Portfolio growth of income and capital
Alliance Growth Portfolio long-term growth of capital Travelers Investment Alliance Capital
Advisers, Inc. ("TIA") Management L.P.
Smith Barney International Equity total return on assets from SBMFM
Portfolio growth of capital and income
Putnam Diversified Income high current income consistent TIA Putnam Investment
Portfolio** with preservation of capital Management, Inc.
</TABLE>

19
<PAGE> 20

* The Funding Options marked with an asterisk (*) are considered Competing
Funds, and may be subject to transfer restrictions. Those marked with two
asterisks (**) are not currently considered Competing Funds, but may be so in
the future because of an allowable change in the Funding Option's investment
strategy.

Please refer to the Contract for transfer restrictions.

An asset allocation program is available for certain Funding Options under the
Contract. See "Asset Allocation Advice."

Certain variable annuity separate accounts and variable life insurance separate
accounts may invest in the Funding Options simultaneously (called "mixed" and
"shared" funding). It is conceivable that in the future it may be
disadvantageous to do so. Although the Company and the Funding Options do not
currently foresee any such disadvantages either to variable annuity Contract
Owners or variable life insurance policyowners, each Funding Option's Board of
Directors intends to monitor events in order to identify any material conflicts
between such Contract Owners and policyowners and to determine what action, if
any, should be taken in response thereto. If a Board of Directors was to
conclude that separate funds should be established for variable life and
variable annuity separate accounts, the variable annuity Contract Owners would
not bear any expenses attendant to the establishment of such separate funds, but
variable annuity Contract Owners and variable life insurance policyowners would
no longer have the economies of scale resulting from a larger combined fund.

20
<PAGE> 21

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Company may advertise different types of historical
performance for the Funding Options available through Separate Account QP. The
Company may advertise the "standardized average annual total returns" of each,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
average annual total returns," both described below.

"Standardized average annual total returns will show the percentage rate of
return of a hypothetical initial investment of $1,000 for the most recent one-,
five- and ten-year periods (or fractional periods thereof). This standardized
calculation reflects the deduction of all applicable charges made to the
Contract, except for premium taxes which may be imposed by certain states.
"Non-standardized average annual total returns" will be calculated in a similar
manner, except non-standardized total returns will not reflect the deduction of
any applicable Surrender Charge or administrative charge, which would decrease
the level of performance shown if reflected in these calculations.

Performance information may be quoted numerically or may be presented in a
table, graph or other illustration. Advertisements may include data comparing
performance to well-known indices of market performance (including, but not
limited to, the Dow Jones Industrial Average, the Standard & Poor's (S&P) 500
Index and the S&P 400 Index, the Lehman Brothers Long-T-Bond Index, the Russell
1000, 2000 and 3000 Indices, the Value Line Index, and the Morgan Stanley
Capital International's EAFE Index). Advertisements may also include published
editorial comments and performance rankings compiled by independent
organizations (including, but not limited to, Lipper Analytical Services, Inc.
and Morningstar, Inc.) and publications that monitor the performance of Fund QP
and the Funding Options.

The total return quotations are based upon historical earnings and are not
necessarily representative of future performance. A Contract Owner's Contract
Value at redemption may be more or less than original cost. The SAI contains
more detailed information about these performance calculations, including actual
examples of each type of performance advertised.

FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------

The following description of the federal income tax consequences under this
Contract is not exhaustive, is not intended to cover all situations and is not
meant to provide tax advice. Because of the complexity of the law and the fact
that the tax results will vary depending on many factors, you should consult
your tax advisor regarding your personal situation. For your information, a more
detailed discussion is contained in the SAI.

GENERAL TAXATION OF ANNUITIES

Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (Code) governs how this money is ultimately taxed,
depending upon the type of contract, qualified or non-qualified, and the manner
in which the money is distributed, as briefly described below.

TYPES OF CONTRACTS: QUALIFIED OR NONQUALIFIED

If you purchase an annuity contract with proceeds of an eligible rollover
distribution from any pension plan, specially sponsored program, or individual
retirement annuity (IRA) with pre-tax dollars, your contract is referred to as a
qualified contract. Some examples of qualified contracts are: IRAs, 403(b)
annuities, pension and profit-sharing plans (including 401(k) plans), Keogh
Plans and certain other qualified deferred compensation plans. If you purchase
the contract on an individual basis and with after-tax dollars and not under one
of the programs described above, your contract is referred to as nonqualified.

21
<PAGE> 22

INVESTOR CONTROL

In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
accounts used to support their contract. In those circumstances, income and
gains from the separate account assets would be includable in the variable
contract owner's gross income.

The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The U.S. Treasury Department has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the contract owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets." As of the date of this prospectus, no such guidance has been
issued.

The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the owners were not owners of separate account assets. For example, a contract
owner or participant of this Contract has additional flexibility in allocating
payments and cash values. These differences could result in the contract owner
being treated as the owner of the assets of Fund QP. In addition, the Company
does not know what standard will be set forth in the regulations or rulings
which the Treasury is expected to issue, nor does the Company know if such
guidance will be issued. The Company therefore reserves the right to modify the
Contract as necessary to attempt to prevent the contract owner from being
considered the owner of a pro rata share of the assets of Fund QP.

The remaining tax discussion assumes that the Contract qualifies as an annuity
contract for federal income tax purposes.

MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS

Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2 or retirement. Distributions must
begin or be continued according to required patterns following the death of the
contract owner or annuitant of both qualified and nonqualified annuities.

NONQUALIFIED ANNUITY CONTRACTS

As the owner of a nonqualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on purchase payments, but you will not be
taxed on increases in the value of your contract until a distribution
occurs -- either as a withdrawal (distribution made prior to the maturity date),
or as annuity payments. When a withdrawal is made, you are taxed on the amount
of the withdrawal that is considered earnings. Similarly, when you receive an
annuity payment, part of each payment is considered a return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
(i.e., any earnings) will be considered ordinary income for tax purposes.

If a nonqualified annuity is owned by other than an individual, however, (e.g.,
by a corporation), increases in the value of the contract attributable to
purchase payments made after February 28, 1986 are includable in income
annually. Furthermore, for contracts issued after April 22, 1987, if you
transfer the contract without adequate consideration all deferred increases in
value will be includable in your income at the time of the transfer.

22
<PAGE> 23

If you make a partial withdrawal, this money will generally be taxed as first
coming from earnings, (income in the contract), and then from your purchase
payments. These withdrawn earnings are includable in your income. (See "Penalty
Tax for Premature Distributions" below). There is income in the contract to the
extent the cash value exceeds your investment in the contract. The investment in
the contract equals the total purchase payments you paid less any amount
received previously which was excludable from gross income. Any direct or
indirect borrowing against the value of the contract or pledging of the contract
as security for a loan will be treated as a cash distribution under the tax law.

Federal tax law requires that nonqualified annuity contracts meet minimum
mandatory distribution requirements upon the death of the contract owner,
including the first of joint owners. If these requirements are not met, the
surviving joint owner, or the beneficiary, will have to pay taxes prior to
distribution. The distribution required depends, among other things, upon
whether an annuity option is elected or whether the new contract owner is the
surviving spouse. We will administer Contracts in accordance with these rules
and we will notify you when you should begin receiving payments.

QUALIFIED ANNUITY CONTRACTS

Under a qualified annuity, since amounts paid into the contract have not yet
been taxed, the full amount of all distributions, including lump-sum withdrawals
and annuity payments are taxed at the ordinary income tax rate unless the
distribution is transferred to an eligible rollover account or contract. The
Contract is available as a vehicle for IRA rollovers and for other qualified
contracts. There are special rules which govern the taxation of qualified
contracts, including withdrawal restrictions, requirements for mandatory
distributions, and contribution limits. We have provided a more complete
discussion in the SAI.

PENALTY TAX FOR PREMATURE DISTRIBUTIONS

Taxable distributions taken before the contract owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions, for life or life expectancy, or
unless the distribution follows the death or disability of the Contract Owner.
Other exceptions may be available in certain tax-qualified plans.

DIVERSIFICATION REQUIREMENTS

The Code states that in order to qualify for the tax benefits described above,
investments made in the separate account of any nonqualified variable annuity
contract must satisfy certain diversification requirements. Tax regulations
define how separate accounts must be diversified. We monitor the investments
constantly and believe that our accounts are adequately diversified. We intend
to administer all contracts subject to this provision of law in a manner that
will maintain adequate diversification.

MISCELLANEOUS
- --------------------------------------------------------------------------------

VOTING RIGHTS

The Company is the legal owner of the shares of the Funding Options. However, we
believe that when a Funding Option solicits proxies in conjunction with a vote
of shareholders we are required to obtain from you and from other owners
instructions on how to vote those shares. When we receive those instructions, we
will vote all of the shares we own in proportion to those instructions. This
will also include any shares we own on our own behalf. Should we determine that
we are no longer required to comply with the above, we will vote the shares in
our own right.

DISTRIBUTION OF THE CONTRACTS

Tower Square Securities, Inc. ("Tower Square") serves as principal underwriter
for the securities issued with respect to the Separate Account. The Company is
the custodian of the Separate Account's assets. It is currently anticipated that
an affiliated broker-dealer may become the principal underwriter for the
Contracts during 1997.

23
<PAGE> 24

The Contracts will be sold by salespersons of Tower Square who represent the
Company as insurance and variable annuity agents and who are registered
representatives of Tower Square or broker-dealers who have entered into
distribution agreements with Tower Square. The compensation paid to sales
representatives will not exceed 5% of payments made under the Contracts. Tower
Square is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc. Tower Square is an indirect wholly owned subsidiary of
The Company.

POSTPONEMENT OF PAYMENT (EMERGENCY PROCEDURE)

Payment of any benefit or values may be postponed whenever (1) the New York
Stock Exchange is closed; (2) when trading on the New York Stock Exchange is
restricted; (3) when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the securities held in the Funding
Options is not reasonably practicable or it is not reasonably practicable to
determine the value of the Funding Option's net assets; or (4) during any other
period when the Securities and Exchange Commission, by order, so permits for the
protection of security holders. Any provision of the Contract which specifies a
Valuation Date will be superseded by this Emergency Procedure.

CONTRACT MODIFICATION

The Company reserves the right to modify the Contract to keep it qualified under
all related law and regulations which are in effect during the term of this
Contract. We will obtain the approval of any regulatory authority needed for the
modifications.

LEGAL PROCEEDINGS

The Company's Counsel with respect to federal laws and regulations applicable to
the issue and sale of the Contracts and with respect to Connecticut law is
Kathleen A. McGah, Esquire, Counsel and Assistant Secretary of The Travelers
Insurance Company. She has passed on all legal matters affecting the Separate
Account. Currently, there are no material legal proceedings affecting the
Separate Account.

24
<PAGE> 25

APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

THE TRAVELERS SEPARATE ACCOUNT QP FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES

<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 8, 1996
(DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
CAPITAL APPRECIATION FUND
Unit Value at beginning of year......................................................... $ 1.000
Unit Value at end of year............................................................... 1.028
Number of units outstanding at end of year.............................................. 293,629
HIGH YIELD BOND TRUST
Unit Value at beginning of year......................................................... $ 1.000
Unit Value at end of year............................................................... 1.031
Number of units outstanding at end of year.............................................. 6,520
MANAGED ASSETS TRUST
Unit Value at beginning of year......................................................... $ 1.000
Unit Value at end of year............................................................... 1.043
Number of units outstanding at end of year.............................................. 78,508
U.S. GOVERNMENT SECURITIES PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.025
Number of units outstanding at end of period............................................ 31,072
SOCIAL AWARENESS STOCK PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.036
Number of units outstanding at end of year (thousands).................................. 35,689
UTILITIES PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.034
Number of units outstanding at end of period............................................ 7,796
LAZARD INTERNATIONAL STOCK PORTFOLIO
Unit Value at beginning of year......................................................... $ N/A
Unit Value at end of year............................................................... N/A
Number of units outstanding at end of year.............................................. N/A
FEDERATED STOCK PORTFOLIO
Unit Value at beginning of year......................................................... $ N/A
Unit Value at end of year............................................................... N/A
Number of units outstanding at end of year.............................................. N/A
FEDERATED HIGH YIELD PORTFOLIO
Unit Value at beginning of year......................................................... $ N/A
Unit Value at end of year............................................................... N/A
Number of units outstanding at end of year.............................................. N/A
LARGE CAP PORTFOLIO
Unit Value at beginning of year......................................................... $ N/A
Unit Value at end of year............................................................... N/A
Number of units outstanding at end of year.............................................. N/A
EQUITY INCOME PORTFOLIO
Unit Value at beginning of year......................................................... $ N/A
Unit Value at end of year............................................................... N/A
Number of units outstanding at end of year.............................................. N/A
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.091
Number of units outstanding at end of period............................................ 239,079
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 0.885
Number of units outstanding at end of period............................................ 404,384
AMERICAN ODYSSEY CORE EQUITY FUND
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.080
Number of units outstanding at end of period............................................ 496,794
</TABLE>

A-1
<PAGE> 26

APPENDIX A
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

THE TRAVELERS SEPARATE ACCOUNT QP FOR VARIABLE ANNUITIES
ACCUMULATION UNIT VALUES (CONTINUED)

<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 8, 1996
(DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
AMERICAN ODYSSEY LONG-TERM BOND FUND
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.022
Number of units outstanding at end of period............................................ 232,943
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.017
Number of units outstanding at end of period............................................ 195,701
AMERICAN ODYSSEY SHORT-TERM BOND FUND
Unit Value at beginning of period....................................................... $ 1,000
Unit Value at end of period............................................................. 1.010
Number of units outstanding at end of period............................................ 116,408
SMITH BARNEY INCOME AND GROWTH PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.058
Number of units outstanding at end of period............................................ 270,469
ALLIANCE GROWTH PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.065
Number of units outstanding at end of period............................................ 44,977
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.017
Number of units outstanding at end of period............................................ 8,805
PUTNAM DIVERSIFIED INCOME PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.019
Number of units outstanding at end of period............................................ 12,636
SMITH BARNEY HIGH INCOME PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.042
Number of units outstanding at end of period............................................ 278
MFS TOTAL RETURN PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.045
Number of units outstanding at end of period............................................ 2,087
SMITH BARNEY MONEY MARKET PORTFOLIO
Unit Value at beginning of period....................................................... $ 1.000
Unit Value at end of period............................................................. 1.010
Number of units outstanding at end of period............................................ 56,124
</TABLE>

The financial statements of Separate Account QP are contained in the Annual
Report which should be read along with this information and which is
incorporated by reference into the SAI. The consolidated financial statements of
The Travelers Insurance Company and Subsidiaries are contained in the SAI.

A-2
<PAGE> 27

APPENDIX B
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

The Statement of Additional Information contains more specific information and
financial statements relating to the Separate Account and the Company. A list of
the contents of the Statement of Additional Information is set forth below:

The Insurance Company
Principal Underwriter
Distribution and Management Agreement
Valuation of Assets
Federal Tax Considerations
Performance Information
Independent Accountants
Financial Statements

- --------------------------------------------------------------------------------

COPIES OF THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1997 (FORM NO. L
12549S) ARE AVAILABLE WITHOUT CHARGE. TO REQUEST A COPY, PLEASE COMPLETE THE
COUPON FOUND BELOW AND MAIL IT TO: THE TRAVELERS INSURANCE COMPANY, ANNUITY
SERVICES, ONE TOWER SQUARE, HARTFORD, CONNECTICUT, 06183-9061.

Name:
- --------------------------------------------------------------------------------
Address:
================================================================================

B-1
<PAGE> 28

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 29

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 30

THE TRAVELERS SEPARATE ACCOUNT QP
FOR VARIABLE ANNUITIES

L-12549 Printed in U.S.A.
TIC Ed. 5-97
<PAGE> 31

MANAGED ASSETS TRUST

One Tower Square
Hartford, Connecticut 06183
Telephone 800-277-0111
- --------------------------------------------------------------------------------

Managed Assets Trust (the "Fund") is a diversified open-end management
investment company (mutual fund) whose goal is high total investment return
through a fully managed investment policy. The Fund has a fully managed
investment policy and invests in common stocks, corporate bonds and money market
instruments.

Shares of the Fund are currently offered without a sales charge only to separate
accounts of The Travelers Insurance Company and The Travelers Life and Annuity
Company (the "Company" or "The Travelers"). The Fund serves as one of the
investment vehicles for certain variable annuity and variable life insurance
contracts issued by the Company. The term "shareholder" as used herein refers to
any insurance company separate account that may use shares of the Fund as an
investment vehicle now or in the future.

This Prospectus concisely sets forth the information about the Fund that you
should know before investing. Please read it and retain it for future reference.
Additional information about the Fund is contained in a Statement of Additional
Information ("SAI") dated May 1, 1997 which has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to The Travelers,
Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030, or by
calling 1-800-842-8573.

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR A VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT ISSUED BY THE TRAVELERS. BOTH THIS
PROSPECTUS AND THE CONTRACT PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 32

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS.................................................................. 3
FUND DESCRIPTION...................................................................... 4
INVESTMENT OBJECTIVE AND POLICIES..................................................... 4
INVESTMENT RESTRICTIONS............................................................... 5
RISK FACTORS.......................................................................... 5
BOARD OF TRUSTEES..................................................................... 5
INVESTMENT ADVISERS................................................................... 6
TAMIC............................................................................... 6
Portfolio Manager................................................................ 6
TIMCO............................................................................... 6
Portfolio Manager................................................................ 6
FUND ADMINISTRATION................................................................... 7
SECURITIES TRANSACTIONS............................................................... 7
FUND EXPENSES......................................................................... 7
TRANSFER AGENT........................................................................ 8
SHAREHOLDER RIGHTS.................................................................... 8
NET ASSET VALUE....................................................................... 8
TAX STATUS............................................................................ 9
DIVIDENDS AND DISTRIBUTIONS........................................................... 9
LEGAL PROCEEDINGS..................................................................... 9
ADDITIONAL INFORMATION................................................................ 9
EXHIBIT A............................................................................. 10
</TABLE>

MAT-2
<PAGE> 33

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MANAGED ASSETS TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

The following information on per share data for the seven years ended December
31, 1996, has been audited by Coopers & Lybrand L.L.P, Independent Accountants.
All other periods presented have been audited by the Fund's prior auditors.
Coopers & Lybrand L.L.P.'s report on the per share data for each of the five
years in the period ended December 31, 1996 is contained in the Fund's Annual
Report which should be read along with this information and which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of year........................ $ 15.50 $ 12.85 $ 14.21 $ 14.02 $ 14.78
Income from operations
Net investment income..................................... 0.46 0.49 0.46 0.51 0.64
Net gains or losses on securities (realized and
unrealized)............................................. 1.50 2.83 (0.73) 0.72 0.01
-------- -------- -------- -------- --------
Total from investment operations........................ 1.96 3.32 (0.27) 1.23 0.65
Less distributions from (5)
Net investment income..................................... (0.89) (0.50) (0.67) (0.85) (1.04)
Net realized gains........................................ (1.59) (0.17) (0.42) (0.19) (0.37)
-------- -------- -------- -------- --------
Total distributions........................................ (2.48) (0.67) (1.09) (1.04) (1.41)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR............................... $ 14.98 $ 15.50 $ 12.85 $ 14.21 $ 14.02
======== ======== ======== ======== ========
TOTAL RETURN(1)............................................ 13.78% 27.12% (2.24)% 9.33% 5.14%
Net assets, end of year (thousands)....................... $ 188,610 $ 171,276 $ 140,887 $ 156,767 $ 148,971
RATIOS TO AVERAGE NET ASSETS
Expenses(2)............................................... 0.58% 0.58% 0.61% 0.56% 0.56%
Net investment income..................................... 3.51% 3.49% 3.59% 3.65% 4.97%
PORTFOLIO TURNOVER RATE.................................... 108% 110% 97% 86% 112%
AVERAGE COMMISSION RATE PAID(3)............................ $ 0.06 -- -- -- --

1991 1990(4) 1989 1988 1987

<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------

PER SHARE DATA
Net asset value, beginning of year........................ $ 12.77 $ 13.03 $ 10.25 $ 9.89 $ 11.03

Income from operations
Net investment income..................................... 0.74 0.65 0.52 0.48 0.40

Net gains or losses on securities (realized and
unrealized)............................................. 1.91 (0.37) 2.26 0.43 (0.16)

-------- -------- -------- -------- --------

Total from investment operations........................ 2.65 0.28 2.78 0.91 0.24

Less distributions from (5)
Net investment income..................................... (0.64) (0.54) -- (0.55) (0.38)

Net realized gains........................................ -- -- -- -- (1.00)

-------- -------- -------- -------- --------

Total distributions........................................ (0.64) (0.54) -- (0.55) (1.38)

-------- -------- -------- -------- --------

NET ASSET VALUE, END OF YEAR............................... $ 14.78 $ 12.77 $ 13.03 $ 10.25 $ 9.89

======== ======== ======== ======== ========

TOTAL RETURN(1)............................................ 21.70% 2.47% 27.12% 9.18% 1.92%

Net assets, end of year (thousands)....................... $ 126,021 $ 92,464 $ 84,223 $ 115,111 $ 119,866

RATIOS TO AVERAGE NET ASSETS
Expenses(2)............................................... 0.56% 0.59% 0.71% 0.66% 0.67%

Net investment income..................................... 5.49% 5.17% 4.41% 4.55% 3.23%

PORTFOLIO TURNOVER RATE.................................... 141% 123% 56% 105% 140%

AVERAGE COMMISSION RATE PAID(3)............................ -- -- -- -- --

</TABLE>

(1) Total return is determined by dividing the increase (decrease) in value of a
share during the year, after reflecting the reinvestment of dividends
declared during the year, by the beginning of year share price. Shares in
Fund MAT are only sold to The Travelers separate accounts in connection with
the issuance of variable annuity and variable life insurance contracts. The
above return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts.

(2) The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by The Travelers in connection with the
voluntary expense limitations. Without the expense reimbursement, the ratios
of operating expenses to average net assets would have been 0.60%, 0.63%,
0.69% and 0.74% for the years ended December 31, 1993, 1992, 1991 and 1990
respectively. For the years ended December 31, 1994, 1995, and 1996 there
were no expense reimbursements by The Travelers in connection with the
voluntary expense limitations.

(3) The Average Commission Rate Paid is required for funds that have over 10% in
equities for which commissions are paid. This information is required for
funds with fiscal year ends on or after September 30, 1996.

(4) On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for the Fund.

(5) For the year ended December 31, 1996, distributions from realized gains
include both net realized short-term and long-term capital gains. Prior to
1996, net realized short-term capital gains were included in distributions
from net investment income.

MAT-3
<PAGE> 34

FUND DESCRIPTION
- --------------------------------------------------------------------------------

Managed Assets Trust (the "Fund") is registered with the SEC as a diversified
open-end management investment company, commonly known as a mutual fund. The
Fund was created under Massachusetts law as a Massachusetts business trust on
August 6, 1982.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Fund's investment objective is to provide a high total investment return
through a fully managed investment policy. To do this, the Fund adjusts its
overall exposure to risk by spreading its investments among those providing
alternatives for capital growth, capital stability and income as market and
economic trend change. This fully managed investment policy makes use of equity,
debt, convertible and money market securities. The Fund expects that over longer
periods a larger portion of the Fund's portfolio will consist of equity
securities.

The Fund's investment philosophy is based on the belief that, as in the past,
the structure of the United States economy and its securities markets will
undergo continuous change. Thus, the fully managed approach puts maximum
emphasis on flexibility. Because of this flexibility, the Fund may have a high
rate of turnover in its portfolio securities and thus higher costs of securities
transactions and brokerage. Accordingly, the Fund would expect to have turnover
in the range of 100% to 300%. The Fund expects that the portfolio turnover rate
will be approximately 50% for debt securities, and 200% to 300% for equity
securities. A higher turnover rate should not be interpreted as a variation from
the stated investment policy. Portfolio turnover is expected to result when the
Fund makes a change in its investments from one investment sector (such as the
equity market) to another investment sector (such as the bond market), as well
as in response to redemptions when the Fund realizes capital gains, and in
response to market conditions. Increased cost to the Fund may result if the Fund
makes a change in the investment sector in which the greatest proportion of its
assets is invested at a time when subsequent market conditions are unfavorable.

The Fund may invest a limited portion of its assets in bonds rated lower than
Baa by Moody's Investors Service, Inc. (Moody's) or BBB by Standard & Poor's
Corporation (S&P) or which, if unrated, are deemed to be of comparable quality
by the Fund's investment adviser. The Fund may not purchase any debt securities
rated B or lower by either service or their equivalent. Bonds rated Baa by
Moody's are considered medium-grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal 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. Debt rated BBB by S&P is regarded as having
an adequate capacity to pay interest and repay principal. While it normally
exhibits 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 debt in this category than in higher rated categories. Bonds
rated lower than Baa by Moody's or BBB by S&P, but above B by either service,
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. Uncertainty of position characterizes bonds in this class.
Travelers Asset Management International Corporation ("TAMIC") expects that
securities rated below Baa by Moody's or below BBB by S&P will be primarily
subordinated convertible securities of issuers whose senior debt is rated Baa or
higher by Moody's, BBB or higher by S&P or, in the absence of such ratings, are
deemed to be of comparable quality by TAMIC.

The Fund may invest in money market instruments which mature within one year of
their purchase, and which consist of U.S. government securities; instruments of
banks insured by the Federal Deposit Insurance Corporation which have assets of
at least $1 billion, including U.S. branches of foreign banks and foreign
branches of U.S. banks, such as certificates of deposit, demand and time
deposits

MAT-4
<PAGE> 35

and bankers' acceptances; prime commercial paper, including master demand notes;
and repurchase agreements secured by U.S. government securities.

For further information about the types of investments and investment techniques
available to the Fund, including the associated investment risks, see Exhibit A
to this Prospectus.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund has adopted the following fundamental investment restrictions which may
not be changed without a vote of a majority of the outstanding voting securities
of the Fund, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). Certain other fundamental restrictions are set forth in the
Statement of Additional Information. Unless otherwise stated, all references to
the Fund's assets are in terms of current market value.

The Fund will not: (1) invest more than 25% of its assets in the securities of a
single issuer; (2) borrow money, except that the Fund may borrow money from
banks for temporary or emergency purposes in amounts of up to 10% of its assets;
(3) pledge more than the lesser of the dollar amounts borrowed or 10% of its
assets; (4) invest more than 25% of its assets in the securities of issuers in
the same industry; and (5) invest more than 10% of its assets in repurchase
agreements maturing in more than seven days and other illiquid securities. In
addition, a policy which may be changed without shareholder approval permits the
Fund to invest up to 25% of its assets in the securities of foreign issuers.

RISK FACTORS
- --------------------------------------------------------------------------------

The Fund's net asset value will fluctuate in response to changes in economic
conditions, interest rates and the market's perception of the underlying
portfolio securities of the Fund. There can be no assurance that the Fund will
achieve its investment objective since there is uncertainty in every investment.

The yield on debt instruments over a period of time should reflect prevailing
interest rates, which depend on a number of factors, including government action
in the capital markets, government fiscal and monetary policy, needs of
businesses for capital goods for expansion, and investor expectations as to
future inflation. The yield on a particular debt instrument is also affected by
the risk that the issuer will be unable to pay principal and interest.

BOARD OF TRUSTEES
- --------------------------------------------------------------------------------

Under Massachusetts law, the Fund's Board of Trustees has absolute and exclusive
control over the management and disposition of all assets of the Fund. Subject
to the provisions of the Declaration of Trust, the business and affairs of the
Fund shall be managed by the Trustees or other parties so designated by the
Trustees. Information relating to the Board of Trustees, including its members
and their compensation, is contained in the SAI.

MAT-5
<PAGE> 36

INVESTMENT ADVISERS
- --------------------------------------------------------------------------------

TAMIC provides investment advice and, in general, supervises the management and
investment program of the Fund. The Travelers Investment Management Company
("TIMCO") provides sub-advisory services to the Fund with respect to the Fund's
common stock investments, subject to the supervision of the Board of Trustees
and TAMIC.

TAMIC

TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. Under its Advisory Agreement with the
Fund, TAMIC is paid an amount equivalent on an annual basis to 0.50% of the
average daily net assets of the Fund. The fee is computed daily and paid weekly.
TAMIC is an indirect wholly owned subsidiary of Travelers Group Inc., a
financial services holding company, and its principal offices are located at One
Tower Square, Hartford, Connecticut 06183.

In addition to providing investment advice to the Fund, TAMIC acts as investment
adviser for other investment companies used to fund variable products issued by
the Company. TAMIC also provides investment advice to individual and pooled
pension and profit-sharing accounts, domestic insurance companies affiliated
with The Travelers, and nonaffiliated insurance companies.

PORTFOLIO MANAGER

The Fund's fixed income investments have been managed by David A. Tyson, Ph.D.
and CFA, since February 1994. Mr. Tyson is currently Senior Vice President and
the head of the Company's Portfolio Management Group. He directly manages The
Travelers Annuity, Life Surplus and Convertible portfolios. His previous
responsibilities have included managing The Travelers Derivatives, Mortgage-
Backed and Quantitative Investment Groups. Mr. Tyson joined The Travelers in
1985 and TAMIC in 1994. He previously spent seven years with the Equitable
Investment Management Corporation where he was responsible for quantitative
equity research and new product development.

TIMCO

TIMCO is employed by TAMIC as the Fund's sub-adviser with respect to the
management of the Fund's common stock investments. For its services under the
Sub-Advisory Agreement, TIMCO receives from TAMIC 50% of the investment advisory
fees earned by TAMIC. TIMCO, a registered investment adviser, has provided
investment advisory services since its incorporation in 1967. TIMCO is an
indirect wholly owned subsidiary of Travelers Group Inc. with principal offices
located at One Tower Square, Hartford, Connecticut 06183.

In addition to serving as sub-adviser to the Fund, TIMCO acts as investment
adviser for other investment companies used to fund variable products issued by
The Travelers and The Travelers Life and Annuity Company. TIMCO also provides
investment advice to individual and pooled pension and profit-sharing accounts,
and affiliated companies of The Travelers.

PORTFOLIO MANAGER

The Fund's common stock investments are managed by a team of TIMCO's investment
professionals. TIMCO uses a disciplined stock selection process to review a
broad universe of equity securities and identify those that appear most
attractive in terms of relative valuation and earnings momentum. A team of
experienced investment professionals selects specific holdings and manage the
portfolio according to specific diversification guidelines.

Effective December 30, 1994, Kent A. Kelley, CFA, became Chief Executive Officer
of TIMCO. Mr. Kelley is responsible for the day-to-day management of the Fund's
common stock investments and is responsible for directing the activities of
TIMCO's portfolio management team. Mr. Kelley was

MAT-6
<PAGE> 37

President of TIMCO from November 1992 to December 1994. He became responsible
for management of the Fund in November 1992. Prior to his appointment as
President, Mr. Kelley was the Executive Vice President in charge of the risk
management group in TIMCO, which managed index funds and other structured
investment strategies.

FUND ADMINISTRATION
- --------------------------------------------------------------------------------

Managed Assets Trust ("Fund") has entered into an Administrative Services
Agreement, whereby Travelers Insurance will be responsible for the pricing and
bookkeeping services for the Fund at an annualized rate of 0.06% of the daily
net assets of the Fund. The Travelers Insurance Company, at its expense, may
appoint a sub-administrator to perform these services. The sub-administrator may
be affiliated with The Travelers Insurance Company.

SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------

Under policies established by the Board of Trustees, TAMIC and TIMCO will select
broker-dealers to execute transactions for the Fund, subject to the receipt of
best execution. When selecting broker-dealers to execute portfolio transactions
for the Fund, TAMIC and TIMCO may consider the number of Fund shares sold by
such broker-dealers. In addition, broker-dealers may from time to time be
affiliated with the Fund, TAMIC, TIMCO or their affiliates.

The Fund may pay higher commissions to broker-dealers that provide research
services. TAMIC and TIMCO may use these services in advising the Fund, as well
as in advising other clients for which they act as investment adviser.

FUND EXPENSES
- --------------------------------------------------------------------------------

In addition to the investment advisory fees discussed above, other expenses of
the Fund include the charges and expenses of the transfer agent, the custodian,
the independent auditors, and any outside legal counsel employed by either the
Fund or the Board of Trustees; the compensation for the disinterested members of
the Board of Trustees; the costs of printing and mailing the Fund's
prospectuses, proxy solicitation materials, and annual, semiannual and periodic
reports; brokerage commissions, interest charges and taxes; and any
registration, filing and other fees payable to government agencies in connection
with the registration of the Fund and its shares under federal and state
securities laws. Additional, high portfolio turnover may involve greater
brokerage commissions and other transaction costs, which would be borne directly
by the Fund, as well as additional realized gains and/or losses to shareholders.

Pursuant to a Management Agreement dated May 1, 1993 between the Fund and The
Travelers Insurance Company, the Company has agreed to reimburse the Fund for
the amount by which the Fund's aggregate annual expenses, including investment
advisory fees but excluding brokerage commissions, interest charges and taxes,
exceed 1.25% of the Fund's average net assets for any fiscal year.

For the fiscal year ended December 31, 1996, the Fund paid .0.58% of its average
net assets in expenses.

MAT-7
<PAGE> 38

TRANSFER AGENT
- --------------------------------------------------------------------------------

First Data Investor Services Group, Inc., Exchange Place, Boston, MA 02109,
serves as the Fund's transfer agent and dividend disbursing agent.

SHAREHOLDER RIGHTS
- --------------------------------------------------------------------------------

Shares of the Fund are currently sold only to insurance company separate
accounts in connection with variable annuity and variable life insurance
contracts issued by the Company. Shares of the Fund are not sold to the general
public. Fund shares are sold on a continuing basis, without a sales charge, at
the net asset value next computed after payment is made by the insurance company
to the Fund's custodian. However, the separate accounts to which shares are sold
may impose sales and other charges, as described in the appropriate contract
prospectus.

The Fund currently issues one class of shares which participate equally in
dividends and distributions and have equal voting, liquidation and other rights.
When issued and paid for, the shares will be fully paid and nonassessable by the
Fund and will have no preference, conversion, exchange or preemptive rights.

Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares are redeemable, transferable and freely
assignable as collateral. There are no sinking fund provisions. (See the
accompanying separate account prospectus for a discussion of voting rights
applicable to purchasers of variable annuity and variable life insurance
contracts.)

Although the Fund is not currently aware of any disadvantages to contract owners
of either variable annuity or variable life insurance contracts because the
Fund's shares are available with respect to both products, an irreconcilable
material conflict may conceivably arise between contract owners of different
separate accounts investing in the Fund due to differences in tax treatment,
management of the Fund's investments, or other considerations. The Fund's Board
of Trustees will monitor events in order to identify any material conflicts
between variable annuity contract owners and variable life insurance policy
owners, and will determine what action, if any, should be taken in the event of
such a conflict.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of a Fund share is computed as of the close of trading on
each day on which the New York Stock Exchange ("Exchange") is open, except on
days when changes in the value of the Fund's securities do not affect the
current net asset value of its shares. The net asset value per share of the Fund
is arrived at by determining the value of the Fund's assets, subtracting its
liabilities, and dividing the result by the number of shares outstanding.

Current values for the Fund's portfolio securities are determined as follows:
Securities that are traded on an established exchange or the over-the-counter
National Market System (NMS) are valued on the basis of the last sales price on
the exchange where primarily traded or on the NMS prior to the time of the
valuation, provided that a sale has occurred and that this price reflects
current market value according to procedures established by the Board of
Trustees. Securities traded in the over-the-counter market, other than NMS, are
valued at the mean of the bid and asked prices at the time of valuation.

Short-term instruments with maturities of sixty days or less (including all
master demand notes) are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount) which, when
combined with accrued interest or amortized discount, approximates market.
Short-term instruments with maturities of more than sixty days, for which market
quotations are readily available, are valued at current market value.

MAT-8
<PAGE> 39

The following are valued at prices deemed in good faith to be fair under
procedures established by the Board of Trustees: (a) securities, including
restricted securities, for which complete quotations are not readily available;
(b) listed securities or those on NMS if, in the Fund's opinion, the last sales
price does not reflect a current market value or if no sale occurred; and (c)
other assets.

Fund shares are redeemed at the redemption value next determined after the Fund
receives a redemption request. The redemption value is the net asset value
adjusted for fractions of a cent and may be more or less than the shareholder's
cost depending upon changes in the value of the Fund's portfolio between
purchase and redemption.

The Fund computes the redemption value at the close of the Exchange at the end
of the day on which it has received all proper documentation from the
shareholder. Redemption proceeds are normally wired or mailed either the same or
the next business day, but in no event later than seven days thereafter.

The Fund may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists as determined by
the SEC so that disposal of the Fund's investments or determination of its net
asset value is not reasonably practicable; or (4) the SEC, for the protection of
shareholders, so orders.

TAX STATUS
- --------------------------------------------------------------------------------

The Fund has qualified and intends to qualify in the future as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for each fiscal year.

DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

Capital gains and dividends are distributed in cash or reinvested in additional
shares of the Fund, without a sales charge. Although purchasers of variable
contracts are not subject to federal income taxes on distributions by the Fund,
they may be subject to state and local taxes and should review the accompanying
contract prospectus for a discussion of the tax treatment applicable to
purchasers of variable annuity and variable life insurance contracts.

LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------

There are no pending material legal proceedings affecting the Fund.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Except as otherwise stated in this Prospectus or as required by law, the Fund
reserves the right to change the terms of the offer stated in this Prospectus
without shareholder approval, including the right to impose or change fees for
services provided.

MAT-9
<PAGE> 40

EXHIBIT A
- --------------------------------------------------------------------------------

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE FUND

OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS

The obligations of foreign branches of United States banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of such securities
may be held outside the United States and the Fund may be subject to the risks
associated with the holding of such property overseas. Various provisions of
federal law governing domestic branches do not apply to foreign branches of
domestic banks.

OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office. In addition, there may be less publicly
available information about a United States branch of a foreign bank than about
a domestic bank.

MASTER DEMAND NOTES

Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund as lender and the issuer as borrower. The Fund has
the right to increase the amount under the note at any time up to the full
amount provided by the note agreement, or to decrease the amount, and the
borrower may repay up to the full amount of the note without penalty. Notes
purchased by the Fund permit the Fund to demand payment of principal and accrued
interest at any time (on not more than seven days notice). Notes acquired by the
Fund may have maturities of more than one year, provided that (i) the Fund is
entitled to payment of principal and accrued interest upon not more than seven
days notice, and (ii) the rate of interest on such notes is adjusted
automatically at periodic intervals which normally will not exceed 31 days but
may extend up to one year. The notes will be deemed to have a maturity equal to
the longer of the period remaining to the next interest rate adjustment or the
demand notice period. Because these types of notes are direct lending
arrangements between the lender and the borrower, such instruments are not
normally traded and there is no secondary market for these notes, although they
are redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with master demand notes, TAMIC considers, under standards
established by the Board of Trustees, earning power, cash flow and other
liquidity ratios of the borrower and will monitor the ability of the borrower to
pay principal and interest on demand. These notes are not typically rated by
credit rating agencies. Unless rated, the Fund will invest in them only if the
issuer meets the criteria established for commercial paper.

REPURCHASE AGREEMENTS

Interim cash balances may be invested from time to time in repurchase agreements
with approved counterparties (i.e., national banks or reporting broker-dealers
meeting the Advisor's credit quality standards as presenting minimal risk of
default). All repurchase transactions must be collateralized by U.S. Government
securities with market value no less than 102% of the amount of the transaction,
including accrued interest. Repurchase transactions generally mature the next
business

MAT-10
<PAGE> 41

day but, in the event of a transaction of longer maturity, collateral will be
marked to market daily and, when required, additional cash or qualifying
collateral will be required from the counterparty.

In executing a repurchase agreement, a portfolio purchases eligible securities
subject to the seller's simultaneous agreement to repurchase them on a mutually
agreed upon date and at a mutually agreed upon price. The purchase and resale
prices are negotiated with the counterparty on the basis of current short-term
interest rates, which may be more or less than the rate on the securities
collateralizing the transaction. Physical delivery or, in the case of
"book-entry" securities, segregation in the counterparty's account at the
Federal Reserve for the benefit of the Portfolio is required to establish a
perfected claim to the collateral for the term of the agreement in the event the
counterparty fails to fulfill its obligation.

As the securities collateralizing a repurchase transaction are generally of
longer maturity than the term of the transaction, in the event of default by the
counterparty on its obligation, the Portfolio would bear the risks of delay,
adverse market fluctuation and transaction costs in disposing of the collateral.

FOREIGN SECURITIES

The Fund may invest in securities principally traded in securities markets
outside the United States. While investment in foreign securities is intended to
reduce risk by providing further diversification, such investments involve
sovereign risk in addition to the credit and market risks normally associated
with domestic securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations. There
may be less publicly available information about a foreign company than about a
U.S. company, and foreign companies may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Investments in foreign securities may also be subject to other risks different
from those affecting U.S. investments, including political or economic
developments, expropriation or nationalization of assets, imposition of
withholding taxes on dividend or interest payments and currency blockage (which
would prevent cash from being brought back to the United States). These risks
are carefully considered by the investment adviser prior to the purchase of
these securities.

WHEN-ISSUED SECURITIES

The Fund may, from time to time, purchase new-issue Government or Agency
securities on a "when-issued" or "to-be-announced" ("TBA") basis ("when-issued
securities"). The prices of such securities will be fixed at the time the
commitment to purchase is made, and may be expressed in either dollar price or
yield maintenance terms. Delivery and payment may be at a future date beyond
customary settlement time. It is the customary practice of the Fund to make
when-issued or TBA purchases for settlement no more than 90 days beyond the
commitment date.

The commitment to purchase a when-issued security may be viewed as a senior
security, and will be marked to market and reflected in the Fund's net asset
value daily from the commitment date. While it is the adviser's intention to
take physical delivery of these securities, offsetting transactions may be made
prior to settlement, if it is advantageous to do so. The Fund does not make
payment or begin to accrue interest on these securities until settlement date.
In order to invest its assets pending settlement, the Fund will normally invest
in short-term money market instruments and other securities maturing no later
than the scheduled settlement date.

The Fund does not intend to purchase when-issued securities for speculative or
"leverage" purposes. Consistent with Section 18 of the 1940 Act and the General
Policy Statement of the SEC thereunder, when the Fund commits to purchase a
when-issued security, it will identify and place in a segregated account
high-grade money market instruments and other liquid securities equal in value
to the purchase cost of the when-issued securities.

MAT-11
<PAGE> 42

The adviser believes that purchasing when-issued securities in this manner will
be advantageous to the Fund. However, this practice does entail certain
additional risks, namely the default of the counterparty on its obligations to
deliver the security as scheduled. In this event, the Fund would experience a
gain or loss equal to the appreciation or depreciation in value from the
commitment date. The adviser employs a rigorous credit quality procedure in
determining the counterparties with which it will deal in when-issued
securities, and in some circumstances, will require the counterparty to post
cash or some other form of security as margin to protect the value of its
delivery obligation pending settlement.

FUTURES CONTRACTS

The Fund may use exchange-traded financial futures contracts as a hedge to
protect against anticipated changes in interest rates or stock prices. Financial
futures contracts consist of stock index futures contracts and futures contracts
on debt securities ("interest rate futures"). A stock index futures contract is
a contractual obligation to buy or sell a specified index of stocks at a future
date for a fixed price. Unlike most other financial futures, stock index futures
require cash settlement on a daily basis. An interest rate futures contract is a
contract to buy or sell specified debt securities at a future time for a fixed
price.

Stock index futures may be used, to a limited extent, to hedge specific common
stocks with respect to market (systematic) risk (involving the market's
assessment of overall economic prospects) as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). Gains and losses on futures contracts employed as hedges
for specific securities will normally be offset by losses or gains,
respectively, on the hedged security.

Hedging by use of interest rate futures seeks to establish, with more certainty
than would otherwise be possible, the effective rate of return on portfolio
securities. When hedging is successful, any depreciation in the value of
portfolio securities will substantially be offset by appreciation in the value
of the futures position. Conversely, any appreciation in the value of the
portfolio securities will substantially be offset by depreciation in the value
of the futures position. At no time will the Fund's transactions in such
financial futures be employed for speculative purposes.

When a futures contract is purchased, the Fund will set aside liquid securities
equal to the total market value of the futures contract, less the amount of the
initial margin.

Positions taken in the futures market are not normally held to maturity, but
instead are liquidated through offsetting transactions which may result in a
profit or a loss. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the stock index or security and
the same delivery date. If the offsetting purchase price is less than the
original sale price, the Fund realizes a gain; if it is more, the Fund realizes
a loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if less, a loss. While futures
positions taken by the Fund will usually be liquidated in this manner, the Fund
may instead make or take delivery of the underlying securities whenever it
appears economically advantageous for it to do so. In determining gain or loss,
transaction costs must be taken into account. There can be no assurance that the
Fund will be able to enter into an offsetting transaction with respect to a
particular contract at a particular time.

All stock index and interest rate futures contracts will be traded on exchanges
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC").

The Fund will not purchase or sell futures contracts for which the aggregate
initial margin exceeds five percent (5%) of the fair market value of its assets,
after taking into account unrealized profits and unrealized losses on any such
contracts it has entered into.

To ensure that its futures transactions meet CFTC standards, the Fund will enter
into futures contracts for hedging purposes only, i.e., for the purposes or with
the intent specified in CFTC regulations and

MAT-12
<PAGE> 43

interpretations, subject to the requirements of the SEC. The Fund will further
seek to assure that fluctuations in the price of any futures contracts that it
uses for hedging purposes will be substantially related to fluctuations in the
price of the securities held by it or which it expects to purchase, or for other
risk reduction strategies, though there can be no assurance the expected result
will always be achieved.

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

While certain futures contracts may be purchased and sold to reduce certain
risks, these transactions may entail other risks. Thus, while the Fund may
benefit from the use of such futures, unanticipated changes in stock price
movements or interest rates may result in a poorer overall performance for the
Fund than if it had not entered into such futures contracts. Moreover, in the
event of an imperfect correlation between the futures position and the portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. The adviser will attempt
to reduce this risk by engaging in futures transactions, to the extent possible,
where, in its judgment, there is a significant correlation between changes in
the prices of the futures contracts and the prices of any portfolio securities
sought to be hedged. Successful use of futures contracts for hedging purposes is
also subject to the adviser's ability to predict correctly movements in the
direction of the market.

BUYING PUT AND CALL OPTIONS

The Fund may purchase put options on securities held, or on futures contracts
whose price volatility is expected to closely match that of securities held, as
a defensive measure to preserve shareholders' capital when market conditions
warrant. The Fund may purchase call options on specific securities, or on
futures contracts whose price volatility is expected to closely match that of
securities eligible for purchase by the Fund, in anticipation of or as a
substitute for the purchase of the securities themselves. These options may be
listed on a national exchange or executed "over-the-counter" with a
broker-dealer as the counterparty. While the adviser anticipates that the
majority of option purchases and sales will be executed on a national exchange,
put or call options on specific securities or for non-standard terms are likely
to be executed directly with a broker-dealer when it is advantageous to do so.
Option contracts will be short-term in nature, generally less than nine months
in duration.

The Fund will pay a premium in exchange for the right to purchase (call) or sell
(put) a specific number of shares of an equity security or futures contract at a
specified price (the strike price) on or before the expiration date of the
option contract. In either case, the Fund's risk is limited to the option
premium paid.

The Fund may sell the put and call options prior to their expiration and thereby
realize a gain or loss. A call option will expire worthless if the price of the
related security is below the contract strike price at the time of expiration; a
put option will expire worthless if the price of the related security is above
the contract strike price at the time of expiration.

Put and call options will be employed for bona fide hedging purposes only.
Liquid securities sufficient to fulfill the call option delivery obligation will
be identified and segregated in an account; deliverable securities sufficient to
fulfill the put option obligation will be similarly identified and segregated.
In the case of put options on futures contracts, portfolio securities whose
price volatility is expected to match that of the underlying futures contract
will be identified and segregated.

MAT-13
<PAGE> 44

WRITING COVERED CALL OPTIONS

The Fund may write or sell covered call options. By writing a call option, the
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price.

The Fund may only write "covered" options. This means that as long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option or in the case of call options on U.S. Treasury
bills, the Fund might own substantially similar U.S. Treasury bills.

The principal reason for writing call options is to obtain, through a receipt of
premiums, a greater current return than would be realized on the underlying
securities alone. The Fund receives a premium from writing a call option which
it retains whether or not the option is exercised. By writing a call option, the
Fund might lose the potential for gain on the underlying security while the
option is open.

Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objectives.

COMMERCIAL PAPER RATINGS

The Fund's investments in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation or Prime-1 by Moody's Investors Service, Inc.
These ratings and other money market instruments are described as follows.

Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. The issuer's long-term senior
debt is rated "A" or better although in some cases "BBB" credits may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of obligations which may be
present or which may arise as a result of public preparations to meet such
obligations. Relative strength or weakness of the above factors determines how
the issuer's commercial paper is rated within various categories.

UNITED STATES GOVERNMENT SECURITIES

Securities issued or guaranteed by the United States Government include a
variety of Treasury securities that differ only in their interest rates,
maturities and dates of issuance. Treasury bills have maturities of one year or
less; Treasury notes have maturities of one to ten years; and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.

Securities issued or guaranteed by the United States Government or its agencies
or instrumentalities include direct obligations of the United States Treasury
and securities issued or guaranteed by the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Central Bank for Cooperatives, Federal Home Loan Banks,
Federal Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal
Land Banks, Maritime Administration, The

MAT-14
<PAGE> 45

Tennessee Valley Authority, District of Columbia Armory Board, Student Loan
Marketing Association and Federal National Mortgage Association.

Some obligations of United States Government agencies and instrumentalities,
such as Treasury bills and Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the United States;
others, such as securities of Federal Home Loan Banks, are supported by the
right of the issuer to borrow from the Treasury; still others, such as bonds
issued by the Federal National Mortgage Association, a private corporation, are
supported only by the credit of the instrumentality. Because the United States
Government is not obligated by law to provide support to an instrumentality
which it sponsors, the Fund will invest in the securities issued by such an
instrumentality only when the adviser determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable
investments. United States Government securities will not include international
agencies or instrumentalities in which the United States Government, its
agencies or instrumentalities participate, such as the World Bank, the Asian
Development Bank or the Inter-American Development Bank, or issues insured by
the Federal Deposit Insurance Corporation.

CERTIFICATES OF DEPOSITS

Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate can usually be traded in the secondary market prior to maturity.

Certificates of deposit will be limited to U.S. dollar-denominated certificates
of United States banks which have at least $1 billion in deposits as of the date
of their most recently published financial statements (including foreign
branches of U.S. banks, U.S. branches of foreign banks which are members of the
Federal Reserve System or the Federal Deposit Insurance Corporation, and savings
and loan associations which are insured by the Federal Deposit Insurance
Corporation).

The Fund will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Fund does not
currently intend to purchase such foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by foreign banks.

BANKERS' ACCEPTANCES

Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Fund must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.

MAT-15
<PAGE> 46

MANAGED ASSETS TRUST

PROSPECTUS

TIC Ed. 5-97
L-11172 Printed in U.S.A.
<PAGE> 47

HIGH YIELD BOND TRUST

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-277-0111
- --------------------------------------------------------------------------------

High Yield Bond Trust (the "Fund") is a diversified open-end management
investment company (mutual fund) whose objective is to provide generous income
to the investor. The Fund invests primarily in corporate bonds and its portfolio
ordinarily includes a substantial number of bonds which, as a class, sell at
discounts from par value and are typically high risk securities. The generous
income sought by the Fund is ordinarily associated with high yield bonds and
similar securities in the lower rating categories of the recognized rating
agencies or with securities that are unrated ("high yield bonds"). Such high
yield securities are commonly known as "junk bonds." High yield bonds generally
involve greater volatility of price and risk of principal and income than bonds
in the higher rating categories and are, on balance, considered predominantly
speculative.

HIGH YIELD BONDS INVOLVE SUBSTANTIAL RISKS. INVESTORS SHOULD REFER TO "RISK
FACTORS" ON PAGE 5 FOR A DESCRIPTION OF THE RISKS ASSOCIATED WITH AN INVESTMENT
IN THE FUND.

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 48

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS.................................................................. 3
FUND DESCRIPTION...................................................................... 4
INVESTMENT OBJECTIVE AND POLICIES..................................................... 4
INVESTMENT RESTRICTIONS............................................................... 5
RISK FACTORS.......................................................................... 5
BOARD OF TRUSTEES..................................................................... 6
INVESTMENT ADVISER.................................................................... 6
Portfolio Manager................................................................... 7
FUND ADMINISTRATION................................................................... 7
SECURITIES TRANSACTIONS............................................................... 7
FUND EXPENSES......................................................................... 7
TRANSFER AGENT........................................................................ 8
SHAREHOLDER RIGHTS.................................................................... 8
NET ASSET VALUE....................................................................... 8
TAX STATUS............................................................................ 9
DIVIDENDS AND DISTRIBUTIONS........................................................... 9
LEGAL PROCEEDINGS..................................................................... 9
ADDITIONAL INFORMATION................................................................ 9
EXHIBIT A............................................................................. 10
EXHIBIT B............................................................................. 15
</TABLE>

HYBT-2
<PAGE> 49

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HIGH YIELD BOND TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

The following information on per share data for the seven years ended December
31, 1996, has been audited by Coopers & Lybrand L.L.P., Independent Accountants.
All other periods presented have been audited by the Fund's prior auditors.
Coopers & Lybrand L.L.P.'s report on the per share data for each of the five
years in the period ended December 31, 1996 is contained in the Fund's Annual
Report which should be read along with this report and which is incorporated by
reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year................... $ 9.00 $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33
Income from operations
Net investment income....... 0.91 0.80 0.66 0.68 0.88 0.94 1.02
Net gains or losses on
securities (realized and
unrealized)............... 0.41 0.41 (0.76) 0.47 0.18 0.88 (1.81)
------- ------- ------- ------- ------ ------ -------
Total from investment
operations.............. 1.32 1.21 (0.10) 1.15 1.06 1.82 (0.79)
Less distributions from
Net investment income....... (1.83) (0.70) (0.66) (0.81) (0.90) (0.94) (0.67)
------- ------- ------- ------- ------ ------ -------
NET ASSET VALUE, END OF
YEAR...................... $ 8.49 $ 9.00 $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87
======= ======= ======= ======= ====== ====== =======
TOTAL RETURN (1).............. 16.05% 15.47% (1.26)% 14.01% 13.16% 26.11% (9.12)%
NET ASSETS, END OF YEAR
(000'S)..................... $17,291 $12,902 $11,716 $12,765 $10,289 $7,724 $ 6,238
RATIOS TO AVERAGE NET ASSETS
Expenses (2)................ 0.97% 1.25% 1.25% 0.99% 0.56% 0.56% 0.92%
Net investment income....... 11.01% 9.37% 7.71% 7.69% 10.24% 11.93% 12.33%
Portfolio turnover rate..... 84% 222% 146% 19% 52% 35% 29%

1989 1988 1987
- -------------------------------------------------------------------------
<S> <C<C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year................... $ 10.12 $ 9.94 $ 11.41
Income from operations
Net investment income....... 1.28 1.21 1.22
Net gains or losses on
securities (realized and
unrealized)............... (1.11) 0.20 (1.21)
------- ------- -------
Total from investment
operations.............. 0.17 1.41 0.01
Less distributions from
Net investment income....... (0.96) (1.23) (1.48)
------- ------- -------
NET ASSET VALUE, END OF
YEAR...................... $ 9.33 $ 10.12 $ 9.94
======= ======= =======
TOTAL RETURN (1).............. 1.40% 14.57% (0.34)%
NET ASSETS, END OF YEAR
(000'S)..................... $ 10,607 $59,637 $51,540
RATIOS TO AVERAGE NET ASSETS
Expenses (2)................ 1.67% 1.00% 0.96%
Net investment income....... 13.37% 11.65% 10.90%
Portfolio turnover rate..... 87% 67% 81%
</TABLE>

(1) Total return is determined by dividing the increase (decrease) in value of a
share during the year, after reflecting the reinvestment of dividends
declared during the year, by the beginning of year share price. Shares in
Fund HYBT are only sold to The Travelers separate accounts in connection
with the issuance of variable annuity and variable life insurance contracts.
Total return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts.

(2) The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by The Travelers in connection with
voluntary expense limitations. Without the expense reimbursement, the ratio
of operating expenses to average net assets would have been 1.28%, 1.33%,
1.31%, 1.28%, 1.87% and 2.13% for the years ended December 31, 1995, 1994,
1993, 1992, 1991 and 1990, respectively. For the fiscal year ended December
31, 1996, there were no expense reimbursements by the Travelers in
connection with the voluntary expense limitations.

(3) On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund HYBT.

HYBT-3
<PAGE> 50

FUND DESCRIPTION
- --------------------------------------------------------------------------------
High Yield Bond Trust (the "Fund") is registered with the SEC as a diversified
open-end management investment company, commonly known as a mutual fund. The
Fund was created under Massachusetts law as a Massachusetts business trust on
March 18, 1982.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide generous income. To achieve this
objective the Fund invests primarily in corporate bonds and its portfolio
ordinarily includes a substantial number of bonds which, as a class, sell at
discounts from par value. These bonds are generally below investment grade, for
example, bonds rated BB or lower by Standard & Poor's Corporation or Ba or lower
by Moody's Investors Service, Inc. These bonds are commonly known as "junk
bonds" and are typically high risk securities. (For a description of the
averaged credit quality ratings of the Fund's assets for the twelve months ended
December 31, 1996, please refer to Exhibit B to the Prospectus.)

While the Fund's investment adviser performs its own credit analyses of the
Fund's investments and does not rely on ratings assigned by rating services,
bonds rated below investment grade generally involve greater volatility of price
and risk of principal and income than bonds in the higher rating categories and
are, on balance, considered predominantly speculative. While such bonds will
likely have some quality and protective characteristics, these characteristics
are outweighed by uncertainties of major risk exposures to adverse conditions.

The Fund considers potential for growth of capital in selecting securities. The
Fund's investments may include fixed and adjustable rate or stripped bonds,
including zero coupon and pay-in-kind ("PIK") bonds, debentures, notes,
equipment trust certificates, U.S. government securities and debt securities
convertible into or exchangeable for preferred or common stock. The Fund may
continue to hold preferred or common stock received in connection with
convertible or exchangeable securities. The Fund may also invest in units which
are debt securities with stock or warrants to buy stock attached. The Fund may,
from time to time, purchase new-issue or government or agency securities on a
"when-issued" or "to-be-announced" basis. The Fund may invest in both domestic
and foreign securities. At least 65% of the Fund's assets normally will be
invested in bonds and debentures.

When market conditions warrant, the Fund may adopt a defensive position to
preserve shareholders' capital by investing in money market instruments. Money
market securities must mature within one year of their purchase and consist of
U.S. government securities; certificates of deposit, demand and time deposits
and bankers' acceptances of banks which are members of the Federal Deposit
Insurance Corporation and which have assets of at least $1 billion, including
master demand notes; and repurchase agreements secured by U.S. government
securities.

The Fund may also invest up to 35% of its total assets in preferred stocks,
including adjustable rate preferred and common stocks and other equity
securities, and convertible securities and warrants which may be used to create
other permissible investments. Such investments must be consistent with the
Fund's objective of providing shareholders with generous income and may be
acquired as part of a unit combining income and equity securities.

For further information about the types of investments and investment techniques
available to the Fund, including the risks associated with such investments and
investment techniques, see Exhibit A to this Prospectus.

HYBT-4
<PAGE> 51

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following fundamental restrictions which may not be
changed without a vote of a majority of the outstanding voting securities of the
Fund, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). Certain other fundamental restrictions are set forth in the Statement of
Additional Information. Unless otherwise stated, all references to the Fund's
assets are in terms of current market value.

The Fund will not: (1) invest more than 5% of its assets in the securities of
any one issuer; (2) borrow money, except to facilitate redemptions or borrow
money for temporary or emergency purposes and then only from banks and in
amounts of up to 10% of its gross assets computed at cost; assets pledged to
secure borrowings shall be no more than the lesser of the amount borrowed or 10%
of the Fund's gross assets computed at cost; (3) invest more than 25% of its
assets in the securities of issuers in the same industry; and (4) invest more
than 10% of its assets in repurchase agreements maturing in more than seven days
and other securities for which market quotations are not readily available.

RISK FACTORS
- --------------------------------------------------------------------------------
The general risk inherent in investing in the Fund is that the net asset value
will fluctuate in response to changes in economic conditions, interest rates and
the market's perception of the underlying portfolio securities of the Fund.
There can be no assurance that the Fund will achieve its investment objective
since there is uncertainty in every investment. Income and yields on high yield
securities, as on all securities, will fluctuate over time.

In addition, there are special considerations relating to high yield securities.
The Fund invests aggressively and seeks to maximize return over time from a
combination of many factors, including high current income, and capital
appreciation from high yielding bonds and other similar securities ("high yield
securities," also commonly known as "junk bonds"). Such aggressive investing
involves risks which are greater than the risks of investing in higher quality
debt securities. These risks include (1) changes in credit status, including
weaker overall credit conditions of issuers and risks of default; (2) industry
market and economic risk; (3) interest rate fluctuations; (4) volatility of net
asset value resulting from broad and rapid changes in the value of underlying
securities; (5) possible legislation having adverse effects on high yield bond
prices; and (6) greater price variability and credit risks of certain high yield
securities such as zero coupon and PIK securities. While these risks provide the
opportunity for maximizing return over time, they may result in greater upward
and downward movement of the net asset value per share of the Fund. As a result,
they should be carefully considered by investors.

Investors should be aware of the following market, economic and credit factors
influencing high yield securities: (1) securities rated BB or lower by Standard
& Poor's Corporation ("S&P") or Ba or lower by Moody's Investors Service, Inc.
("Moody's") are considered predominantly speculative with respect to the ability
of the issuer to meet principal and interest payments; (2) the value of high
yield securities may be more susceptible to real or perceived adverse economic,
company or industry conditions than is the case for higher quality securities;
(3) a widespread economic downturn could result in increased defaults in the
high yield market; (4) adverse market, credit or economic conditions could make
it difficult at certain times to sell certain high yield securities held by the
Fund; (5) the secondary market for high yield securities may be less liquid than
the secondary market for higher quality securities which may affect the value of
certain high yield securities held by the Fund at certain times; (6) there may
not always be readily available market quotations for certain securities; (if
this occurs, the investment adviser will use its best judgment to assign values
to those securities); and (7) zero coupon and PIK securities may be subject to
greater changes in value due to market conditions, the absence of a cash
interest payment and the tendency of issuers of such securities to have weaker
overall credit

HYBT-5
<PAGE> 52

conditions than other high yield securities. These characteristics of high yield
securities make them generally more appropriate for long-term investment.

The generous income sought by the Fund is ordinarily associated with securities
in the lower rating categories of the recognized rating agencies or with
securities that are unrated. Such high yield securities are generally rated BB
or lower by S&P or Ba or lower by Moody's. The Fund may invest in securities
that are rated as low as D by S&P and C- by Moody's. The Fund intends to invest
in D rated debt only in cases where the investment adviser determines that there
is a distinct prospect of improvement in the issuer's financial position as a
result of the completion of reorganization or otherwise. The Fund may also
invest in unrated securities which offer comparable yields and risks as
securities which are rated, as well as in non-investment quality zero coupon and
PIK securities. (For a description of these rating categories, please refer to
the Statement of Additional Information.)

Since the Fund takes an aggressive approach to investing, the investment adviser
tries to maximize the return by controlling risk through diversification, credit
analysis, review of sector and industry trends, interest rate forecasts and
economic analysis. Travelers Asset Management International Corporation's
("TAMIC") analysis of securities focuses on values based on factors such as
interest or dividend coverage, asset values, earnings prospects and the quality
of management of the company. In making investment recommendations, TAMIC also
considers current income, potential for capital appreciation, maturity
structure, quality guidelines, coupon structure, average yield, percentage of
zero coupon and PIK securities, percentage of non-accruing items, and yield to
maturity. TAMIC also considers the ratings of Moody's and S&P assigned to
various securities but does not rely solely on ratings assigned by Moody's and
S&P because (1) Moody's and S&P assigned ratings are based largely on historical
financial data and may not accurately reflect the current financial outlook of
companies, and (2) there can be large differences among the current financial
conditions of issuers within the same rating category. Achievement of the Fund's
investment objective is more dependent upon TAMIC's own credit analysis than is
the case for higher quality bonds.

BOARD OF TRUSTEES
- --------------------------------------------------------------------------------

INVESTMENT ADVISER
- --------------------------------------------------------------------------------

TAMIC provides investment advice and, in general, supervises the management and
investment program of the Fund.

TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. TAMIC is an indirect wholly owned
subsidiary of Travelers Group Inc., a financial services holding company, and
its principal offices are located at One Tower Square, Hartford, Connecticut
06183.

In addition to providing investment advice to the Fund, TAMIC acts as investment
adviser for other investment companies which fund variable contracts issued by
the Company, as well as for individual and pooled pension and profit-sharing
accounts, domestic insurance companies affiliated with The Travelers, and
nonaffiliated insurance companies.

HYBT-6
<PAGE> 53

For furnishing investment management and advisory services to the Fund, TAMIC is
paid an amount equivalent on an annual basis to the advisory fee schedule set
forth in the table below. The fee is computed daily and paid weekly.

<TABLE>
<CAPTION>
ANNUAL AGGREGATE NET ASSET
MANAGEMENT FEE VALUE OF THE FUND
- -------------- -------------------
<C> <S> <C>
0.50% of the first $ 50,000,000, plus
0.40% of the next $ 100,000,000, plus
0.30% of the next $ 100,000,000, plus
0.25% of amounts over $ 250,000,000
</TABLE>

For the fiscal year ended December 31, 1996, TAMIC received a fee equal to .42%
of the Fund's average net assets for its services as investment adviser.

PORTFOLIO MANAGER

The High Yield Bond Trust is managed by Thomas L. Hajdukiewicz. Mr. Hajdukiewicz
joined The Travelers Insurance Company as a Vice President and Portfolio Manager
in January of 1997. Prior to coming to TAMIC, Mr. Hajdukiewicz served as an
Analyst/Portfolio Manager with MacKay Shields Financial Corporation and as a
Financial Analyst with America Capital Asset Management.

FUND ADMINISTRATION
- --------------------------------------------------------------------------------

The Fund has entered into an Administrative Services Agreement, whereby
Travelers Insurance will be responsible for the pricing and bookkeeping services
for the Fund at an annualized rate of 0.06% of the daily net assets of the Fund.
The Travelers Insurance Company, at its expense, may appoint a sub-administrator
to perform these services. The sub-administrator may be affiliated with The
Travelers Insurance Company.

SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------

Under policies established by the Board of Trustees, TAMIC selects
broker-dealers to execute transactions for the Fund, subject to the receipt of
best execution. When selecting broker-dealers to execute portfolio transactions
for the Fund, TAMIC may consider the number of Fund shares sold by such
broker-dealers. In addition, broker-dealers may from time to time be affiliated
with the Fund, TAMIC, or their affiliates.

The Fund may pay higher commissions to broker-dealers that provide research
services. TAMIC may use these services in advising the Fund as well as in
advising its other clients.

FUND EXPENSES
- --------------------------------------------------------------------------------

In addition to the investment advisory fees discussed above, the other expenses
of the Fund include the charges and expenses of the transfer agent, the
custodian, the independent auditors, and any outside legal counsel employed by
either the Fund or the Board of Trustees; the compensation for the disinterested
members of the Board of Trustees; the costs of printing and mailing the Fund's
prospectuses, proxy solicitation materials, and annual, semi-annual and periodic
reports; brokerage commissions, interest charges and taxes; and any
registration, filing and other fees payable to government agencies in connection
with the registration of the Fund and its shares under federal and state
securities laws. Additionally, high portfolio turnover may involve
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund, as well as additional gains or losses to
shareholders.

HYBT-7
<PAGE> 54

TRANSFER AGENT
- --------------------------------------------------------------------------------

First Data Investor Services Group, Inc., Exchange Place, Boston, MA 02109,
serves as the Fund's transfer agent and dividend disbursing agent.

SHAREHOLDER RIGHTS
- --------------------------------------------------------------------------------

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund values short-term money market instruments with maturities of sixty
days or less at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest approximates market. All other investments are valued at market
value or where market quotations are not readily available, at fair value as
determined in good faith by the Fund's Board of Trustees.

HYBT-8
<PAGE> 55

The Fund may temporarily suspend the right to redeem its shares when: (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists as determined by
the SEC so that disposal of the Fund's investments or determination of its net
asset value is not reasonably practicable; or (4) the SEC, for the protection of
shareholders, so orders.

TAX STATUS
- --------------------------------------------------------------------------------

The Fund has qualified, and intends to qualify in the future, as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for each fiscal year.

DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

The distribution requirements described above may have an adverse effect on the
Fund to the extent it invests in high yield securities structured as zero coupon
and PIK bonds. An investment company typically accrues income on those
securities prior to the receipt of cash payments. Therefore, the Fund may have
to dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or leverage itself by borrowing cash, to satisfy distribution
requirements.

LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------

There are no pending material legal proceedings affecting the Fund.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

HYBT-9
<PAGE> 56

EXHIBIT A
- --------------------------------------------------------------------------------

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE FUND

ZERO COUPON BONDS

Zero coupon bonds do not pay interest for several years, then they pay a full
coupon interest until maturity. They are sold at a substantial original issue
discount that equals the missing interest payment compounded at the coupon rate.
Additionally, zero coupon bonds give the issuer the flexibility of reduced cash
interest expense for several years, and they give the purchaser the potential
advantage of compounding the coupons at a higher rate than might otherwise be
available.

However, zero coupon bonds are very risky for the investor. Because the cash
flows from the bonds are deferred and because zero coupon bonds often represent
very subordinated debt, their prices are subject to more volatility than most
other bonds.

A variant of zero coupon bonds are step-up bonds. These bonds pay a low initial
interest rate for several years and then a higher rate until maturity. They are
also issued at an original issue discount.

For federal income tax purposes, a purchaser of zero coupon bonds (either
initially or in the secondary market) is treated as if the buyer had purchased a
corporate obligation issued on the purchase date with an original issue
discount. The purchaser is required to take into income each year as ordinary
income an allocable portion of such discounts determined on a "constant yield"
method. Any such income increases the holder's tax basis for the zero coupon
bond, and any gain or loss on a sale of the zero coupon bonds relative to the
holder's basis, as so adjusted, is a capital gain or loss. Certain federal tax
law income and capital gain distribution requirements may have an adverse effect
on the Fund to the extent the Fund invests in zero coupon bonds. See "Dividends
and Tax Status."

PAY-IN-KIND BONDS

Pay-in-kind (PIK) bonds pay interest either in cash or in additional securities
at the issuer's option for a specified period. Like zero coupon bonds, PIK bonds
are designed to give the issuer flexibility in managing cash flow. Unlike zero
coupon bonds, however, PIK bonds offer the investor the opportunity to sell the
additional securities issued in lieu of interest and thus obtain current income
on the original investment. Certain federal tax law income and capital gain
distribution requirements may have an adverse effect on the Fund to the extent
that the Fund invests in PIK bonds. See "Dividends and Tax Status."

RESET BONDS

The interest rate on reset bonds is adjusted periodically to a level which
should allow the bonds to trade at a specified dollar level, generally par or
$101. The rate can usually be raised, but the bonds have a low call premium,
limiting the opportunity for capital gains. Some resets have a maximum rate,
generally 2.5% or 3% above the initial rate.

INCREASING RATE NOTES

Increasing rate notes (IRNs) have interest rates that increase periodically (by
1/4% per quarter, for example). IRNs are generally used as a temporary
financing instrument since the increasing rate is an incentive for the issuer to
refinance with longer term debt.

HYBT-10
<PAGE> 57

UNITED STATES (U.S.) GOVERNMENT SECURITIES

Securities issued or guaranteed by the U.S. Government include a variety of
Treasury securities that differ only in their interest rates, maturities and
dates of issuance. Treasury bills have maturities of one year or less; Treasury
notes have maturities of one to ten years; and Treasury bonds generally have
maturities of greater than ten years at the date of issuance.

Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include direct obligations of the U.S. Treasury and securities
issued or guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the U.S., Small Business Administration,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Home Loan Banks, Federal Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime
Administration, The Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association and Federal National Mortgage
Association.

Some obligations of U.S. Government agencies and instrumentalities, such as
Treasury bills and Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S.; others,
such as securities of Federal Home Loan Banks, are supported by the right of the
issuer to borrow from the Treasury; still others, such as bonds issued by the
Federal National Mortgage Association, a private corporation, are supported only
by the credit of the instrumentality. Because the U.S. Government is not
obligated by law to provide support to an instrumentality it sponsors, the Fund
will invest in the securities issued by such an instrumentality only when TAMIC
determines that the credit risk with respect to the instrumentality does not
make its securities unsuitable investments. U.S. Government securities will not
include international agencies or instrumentalities in which the U.S.
Government, its agencies or instrumentalities participate, such as the World
Bank, the Asian Development Bank or the Inter-American Development Bank, or
issues insured by the Federal Deposit Insurance Corporation.

WHEN-ISSUED SECURITIES

The commitment to purchase a when-issued security may be viewed as a senior
security, and will be marked to market and reflected in the Fund's net asset
value daily from the commitment date. While it is TAMIC's intention to take
physical delivery of these securities, offsetting transactions may be made prior
to settlement, if it is advantageous to do so. The Fund does not make payment or
begin to accrue interest on these securities until settlement date. In order to
invest its assets pending settlement, the Fund will normally invest in
short-term money market instruments and other securities maturing no later than
the scheduled settlement date.

The Fund does not intend to purchase when-issued securities for speculative or
"leverage" purposes. Consistent with Section 18 of the 1940 Act and the General
Policy Statement of the SEC thereunder, when the Fund commits to purchase a
security on a when-issued or TBA basis, it will identify and place in a
segregated account high-grade money market instruments and other liquid
securities equal in value to the purchase cost of the when-issued securities.

TAMIC believes that purchasing securities in this manner will be advantageous to
the Fund. However, this practice does entail certain additional risks, namely
the default of the counterparty on its obligations to deliver the security as
scheduled. In this event, the Fund would experience a gain or loss equal to the
appreciation or depreciation in value from the commitment date. TAMIC employs a
rigorous credit quality procedure in determining the counterparties with which
it will

HYBT-11
<PAGE> 58

deal in when-issued securities, and in some circumstances, will require the
counterparty to post cash or some other form of security as margin to protect
the value of its delivery obligation pending settlement.

WRITING COVERED CALL OPTIONS

Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could impair the Fund's ability to use such
options to achieve its investment objectives.

MONEY MARKET INSTRUMENTS

Money market securities are instruments with remaining maturities of one year or
less, such as bank certificates of deposit, bankers' acceptances, commercial
paper (including master demand notes) and obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, some of which may be
subject to repurchase agreements.

CERTIFICATES OF DEPOSIT

Certificates of deposit will be limited to U.S. dollar-denominated certificates
of U.S. banks which have at least $1 billion in deposits as of the date of their
most recently published financial statements (including foreign branches of U.S.
banks, U.S. branches of foreign banks which are members of the Federal Reserve
System or the Federal Deposit Insurance Corporation, and savings and loan
associations which are insured by the Federal Deposit Insurance Corporation).

OBLIGATIONS OF FOREIGN BRANCHES OF U.S. BANKS

The obligations of foreign branches of U.S. banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by government regulation. Payment of interest
and principal upon these obligations may also be affected by governmental action
in the country of domicile of the branch (generally referred to as

HYBT-12
<PAGE> 59

sovereign risk). In addition, evidences of ownership of such securities may be
held outside the U.S. and the Fund may be subject to the risks associated with
the holding of such property overseas. Various provisions of federal law
governing domestic branches do not apply to foreign branches of domestic banks.

OBLIGATIONS OF U.S. BRANCHES OF FOREIGN BANKS

Obligations of U.S. branches of foreign banks may be general obligations of the
parent bank in addition to the issuing branch, or may be limited by the terms of
a specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. In addition, there may be less publicly available information about a
U.S. branch of a foreign bank than about a domestic bank.

BANKERS' ACCEPTANCES

COMMERCIAL PAPER RATINGS

The Fund's investments in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation (S&P) or Prime-1 by Moody's Investors Service,
Inc. (Moody's). These ratings and other money market instruments are described
as follows.

Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. The issuer's long-term senior
debt is rated "A" or better, although in some cases "BBB" credits may be
allowed. The issuer has access to at least two additional channels of borrowing.
Basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well established and
the issuer has a strong position within the industry.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public preparations to meet such
obligations. Relative strength or weakness of the above factors determines how
the issuer's commercial paper is rated within various categories.

FOREIGN SECURITIES

HYBT-13
<PAGE> 60

transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investments in foreign countries and potential
restrictions on the flow of international capital. Additionally, dividends
payable on foreign securities may be subject to foreign taxes withheld prior to
distribution. Foreign securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility. Changes
in foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by the Portfolio will not be registered with, nor will
the issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about the
securities and the foreign company or government issuing them than is available
about a domestic company of government entity. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.

HYBT-14
<PAGE> 61

EXHIBIT B
- --------------------------------------------------------------------------------

CORPORATE BOND RATINGS

High Yield Bond Trust invests primarily in corporate bonds rated below
Investment Grade. For Moody's Investors Service (Moody's), this means bonds
rated Ba or lower; other rating agencies, including Standard & Poor's
Corporation, Duff & Phelps, Fitch Investors Service, Inc. have similar rating
categories.

MOODY'S CORPORATE BOND RATINGS

1. Aaa -- Bonds which are 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 are not likely to impair the fundamentally strong
position of such issues.

2. Aa -- Bonds which are 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 there may be other
elements present which make the long term risks appear somewhat larger than in
Aaa securities.

3. A -- Bonds which are 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 sometime in the future.

4. Baa -- Bonds which are 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.

5. Ba -- Bonds which are rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

6. B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.

7. Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

8. Ca -- Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other market
shortcomings.

9. C -- Bonds which are rated as C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

HYBT-15
<PAGE> 62

S&P CORPORATE BOND RATINGS

A Standard & Poor's Corporation (S&P) corporate bond rating is a current
assessment of the creditworthiness of an obligor, including obligors outside the
U.S., with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers, or lessees. Ratings of
foreign obligors do not take into account currency exchange and related
uncertainties. The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable.

The ratings are based, in varying degrees, on the following considerations:

a. Likelihood of default -- capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;

b. Nature of and provisions of the obligation; and

c. Protection afforded by and relative position of the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.

PLUS (+) OR MINUS (-): To provide more detailed indications of credit quality,
ratings from "AA" to "A" may be modified by the addition of a plus or minus sign
to show relative standing within the major rating categories.

Bond ratings are as follows:

1. AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

2. AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

3. A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

4. BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Although it normally exhibits 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
debt in this category than in higher rated categories.

5. BB, B, CCC, CC and C -- Debt rated BB, B, CCC, CC and C is 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 indicates
the lowest degree of speculation, and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

HYBT-16
<PAGE> 63

The table below shows the averaged credit quality ratings of the Fund's assets
for the twelve months ended December 31, 1996:

<TABLE>
<CAPTION>
S&P OR
MOODY'S RATING PERCENTAGE
----------------- ----------
<S> <C>
AAA....................................................... 17.42%
AA1....................................................... %
AA2....................................................... %
AA3....................................................... %
A1........................................................ %
A2........................................................ %
A3........................................................ %
BAA1...................................................... %
BAA2...................................................... %
BAA3...................................................... %
BA1....................................................... 0.64%
BA2....................................................... %
BA3....................................................... 2.98%
B1........................................................ 8.26%
B2........................................................ 15.64%
B3........................................................ 41.63%
CAA....................................................... 12.17%
CA........................................................ 0.68%
C......................................................... %
D......................................................... %
NR........................................................ 0.58%
-------
100.00%
=======
</TABLE>

HYBT-17
<PAGE> 64

HIGH YIELD BOND TRUST
PROSPECTUS

TIC Ed. 5-97
Printed in U.S.A.
L-11173
<PAGE> 65

CAPITAL APPRECIATION FUND

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 1-860-277-0111
- --------------------------------------------------------------------------------

Capital Appreciation Fund (the "Fund") is a diversified open-end management
investment company (mutual fund) whose goal is growth of capital primarily
through the use of common stocks. The Fund invests principally in common stocks
of small to large companies. Investments in smaller companies tend to be more
volatile than investments in larger more established companies.

This Prospectus concisely sets forth the information about the Fund that you
should know before investing. Please read and retain it for future reference.
Additional information about the Fund is contained in a Statement of Additional
Information ("SAI") dated May 1, 1997 which has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to The Travelers
Insurance Company, One Tower Square, Hartford, Connecticut 06183-5030, or by
calling 800-842-8573.

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 66

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS................................................................... 3
FUND DESCRIPTION....................................................................... 4
INVESTMENT OBJECTIVE AND POLICIES...................................................... 4
INVESTMENT RESTRICTIONS................................................................ 5
RISK FACTORS........................................................................... 5
BOARD OF TRUSTEES...................................................................... 5
INVESTMENT ADVISERS.................................................................... 5
TAMIC................................................................................ 6
JANUS CAPITAL CORPORATION............................................................ 6
Portfolio Manager................................................................. 6
FUND ADMINISTRATION.................................................................... 6
SECURITIES TRANSACTIONS................................................................ 6
FUND EXPENSES.......................................................................... 7
TRANSFER AGENT......................................................................... 7
SHAREHOLDER RIGHTS..................................................................... 7
NET ASSET VALUE........................................................................ 8
TAX STATUS............................................................................. 8
DIVIDENDS AND DISTRIBUTIONS............................................................ 8
LEGAL PROCEEDINGS...................................................................... 8
ADDITIONAL INFORMATION................................................................. 8
EXHIBIT A.............................................................................. 9
</TABLE>

CAF-2
<PAGE> 67

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

CAPITAL APPRECIATION FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

The following information on per share data for the seven years ended December
31, 1996 has been audited by Coopers & Lybrand L.L.P., Independent Accountants.
All other periods presented have been audited by the Fund's prior auditors.
Coopers & Lybrand L.L.P.'s report on the per share data for each of the five
years in the period ended December 31, 1996 is contained in the Fund's Annual
Report which should be read along with this information and which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996(7) 1995 1994 1993(4) 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year..................... $ 33.18 $ 24.50 $ 25.87 $ 22.72 $ 19.63
Income from operations
Net investment income.................................. 0.23 0.24 0.19 0.19 0.28
Net gains or losses on securities (realized and
unrealized).......................................... 8.49 8.61 (1.41) 3.21 3.13
--------- --------- -------- -------- --------
Total from investment operations..................... 8.72 8.85 (1.22) 3.40 3.41
Less distributions from (6)
Net investment income.................................. (0.41) (0.17) (0.15) (0.25) (0.32)
Net realized gains..................................... (4.77) -- -- -- --
--------- --------- -------- -------- --------
Total distributions.................................. (5.18) (0.17) (0.15) (0.25) (0.32)
--------- --------- -------- -------- --------
NET ASSET VALUE, END OF YEAR............................ $ 36.72 $ 33.18 $ 24.50 $ 25.87 $ 22.72
========== ========== ========= ========= =========
TOTAL RETURN (1)........................................ 28.21% 36.37% (4.76)% 15.09% 17.60%
Net assets, end of year (thousands).................... $ 224,132 $ 122,155 $ 78,494 $ 62,414 $ 29,506
RATIOS TO AVERAGE NET ASSETS
Expenses (2)........................................... 0.83% 0.85% 0.89% 0.87% 0.56%
Net investment income.................................. 0.69% 0.84% 0.79% 0.81% 1.39%
PORTFOLIO TURNOVER RATE................................. 84% 124% 106% 155% 126%
AVERAGE COMMISSION RATE PAID (PER SHARES) (3)........... $ 0.06 -- -- -- --

1991 1990(5) 1989 1988 1987
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year..................... $ 14.62 $ 15.76 $ 13.62 $ 12.54 $ 17.11
Income from operations
Net investment income.................................. 0.36 0.09 0.14 0.11 (0.01)
Net gains or losses on securities (realized and
unrealized).......................................... 4.75 (1.08) 2.00 1.15 (1.35)
-------- -------- -------- -------- --------
Total from investment operations..................... 5.11 (0.99) 2.14 1.26 (1.36)
Less distributions from (6)
Net investment income.................................. (0.10) (0.15) -- (0.18) --
Net realized gains..................................... -- -- -- -- (3.21)
-------- -------- -------- -------- --------
Total distributions.................................. (0.10) (0.15) -- (0.18) (3.21)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR............................ $ 19.63 $ 14.62 $ 15.76 $ 13.62 $ 12.54
========= ========= ========= ========= =========
TOTAL RETURN (1)........................................ 35.16% (6.24)% 15.71% 10.06% (8.12)%
Net assets, end of year (thousands).................... $ 20,497 $ 13,494 $ 15,456 $ 42,470 $ 50,457
RATIOS TO AVERAGE NET ASSETS
Expenses (2)........................................... 0.56% 0.82% 1.37% 1.01% 0.93%
Net investment income.................................. 2.05% 0.58% 0.84% 0.83% (0.05)%
PORTFOLIO TURNOVER RATE................................. 205% 80% 75% 104% 170%
AVERAGE COMMISSION RATE PAID (PER SHARES) (3)........... -- -- -- -- --
</TABLE>

(1) Total return is determined by dividing the increase (decrease) in value of a
share during the year, after reflecting the reinvestment of dividends
declared during the year, by the beginning of year share price. Shares in
the Fund are only sold to The Travelers separate accounts in connection with
the issuance of variable annuity and variable life insurance contracts.
Total Return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts.

(2) The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by The Travelers in connection with
voluntary expense limitations. Without the expense reimbursement, the ratio
of operating expenses to average net assets would have been 0.96%, 0.91%,
1.28% and 1.56% for the years ended December 31, 1993, 1992, 1991 and 1990,
respectively. For the years ended December 31, 1994, and 1995 and 1996,
there were no expense reimbursements by The Travelers in connection with the
voluntary expense limitation.

(4) Effective May 1, 1993, Janus Capital Corporation became subadviser for the
Fund.

(5) On May 1, 1990, TIMCO replaced Keystone Custodian Funds, Inc. as the
investment adviser for the Fund.

(6) For the year ended December 31, 1996, distributions from realized gains
include both net realized short-term and long-term capital gains. Prior to
1996, net realized short-term capital gains were included in distributions
from net investment income.

(7) Effective July 1, 1996, TAMIC replaced TIMCO as the investment adviser for
the Fund.

CAF-3
<PAGE> 68

FUND DESCRIPTION
- --------------------------------------------------------------------------------

Capital Appreciation Fund (the "Fund") is registered with the SEC as a
diversified open-end management investment company, commonly known as a mutual
fund. The Fund was created under Massachusetts law as a Massachusetts business
trust on March 18, 1982.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Fund's investment objective is to provide growth of capital primarily
through the use of common stocks. The Fund invests principally in common stocks
of small to large companies. It is the policy of the Fund to invest its assets
as fully as practicable in common stocks, securities convertible into common
stocks and securities having common stock characteristics, including rights and
warrants, selected primarily for prospective capital growth. Investments in
smaller companies tend to be more volatile than investments in larger, more
established issuers. While income is not an objective, securities appearing to
offer attractive possibilities for future growth of income may be included in
the portfolio whenever it seems possible to do so without conflicting with the
Fund's objective of capital growth. The Fund may invest in domestic, foreign and
restricted securities. While the Fund may occasionally invest in foreign
securities, it is not anticipated that they will, at any time, account for more
than twenty-five percent (25%) of the investment portfolio.

Although the Fund normally invests primarily in equity securities, the Fund may
increase its cash position when the investment adviser or the sub-adviser is
unable to locate investment opportunities with desirable risk/reward
characteristics and perceives an opportunity for capital growth from such
securities so the Fund may receive a return on its idle cash. The Fund may
invest in preferred stocks; warrants; corporate bonds and debentures; U.S.
government securities; instruments of banks which are members of the Federal
Deposit Insurance Corporation and have assets of at least $1 billion, such as
certificates of deposit, demand and time deposits and bankers' acceptances;
prime commercial paper, including master demand notes; repurchase agreements
secured by U.S. government securities; or other debt securities. The Fund may
invest in debt securities rated below investment grade. (See "High Yield/High
Risk Bonds" in Exhibit A.) When the Fund invests in debt securities, investment
income will increase and may constitute a large portion of the return on the
Fund and the Fund probably will not participate in market advances or declines
to the extent that it would if it were fully invested in common stocks.

The Fund may write covered call options on securities which it owns. Such an
option on an underlying security would obligate the Fund to sell, and give the
purchaser of the option the right to buy, that security at a stated exercise
price at any time until a stated expiration date of the option. The Fund may
also purchase index or individual equity call or put options. The Fund will pay
a premium to buy call (or put) options and thereby obtain the right to buy (or
sell) a fixed number of shares of the underlying asset at the stated exercise
price on or prior to the stated expiration date.

The Fund may also use exchange-traded futures contracts as a hedge to protect
against changes in stock prices or interest rates, and, to a limited extent, to
seek to enhance return. A stock index futures contract is a contractual
obligation to buy or sell a specified index of stocks at a future date for a
fixed price. An interest rate futures contract is a contract to buy or sell
specified debt securities at a future time for a fixed price.

CAF-4
<PAGE> 69

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund has adopted the following fundamental investment restrictions,
(summarized from the full restrictions set forth in the SAI), which may not be
changed without a vote of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act of 1940, as amended.
Certain other fundamental restrictions are fully set forth in the Statement of
Additional Information. Unless otherwise stated, all references to the Fund's
assets are in terms of current market value, and all limitations apply at the
time of investment.

The Fund will not: (1) invest more than 5% of its assets in the securities of
any one issuer; (2) borrow money, except that the Fund may borrow money from
banks for temporary or emergency purposes in amounts of up to 10% of its gross
assets computed at cost; assets pledged to secure borrowings shall be no more
than the lesser of the amount borrowed or 10% of the Fund's gross assets
computed at cost; (3) invest more than 25% of its assets in the securities of
issuers in the same industry; and (4) invest more than 10% of its assets in
securities for which market quotations are not readily available, including
restricted securities.

RISK FACTORS
- --------------------------------------------------------------------------------

The risk inherent in investing in the Fund is that the net asset value will
fluctuate in response to changes in economic conditions, interest rates and the
market's perception of the underlying portfolio securities of the Fund. There
can be no assurance that the Fund will achieve its investment objective since
there is uncertainty in every investment.

The investment experience of equity investments over time will tend to reflect
levels of stock market prices and dividend payouts. Both are affected by diverse
factors, including not only business conditions and investor confidence in the
economy, but current conditions in a particular industry or company. The yield
on a common stock is not contractually determined. Equity securities are subject
to financial risks relating to the earning stability and overall financial
soundness of an issue. They are also subject to market risks relating to the
effect of general changes in the securities market on the price of a security.
In addition, there may be more risk associated with the Fund to the extent that
it invests in small or mid-sized companies. More risk is associated with
investment in small or mid-sized companies than with larger companies because
such companies may be dependent on only one or two products and may be more
vulnerable to competition from larger companies with greater resources and to
economic conditions affecting their market sector. Small or mid-sized companies
may be new, without long business or management histories, and perceived by the
market as unproven. Their securities may be held primarily by insiders or
institutional investors, which may affect marketability. The prices of these
stocks often fluctuate more than the overall stock market.

BOARD OF TRUSTEES
- --------------------------------------------------------------------------------

INVESTMENT ADVISERS
- --------------------------------------------------------------------------------

Travelers Asset Management International Corporation ("TAMIC") provides
investment advice and, in general, supervises the management and investment
program of the Fund. Janus Capital Corporation provides sub-advisory services to
the Fund with respect to its daily investment operations, subject to the
supervision of the Board of Trustees and TAMIC.

CAF-5
<PAGE> 70

TAMIC

TAMIC is a registered investment adviser that was incorporated in 1978. Its
principal offices are located at One Tower Square, Hartford, Connecticut, and it
is an indirect wholly owned subsidiary of Travelers Group Inc., a financial
services holding company. TAMIC also acts as investment adviser or subadviser
for other investment companies used to fund variable products, as well as for
individual and pooled pension and profit-sharing accounts, and for domestic
insurance companies affiliated with the Travelers Insurance Company and
nonaffiliated insurance companies.

Under the Investment Advisory Agreement, TAMIC will be paid an amount equivalent
on an annual basis to 0.75% of the average daily net assets of the Fund. From
this amount, TAMIC will in turn pay an amount equivalent on an annual basis to
0.55% of the average daily net assets of the Fund to Janus Capital Corporation
for its services as sub-adviser. TAMIC will retain 0.20% as compensation for its
services as described above. The fee is computed and paid weekly.

JANUS CAPITAL CORPORATION

Janus Capital Corporation (Janus Capital), 100 Filmore Street, Denver, Colorado
80206, has been employed by TAMIC as a sub-adviser to manage the daily
investment operations of the Fund, subject to the supervision of both TAMIC and
the Board of Trustees. Kansas City Southern Industries, Inc., a publicly traded
holding company whose primary subsidiaries are engaged in transportation,
financial services and real estate, owns approximately 83% of the outstanding
voting stock of Janus Capital. Janus Capital also acts as investment adviser to
other investment companies not affiliated with the Fund, as well as to
individual, corporate, charitable and retirement accounts.

For the year ended December 31, 1996, as described above, TAMIC, and not the
Fund, paid to Janus Capital an amount equivalent on an annual basis to 0.55% of
the Fund's average daily net assets for its services as sub-adviser to the Fund.
Effective January 7, 1997, TAMIC will pay to the Sub-Adviser a reduced fee,
equivalent on an annual basis to the following:

<TABLE>
<CAPTION>
ANNUAL AGGREGATE NET ASSET
SUB-ADVISORY VALUE OF THE
FEE ACCOUNT
- -------------- -------------------
<C> <S> <C>
0.55% of the first $ 100,000,000
0.50% of the next $ 400,000,000
0.45% of the amount over $ 500,000,000
</TABLE>

The sub-advisory fees will be deducted on each valuation date and will be paid
monthly.

PORTFOLIO MANAGER

The day-to-day portfolio management of the Fund is currently handled by Thomas
F. Marsico, a Vice President and Portfolio Manager of Janus Capital Corporation,
and has been since May 1993. Mr. Marisco also serves as portfolio manager for
three other funds sponsored by Janus Capital, going back to March of 1988 for
one of these funds.

FUND ADMINISTRATION
- --------------------------------------------------------------------------------

Capital Appreciation Fund ("Fund") has entered into an Administrative Services
Agreement, whereby Travelers Insurance will be responsible for the pricing and
bookkeeping services for the Fund at an annualized rate of 0.06% of the daily
net assets of the Fund. The Travelers Insurance Company, at its expense, may
appoint a sub-administrator to perform these services. The sub-administrator may
be affiliated with The Travelers Insurance Company.

SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------

Under policies established by the Board of Trustees, TAMIC or Janus Capital will
select broker-dealers to execute transactions for the Fund, subject to the
receipt of best execution. Broker-dealers may from time to time be affiliated
with the Fund, TAMIC, Janus Capital or their affiliates.

CAF-6
<PAGE> 71

The Fund may pay higher commissions to broker-dealers which provide research
services. TAMIC and Janus Capital may use these services in advising the Fund,
as well as in advising other clients for which they provide advisory services.

FUND EXPENSES
- --------------------------------------------------------------------------------

In addition to the investment advisory fees discussed above, other expenses of
the Fund include the charges and expenses of the transfer agent, the custodian,
the independent auditors, and any outside legal counsel employed by either the
Fund or the Board of Trustees; the compensation for the disinterested members of
the Board of Trustees; the costs of printing and mailing the Fund's
prospectuses, proxy solicitation materials, and annual, semi-annual and periodic
reports; brokerage commissions, interest charges and taxes; and any
registration, filing and other fees payable to government agencies in connection
with the registration of the Fund and its shares under federal and state
securities laws. Additionally, high portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs, which will be borne
directly by the Fund.

For the fiscal year ended December 31, 1996, the Fund paid 0.83% of its average
net assets in expenses.

TRANSFER AGENT
- --------------------------------------------------------------------------------

First Data Investor Services Group, Inc., Exchange Place, Boston, MA 02109,
serves as the Fund's transfer agent and dividend disbursing agent.

SHAREHOLDER RIGHTS
- --------------------------------------------------------------------------------

CAF-7
<PAGE> 72

insurance policy owners, and will determine what action, if any, should be taken
in the event of such a conflict.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of a Fund share is computed as of the close of trading on
each day on which the New York Stock Exchange ("Exchange") is open, except on
days when changes in the value of the Fund's securities do not affect the
current net asset value of its shares. The net asset value per share is arrived
at by determining the value of the Fund's assets, subtracting its liabilities,
and dividing the result by the number of shares outstanding.

The Fund values short-term money market instruments with maturities of sixty
days or less at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest receivable, approximates market. All other investments are
valued at market value or, where market quotations are not readily available, at
fair value as determined in good faith by the Fund's Board of Trustees.

TAX STATUS
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------

There are no pending material legal proceedings affecting the Fund.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

CAF-8
<PAGE> 73

EXHIBIT A
- --------------------------------------------------------------------------------

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE FUND

FUTURES CONTRACTS

The Fund may use exchange-traded financial futures contracts either as a hedge
to protect against anticipated changes in stock prices and interest rates, or to
facilitate the purchase or sale of securities or, to a limited extent, to seek
to enhance return. Financial futures contracts consist of stock index futures
contracts and futures contracts on debt securities ("interest rate futures"). A
stock index futures contract is a contractual obligation to buy or sell a
specified index of stocks at a future date for a fixed price. An interest rate
futures contract is a contract to buy or sell specified debt securities at a
future time for a fixed price. When a futures contract is purchased, the Fund
will set aside liquid securities equal to the total market value of the futures
contract, less the amount of the initial margin.

Hedging by use of interest rate futures seeks to protect the portfolio against
potential adverse movements in interest rates. When hedging is successful, any
depreciation in the value of portfolio securities will substantially be offset
by appreciation in the value of the futures position. Conversely, any
appreciation in the value of the portfolio securities will substantially be
offset by depreciation in the value of the futures position.

Positions taken in the futures markets are not normally held to maturity, but
instead are liquidated through offsetting transactions which may result in a
profit or a loss. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the stock index or security and
the same delivery date. If the offsetting purchase price is less than the
original sale price, the Fund realizes a gain; if it is more, the Fund realizes
a loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if less, a loss. While futures
positions taken by the Fund will usually be liquidated in this manner, the Fund
may instead make or take delivery of underlying securities whenever it appears
economically advantageous for it to do so. In determining gain or loss,
transaction costs must also be taken into account. There can be no assurance
that the Fund will be able to enter into an offsetting transaction with respect
to a particular contract at a particular time.

The Fund will not purchase or sell futures contract or related options for
non-hedging purposes if the aggregate initial margin and premiums required to
establish such positions exceeds five percent (5%) of the fair market value of
its net assets, after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into.

All stock index and interest rate futures contracts will be traded on exchanges
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC"). The Fund will further seek to assure that fluctuations in the price of
any futures contracts that it uses for hedging purposes will be substantially
related to fluctuations in the price of the securities held by it or which it
expects to purchase, or for other risk reduction strategies, though there can be
no assurance that the expected result will always be achieved.

CAF-9
<PAGE> 74

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

While certain futures contracts may be purchased and sold to reduce certain
risks, these transactions may entail other risks. Thus, while the Fund may
benefit from the use of such futures, changes in stock price movements or
interest rates may result in a poorer overall performance for the Fund than if
it had not entered into such futures contracts. Moreover, in the event of an
imperfect correlation between the futures position and the portfolio position
which is intended to be protected, the desired protection may not be obtained
and the Fund may be exposed to risk of loss. The adviser will attempt to reduce
this risk by engaging in futures transactions, to the extent possible, where, in
its judgment, there is a significant correlation between changes in the prices
of the futures contracts and the prices of any portfolio securities sought to be
hedged. Successful use of futures contracts for hedging purposes is also subject
to the adviser's ability to predict correctly movements in the direction of the
market.

FORWARD CONTRACTS

Forward contracts are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are not
currently exchange traded and are typically negotiated on an individual basis.
The Funds may enter into forward currency contracts to hedge against declines in
the value of securities denominated in, or whose value is tied to, a currency
other than the U.S. dollar or to reduce the impact of currency appreciation on
purchases of such securities. They may also enter into forward contracts to
purchase or sell securities or other financial indices.

BUYING PUT AND CALL OPTIONS

Put and call options will be employed primarily for bona fide hedging purposes
and to a limited extent, to seek to enhance return. Liquid securities sufficient
to fulfill the call option delivery obligation will be identified and segregated
in an account; deliverable securities sufficient to fulfill the put option
obligation will be similarly identified and segregated. In the case of put
options on futures contracts, portfolio securities whose price volatility is
expected to match that of the underlying futures contract will be identified and
segregated.

WRITING COVERED CALL OPTIONS

CAF-10
<PAGE> 75

Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could impair the Fund's ability to use such
options to achieve its investment objectives.

LOANS OF SECURITIES TO BROKER DEALERS

The Fund may lend securities to brokers and dealers pursuant to agreements
requiring that the loans be continuously secured by cash, or securities of the
U.S. government, its agencies or instrumentalities or any combination of cash
and such securities, as collateral equal at all times in value to at least the
market value of the securities loaned. Such securities loans will not be made
with respect to the Fund if as a result the aggregate of all outstanding
securities loans exceeds 15% of the value of the Fund's total assets taken at
their current value. The Fund continues to receive interest or dividends on the
securities loaned and simultaneously earns interest on the investment of the
cash loan collateral in U.S. Treasury notes, certificates of deposit, other high
grade, short-term obligations or interest bearing cash equivalents. Although
voting rights attendant to securities loaned pass to the borrower, such loans
may be called at any time and will be called so that the securities may be voted
by the Fund if, in the opinion of the Fund, a material event affecting the
investment is to occur. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans may be made only to borrowers deemed to be of good standing, under
standards approved by the Board of Trustees, when the income to be earned from
the loan justifies the attendant risks.

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. Additionally, dividends payable on foreign
securities may be subject to foreign taxes withheld prior to distribution.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by the Fund will not be registered with, nor will the
issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about the
securities and the foreign company or government issuing them than is available
about a domestic company of government entity. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.

HIGH YIELD/HIGH RISK BONDS

The Fund has no pre-established minimum quality standards and may invest up to
35% of its assets in debt securities that are rated below investment grade
(securities rated Ba or lower by Moody's Investors Service, Inc. ("Moody's") or
BB or lower by Standard & Poor's Corporation ("S&P")).

CAF-11
<PAGE> 76

Such securities generally offer a higher yield, but may be subject to a higher
risk of default in interest or principal payments and are considered
speculative. The market prices of lower rated securities are generally less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic or political changes, or in the case of corporate
issuers, individual corporate developments. Lower rated securities may also have
less liquid markets than higher rated securities, and their liquidity as well as
their value may be more severely affected by adverse economic conditions, by
adverse publicity and investor perceptions of the market or by new or proposed
legislation. (See the Statement of Additional Information for a more detailed
discussion of the bond ratings.)

The Fund may also invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the investment adviser or sub-adviser may treat such securities as
unrated debt. Unrated debt securities will be included in the 35% limit of the
Fund, unless the investment adviser or the sub-adviser deems such securities to
be the equivalent of investment-grade securities.

RISKS RELATING TO HIGH YIELD/HIGH RISK BONDS

High yield bonds are typically lower rated securities; the lower the quality of
a debt security, the higher the yield it will provide, but the greater the risk
that interest or principal payments will not be made when due. In the event of
an unanticipated default, the Fund would experience a reduction in its income,
and could expect a decline in the market value of the securities so affected.

While providing opportunities to maximize return over time, investors should be
aware of the following market, economic and credit factors influencing high
yield securities: (1) securities rated BB or lower by S&P or Ba or lower by
Moody's are considered predominantly speculative with respect to the ability of
the issuer to meet principal and interest payments; (2) the value of high yield
securities may be more susceptible to real or perceived adverse economic,
company or industry conditions than is the case for higher quality securities;
(3) widespread economic downturn could result in increased defaults in the high
yield market; (4) adverse market, credit or economic conditions could make it
difficult at certain times to sell certain high yield securities held by the
Fund; (5) the secondary market for high yield securities may be less liquid than
the secondary market for higher quality securities which may affect the value of
certain high yield securities held by the Fund at certain times; and (6) there
may not always be readily available market quotations for certain securities. At
these times, the investment adviser or sub-adviser will use its best judgment to
assign values to those securities.

MONEY MARKET INSTRUMENTS

Money market securities are instruments with remaining maturities of one year or
less such as bank certificates of deposit, bankers' acceptances, commercial
paper (including master demand notes) and obligations issued or guaranteed by
the United States government, its agencies or instrumentalities, some of which
may be subject to repurchase agreements.

CERTIFICATES OF DEPOSIT

CAF-12
<PAGE> 77

BANKERS' ACCEPTANCES

COMMERCIAL PAPER

Commercial paper will consist of issues rated at the time of purchase A-1 or
higher by S&P or Prime-1 by Moody's; or, if not rated, will be issued by
companies which have an outstanding debt issue rated at the time of purchase
Aaa, Aa or A by Moody's, or AAA, AA or A by S&P, or will be determined by the
adviser to be of comparable quality.

Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. The issuer's long-term senior
debt is rated "A" or better, although in some cases "BBB" credits may be
allowed. The issuer has access to at least two additional channels of borrowing.
Basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well established and
the issuer has a strong position within the industry.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public preparations to meet such
obligations. Relative strength or weakness of the above factors determines how
the issuer's commercial paper is rated within various categories.

UNITED STATES GOVERNMENT SECURITIES

CAF-13
<PAGE> 78

Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime
Administration, The Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association and Federal National Mortgage
Association.

Some obligations of U.S. government agencies and instrumentalities, such as
Treasury bills and Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the United States;
others, such as securities of Federal Home Loan Banks, are supported by the
right of the issuer to borrow from the Treasury; still others, such as bonds
issued by the Federal National Mortgage Association, a private corporation, are
supported only by the credit of the instrumentality. Because the U.S. government
is not obligated by law to provide support to an instrumentality it sponsors,
the Fund will invest in the securities issued by such an instrumentality only
when the adviser determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable investments. U.S.
government securities will not include international agencies or
instrumentalities in which the U.S. government, its agencies or
instrumentalities participate, such as the World Bank, Asian Development Bank or
the Inter-American Development Bank, or issues insured by the Federal Deposit
Insurance Corporation.

REPURCHASE AGREEMENTS

Interim cash balances may be invested from time to time in repurchase agreements
with approved counterparties. Approved counterparties are limited to national
banks or reporting broker-dealers meeting the advisers credit quality standards
as presenting minimal risk of default. All repurchase transactions must be fully
collateralized. Repurchase transactions generally mature the next business day
but, in the event of a transaction of longer maturity, collateral will be marked
to market daily and, when required, additional cash or qualifying collateral
will be required from the counterparty.

In executing a repurchase agreement, the Fund purchases eligible securities
subject to the seller's simultaneous agreement to repurchase them on a mutually
agreed upon date and at a mutually agreed upon price. The purchase and resale
prices are negotiated with the counterparty on the basis of current short-term
interest rates, which may be more or less than the rate on the securities
collateralizing the transaction. Physical delivery or, in the case of "book
entry" securities, segregation in the counterparty's account at the Federal
Reserve for the benefit of the Fund is required to establish a perfected claim
to the collateral for the term of the agreement in the event the counterparty
fails to fulfill its obligation.

As the securities collateralizing a repurchase transaction are generally of
longer maturity than the term of the transaction, in the event of default by the
counterparty on its obligation, the Fund would bear the risks of delay, adverse
market fluctuation and transaction costs in disposing of the collateral.

CAF-14
<PAGE> 79

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 80

CAPITAL APPRECIATION FUND
PROSPECTUS

L-11171 Printed in U.S.A.
TIC Ed. 5-97
<PAGE> 81

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-277-0111
- --------------------------------------------------------------------------------

The Travelers Series Trust (the "Series Trust") is a diversified open-end
management investment company (mutual fund) which consists of multiple series of
shares (the "Portfolios"), each with its own investment objective and policies.
The Portfolios of the Series Trust described herein are the U.S. Government
Securities Portfolio, the Social Awareness Stock Portfolio and the Utilities
Portfolio.

Shares of the Portfolios are currently offered without a sales charge to
separate accounts of The Travelers Insurance Company and The Travelers Life and
Annuity Company (collectively, "the Company" or "The Travelers"). The Portfolios
serve as investment vehicles for variable annuity and variable life insurance
contracts issued by the Company. All Portfolios described herein may not be
available under all variable contracts. The term "shareholder" as used herein
refers to any insurance company separate account that may use shares of the
Portfolios as investment vehicles now or in the future.

This Prospectus concisely sets forth the information about the Series Trust and
applicable Portfolios that you should know before investing. Please read it and
retain it for future reference. Additional information about the Series Trust
and the Portfolios is contained in a Statement of Additional Information ("SAI")
dated May 1, 1997 which has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. A copy
may be obtained, without charge, by writing to The Travelers, Annuity Services,
One Tower Square, Hartford, Connecticut 06183-5030, or by calling
1-800-842-8573.

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 82

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 83

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS -- U.S. Government Securities Portfolio.......................... 4
FINANCIAL HIGHLIGHTS -- Social Awareness Stock Portfolio.............................. 5
FINANCIAL HIGHLIGHTS -- Utilities Portfolio........................................... 6
FUND DESCRIPTION...................................................................... 7
U.S. GOVERNMENT SECURITIES PORTFOLIO.................................................. 7
Investment Objective and Policies................................................... 7
Investment Restrictions............................................................. 8
Risk Factors........................................................................ 8
SOCIAL AWARENESS STOCK PORTFOLIO...................................................... 8
Investment Objective and Policies................................................... 8
Investment Restrictions............................................................. 9
Risk Factors........................................................................ 10
UTILITIES PORTFOLIO................................................................... 10
Investment Objective and Policies................................................... 10
Investment Restrictions............................................................. 11
Risk Factors and Special Considerations............................................. 11
BOARD OF TRUSTEES..................................................................... 12
INVESTMENT ADVISERS................................................................... 13
TAMIC............................................................................... 13
Portfolio Manager -- U.S. Government Securities Portfolio........................... 13
Advisory Fees -- U.S. Government Securities Portfolio............................... 13
SBMFM............................................................................... 13
Portfolio Manager -- Social Awareness Stock Portfolio............................... 13
Advisory Fees -- Social Awareness Stock Portfolio................................... 14
Portfolio Manager -- Utilities Portfolio............................................ 14
Advisory Fees -- Utilities Portfolio................................................ 14
FUND ADMINISTRATION...................................................................
SECURITIES TRANSACTIONS............................................................... 14
FUND EXPENSES......................................................................... 15
TRANSFER AGENT........................................................................ 15
SHARES OF THE SERIES TRUST............................................................ 15
NET ASSET VALUE....................................................................... 16
TAX STATUS............................................................................ 17
DIVIDENDS AND DISTRIBUTIONS........................................................... 17
LEGAL PROCEEDINGS..................................................................... 17
ADDITIONAL INFORMATION................................................................ 17
EXHIBIT A............................................................................. 18
</TABLE>

SERIES-3
<PAGE> 84

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following information on per share data for the U.S. Government Securities
Portfolio for each of the four years in the period ended December 31, 1996 and
the period January 24, 1992 (date operations commenced) to December 31, 1992 has
been audited by Coopers & Lybrand L.L.P., Independent Accountants. Their report
on the per share data for each of the applicable periods ended December 31, 1996
is contained in the Fund's Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. Refer to the
cover of this Prospectus for information on obtaining a free copy of the SAI.

<TABLE>
<CAPTION>
JANUARY
24,(1)
YEAR ENDED DECEMBER 31, TO
-------------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $ 12.43 $ 10.58 $ 11.63 $ 10.79 $10.00
Income from operations
Net investment income.................... 0.68 0.65 0.60 0.57 0.53
Net gains on securities (realized and
unrealized)............................ (0.52) 1.80 (1.23) 0.44 0.26
-------- -------- -------- -------- ------------
Total from investment operations....... 0.16 2.45 (0.63) 1.01 0.79
Less distributions from(5)
Net investment income.................... (1.55) (0.60) (0.39) (0.17) --
Net realized gains....................... (0.18) -- (0.03) -- --
-------- -------- -------- -------- ------------
Total distributions.................... $ (1.73) $ (0.60) $ (0.42) $ (0.17) --
-------- -------- -------- -------- ------------
NET ASSET VALUE, END OF PERIOD............. $ 10.86 $ 12.43 $ 10.58 $ 11.63 $10.79
======= ======= ======= ======= ===========
TOTAL RETURN(2)............................ 1.46% $ 24.42% (5.64)% 9.48% 7.90%
NET ASSETS, END OF PERIOD (THOUSANDS)...... $ 26,009 $ 28,192 $ 24,522 $ 25,520 $9,017
RATIOS TO AVERAGE NET ASSETS
Expenses(4).............................. 0.62% 0.56% 0.71% 0.58% 0.38%(3)
Net income............................... 5.68% 5.80% 5.56% 5.04% 4.72%(3)
PORTFOLIO TURNOVER RATE.................... 501% 214% 16% 51% 25%
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares in the U.S. Government Securities Portfolio are only sold to The Travelers separate accounts in
connection with the issuance of variable annuity and variable life insurance contracts. Total return does not
reflect the deduction of any contract charges or fees assessed by The Travelers separate accounts. For the
periods less than one year, total returns are not annualized.
(3) Annualized.
(4) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with voluntary expense limitations. Without the expense reimbursement, the ratio of operating expenses to
average net assets would have been 0.77% and 0.72% for the year ended December 31, 1993 and the period ended
December 31, 1992, respectively. For the years ended December 31, 1996, 1995 and 1994, there were no expense
reimbursements by The Travelers in connection with the voluntary expense limitations.
(5) For the year ended December 31, 1996, distributions from realized gains include both net realized short-term
and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in
distributions from net investment income.
</TABLE>

SERIES-4
<PAGE> 85

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following information on per share data for the Social Awareness Stock
Portfolio for each of the four years in the period ended December 31, 1996 and
the period May 1, 1992 (date operations commenced) to December 31, 1992 has been
audited by Coopers & Lybrand L.L.P., Independent Accountants. Their report on
the per share data for each of the applicable periods ended December 31, 1996 is
contained in the Fund's Annual Report which should be read along with this
information and which is incorporated by reference into the SAI. Refer to the
cover of this Prospectus for information on obtaining a free copy of the SAI.

<TABLE>
<CAPTION>
MAY 1,(1)
YEAR ENDED DECEMBER 31, TO
--------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period............................. $ 14.32 $ 11.05 $11.64 $ 10.95 $10.00
Income from operations
Net investment income................ 0.31 0.12 0.16 0.17 0.16
Net gains on securities (realized and
unrealized)........................ 2.42 3.47 (0.45) 0.65 0.79
-------- ------- ------------ ------------ -------
Total from operations.............. 2.73 3.59 (0.29) 0.82 0.95
Less distributions from(6)
Net investment income................ (0.43) (0.14) (0.24) (0.13) --
Net realized gains................... (0.86) (0.18) (0.06) -- --
-------- ------- ------------ ------------ -------
Total distributions................ (1.29) (0.32) (0.30) (0.13) --
-------- ------- ------------ ------------ -------
Net asset value, end of period....... $ 15.76 $ 14.32 $11.05 $ 11.64 $10.95
======= ====== =========== ====== ==============
TOTAL RETURN(2)........................ 19.98% 33.37% (2.69)% 7.55% 9.50%
Net assets, end of period
(thousands)........................ $ 11,040 $ 7,055 $3,879 $ 3,361 $1,394
RATIOS TO AVERAGE NET ASSETS
Expenses(5)............................ 1.25% 1.25% 1.25% 1.05% 0.71%(3)
Net income............................. 0.43 0.99% 1.43% 1.50% 2.22%(3)
Portfolio turnover rate................ 26% 73% 137% %60 56%
Average Commission Rate Paid(4)........ $ 0.06 -- -- -- --
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares in the Social Awareness Stock Portfolio are only sold to The Travelers separate accounts in connection
with the issuance of variable annuity contracts. Total return does not reflect the deduction of any contract
charges or fees assessed by The Travelers separate accounts. For the periods less than one year, total
returns are not annualized.
(3) Annualized.
(4) The Average Commission Rate Paid is required for funds that have over 10% in equities for which commissions
are paid. This information is required for funds with fiscal year ends on or after September 30, 1996.
(5) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with voluntary expense limitations. Without the expense reimbursement, the ratio of operating expenses to
average net assets would have been 1.69%, 1.75%, 3.34%, 3.73% and 2.19% for the years ended December 31,
1996, 1995, 1994, 1993 and the period ended December 31, 1992, respectively.
(6) For the year ended December 31, 1996, distributions from realized gains include both net realized short-term
and long-term capital gains. Prior to 1996 net realized short-term capital gains were included in
distributions from net investment income.
</TABLE>

SERIES-5
<PAGE> 86

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following information on per share data for the Utilities Portfolio for the
years ended December 31, 1996 and 1995 and the period February 4, 1994 (date
operations commenced) to December 31, 1994 has been audited by Coopers & Lybrand
L.L.P., Independent Accountants. Their report on the per share data for the
applicable periods ended December 31, 1996 is contained in the Fund's Annual
Report which should be read along with this information and which is
incorporated by reference into the SAI.

<TABLE>
<CAPTION>
FEBRUARY
4,(1)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
---------------------- ------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......................... $ 12.85 $ 10.17 $10.00
Income from operations
Net investment income......................................... 0.47 0.48 0.35
Net realized and unrealized gain (loss)....................... 0.47 2.44 (0.18)
-------- -------- ------------
Total from operations....................................... 0.94 2.92 0.17
Less Distributions From(6)
Net investment income......................................... (0.84) (0.24) --
Net realized gains............................................ (0.73) -- --
-------- -------- ------------
Total distributions........................................... (1.57) (0.24) --
-------- -------- ------------
NET ASSET VALUE, END OF PERIOD.................................. $ 12.22 $ 12.85 $10.17
======= ======= ===========
TOTAL RETURN(2)................................................. 7.47% 29.29% 1.70%
NET ASSETS, END OF YEAR (000'S)................................. $ 18,214 $ 15,340 $5,757
RATIOS TO AVERAGE NET ASSETS
Expenses(3)................................................... 1.07% 1.25% 1.25%(5)
Net investment income......................................... 3.88% 4.29% 3.86%(5)
PORTFOLIO TURNOVER RATE......................................... 39% 25% 32%
AVERAGE COMMISSION RATE PAID(4)................................. $ 0.06 -- --
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares in the Utilities Portfolio are only sold to The Travelers separate accounts in connection with the
issuance of variable annuity and variable life insurance contracts. The total return does not reflect contract
charges or fees assessed by The Travelers separate accounts. For periods less than one year, total returns are
not annualized.
(3) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with the voluntary expense limitations. Without the expense reimbursement, the ratio of operating expenses to
average net assets would have been 1.27% and 3.49% annualized for the year ended December 31, 1995 and the
period ended December 31, 1994, respectively. For the fiscal year ended December 31, 1996, there were no
expense reimbursements by The Travelers in connection with the voluntary expense limitations.
(4) The Average Commission Rate Paid is required for funds that have over 10% in equities for which commissions
are paid. This information is required for funds with fiscal year ends on or after September 30, 1996; earlier
compliance is allowed.
(5) Annualized.
(6) For the year ended December 31, 1996, distributions from realized gains include both net short-term and
long-term capital gains. Prior to 1996 net realized short-term capital gains were included in distributions
from net investment income.
</TABLE>

SERIES-6
<PAGE> 87

FUND DESCRIPTION
- --------------------------------------------------------------------------------

The Travelers Series Trust (the "Series Trust") is registered with the SEC as an
open-end management investment company. The Series Trust is organized as a
business trust under the laws of the Commonwealth of Massachusetts. An Agreement
and Declaration of Trust dated October 11, 1991 (the "Declaration of Trust")
authorizes the shares of the Series Trust to be divided into two or more series
related to separate portfolios of investments, and further allows the Board of
Trustees to establish additional portfolios at any time.

The Series Trust is currently divided into fourteen series (the "Portfolios")
each with its own investment objective and policies, all of which are
diversified portfolios under the Investment Company Act of 1940, as amended
("1940 Act"). Three Portfolios, as described below, are contained in this
prospectus. The other portfolios are described in a separate prospectus.

U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The U.S. Government Securities Portfolio's investment objective is to seek the
highest credit quality, current income and total return. To achieve this
objective, the U.S. Government Securities Portfolio invests primarily in direct
obligations of the United States, obligations of its instrumentalities supported
by its full faith and credit, and obligations issued or guaranteed by federal
agencies which are independent corporations sponsored by the United States and
which are subject to its general supervision, but which are not supported by the
full faith and credit of the United States. The Portfolio may, from time to
time, purchase new-issue or government or agency securities on a "when-issued"
or "to-be-announced" basis.

When market conditions warrant, the U.S. Government Securities Portfolio may
adopt a defensive position by investing in money market instruments. Such
instruments, which must mature within one year of their purchase, consist of
U.S. Government securities; certificates of deposit, demand and time deposits
and bankers' acceptances of banks which are members of the Federal Deposit
Insurance Corporation and which have assets of at least $1 billion, including
U.S. branches of foreign banks and foreign branches of U.S. banks; prime
commercial paper, including master demand notes; and repurchase agreements
secured by U.S. Government securities. The investments of the U.S. Government
Securities Portfolio in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation and Prime-1 by Moody's Investors Service, Inc.
(For a description of these rating systems, see the Appendix to the SAI.)

Direct obligations of the United States include Treasury Bills which are issued
on a discount basis with a maturity of one year or less, Treasury Notes which
have maturities at issuance of between one and ten years, and Treasury Bonds
which have maturities at issuance of greater than ten years. Instrumentalities
of the United States whose debt obligations are backed by its full faith and
credit include: Government National Mortgage Association, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Maritime
Administration, District of Columbia Armory Board, Farm Credit System, Financial
Assistance Corporation, Federal Financing Bank and Washington Metropolitan Area
Transit Authority. Federal agencies include: Farm Credit System, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association and Student Loan Marketing Association.

The U.S. Government Securities Portfolio may write covered call options on
securities which it owns. Such an option on an underlying security would
obligate the Portfolio to sell, and give the purchaser of the option the right
to buy, that security at a stated exercise price at any time until a stated
expiration date of the option. The Portfolio may also purchase put and call
options for bona fide hedging purposes.

SERIES-7
<PAGE> 88

The U.S. Government Securities Portfolio may use exchange-traded futures
contracts as a hedge to protect against changes in interest rates.

A detailed discussion of certain types of investments and investment techniques
utilized by the U.S. Government Securities Portfolio is included in Exhibit A to
this Prospectus.

INVESTMENT RESTRICTIONS

The U.S. Government Securities Portfolio has adopted the following fundamental
investment restrictions which may not be changed without a vote of a majority of
the Portfolio's outstanding voting securities, as defined in the 1940 Act. These
restrictions and certain other fundamental investment restrictions are fully set
forth in the SAI. Unless otherwise noted, all references to the Portfolio's
assets are in terms of current market value. The U.S. Government Securities
Portfolio will not: (1) invest more than 5% of its assets in the securities of
any one issuer (exclusive of securities issued or guaranteed by the United
States government, its agencies or instrumentalities, for which there is no
limit); (2) borrow money, except to facilitate redemptions or borrow money for
temporary or emergency purposes and then only from banks and in amounts of up to
10% of its gross assets computed at cost; assets pledged to secure borrowings
shall be no more than the lesser of the amount borrowed or 10% of the
Portfolio's gross assets computed at cost; (3) invest more than 25% of its
assets in the securities of issuers in any single industry (exclusive of
securities of the United States, its agencies or instrumentalities, for which
there is no limit); and (4) make margin purchases or short sales of securities,
except for short-term credits which are necessary for the clearance of
transactions, and to place not more than 5% of its net asset value in total
margin deposits for positions in futures contracts.

RISK FACTORS

U.S. Government securities are considered among the safest of fixed-income
investments. As a result, however, their yields are generally lower than the
yields available from corporate debt securities. The value of the Portfolio's
securities will fluctuate based on market conditions and interest rates.
Interest rates depend on a number of factors, including government action in the
capital markets, government fiscal and monetary policy, needs of businesses for
capital goods for expansion, and investor expectations as to future inflation.
An increase in interest rates will generally reduce the value of debt
securities, and conversely a decline in interest rates will generally increase
the value of debt securities.

SOCIAL AWARENESS STOCK PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Social Awareness Stock Portfolio (the "Social
Awareness Portfolio") is long-term capital appreciation and retention of net
investment income. The Portfolio seeks to fulfill this objective by selecting
investments, primarily common stocks, that meet certain social criteria, based
on analysis of data supplied by various research services. This principal
objective does not preclude the realization of short-term gains when conditions
suggest the long-term goal is accomplished by such short-term transactions.

The assets of the Social Awareness Portfolio generally will be invested in a
portfolio of equity securities, primarily common stocks, diversified across
industries and companies. However, when it is determined that investments of
other types may be advantageous for defensive purposes or for temporary
investment of cash flows, investments may be made in bonds, notes or other
evidence of indebtedness, issued publicly or placed privately, deemed to be of
suitable credit quality, including obligations of the United States government.

The Social Awareness Portfolio utilizes certain social criteria to define
acceptable investment vehicles for the Portfolio. Companies will not meet the
social criteria established for the Portfolio if a

SERIES-8
<PAGE> 89

significant portion of their revenues, as determined by SBMFM, are derived from:
(a) the production of tobacco, tobacco products, alcohol, or military defense
systems; or (b) the provision of military defense related services, or (c)
gambling services. These investment restrictions are not fundamental and may be
changed without shareholder approval.

Based upon SBMFM's analysis of information supplied by research services, the
Social Awareness Portfolio will not invest in the securities of a company if
SBMFM determines that the company fails to meet the social criteria outlined
above. SBMFM will review the available universe of common stocks on a quarterly
basis, and will determine which securities are acceptable investments for assets
of the Portfolio. From those deemed acceptable, SBMFM will select securities for
the Portfolio, seeking companies which appear attractive based upon quantitative
and/or qualitative analysis.

If a company fails a social criteria restriction after the Social Awareness
Portfolio has purchased its common stock, or should the Portfolio inadvertently
acquire a security which is not an acceptable investment, SBMFM will eliminate
the securities of such company from the Social Awareness Portfolio's portfolio
in an orderly manner within a reasonable period of time.

The Social Awareness Portfolio may use exchange-traded financial futures
contracts as a hedge to protect against changes in stock prices or interest
rates. The use of stock futures contracts by the Portfolio is intended primarily
to limit transaction and borrowing costs. The Social Awareness Portfolio may
also purchase and sell interest rate futures to hedge against changes in
interest rates that might otherwise have an adverse effect on the value of the
Portfolio's securities. The Portfolio may also write covered call options on
securities which it owns, and may purchase index or individual equity call or
put options. When market conditions warrant, the Social Awareness Portfolio may
adopt a defensive position to preserve shareholders' capital by investing in
money market instruments. Such instruments, which must mature within one year of
their purchase, consist of U.S. government securities; instruments of banks
which are members of the Federal Deposit Insurance Corporation and have assets
of at least $1 billion, such as certificates of deposit, demand and time
deposits and bankers' acceptances; prime commercial paper, including master
demand notes; and repurchase agreements secured by U.S. government securities.

INVESTMENT RESTRICTIONS

In addition to the social criteria listed above, the Social Awareness Portfolio
has adopted the following fundamental investment restrictions which may not be
changed without a vote of a majority of the Portfolio's outstanding voting
securities, as defined in the 1940 Act. These restrictions and certain other
fundamental investment restrictions are fully set forth in the SAI. Unless
otherwise noted, all references to the Portfolio's assets are in terms of
current market value. The Social Awareness Portfolio will not (1) invest more
than 5% of its assets in the securities of any one issuer, except obligations of
the U.S. government and its instrumentalities; (2) borrow money, except for
extraordinary or emergency purposes, including meeting redemptions or settling
securities transactions and then only from banks and in amounts of up to 10% of
its total assets; the Portfolio will not purchase securities while borrowings
exceed 5% of its total assets, except to honor prior commitments; (3) purchase
interests in real estate, except as may be represented by securities for which
there is an established market; (4) make loans, except through the acquisition
of a portion of a privately placed issue of bonds, debentures or other evidences
of indebtedness of a type customarily purchased by institutional investors; (5)
acquire more than 10% of the voting securities of any one issuer; (6) make
purchases on margin, except for short-term credits which are necessary for the
clearance of transactions, and for the placement of not more than 5% of its net
asset value in total margin deposits for positions in futures contracts; and (7)
invest more than 5% of its assets in restricted securities.

SERIES-9
<PAGE> 90

RISK FACTORS

UTILITIES PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The primary investment objective of the Utilities Portfolio (the "Portfolio") is
to provide current income. Long-term capital appreciation is a secondary
objective. The Portfolio's investment objectives may be changed only with the
approval of a majority of the Portfolio's outstanding shares. There can be no
assurance that the Portfolio will achieve its investment objectives.

The Portfolio seeks to achieve its objectives by investing in equity and debt
securities of companies in the utility industries. For purposes of this
Prospectus, the utility industries are deemed to be comprised of companies
principally engaged in the manufacture, production, generation, transmission and
sale of electric and gas energy and companies principally engaged in the
communications field, including entities such as telephone, telegraph,
satellite, microwave and other companies regulated by governmental agencies as
utilities that provide communication facilities for the public benefit, but not
including those in public broadcasting. For purposes of this prospectus,
"principally engaged" means that at least 50% of a company's assets, gross
income or net profits results from utility operations or the company is
regulated as a utility by a government agency or authority. The Portfolio will
invest primarily in utility equity and debt securities that have a high expected
rate of return, as determined by the investment adviser. Under normal market
conditions, the Portfolio will invest at least 65% of its assets in such
securities. The Portfolio may invest up to 35% of its assets in equity and debt
securities of non-utility companies believed to afford a reasonable opportunity
for achieving the Portfolio's investment objectives. When the investment adviser
believes that market conditions warrant, the Portfolio may adopt a temporary
defensive posture and may invest, without limit, in debt securities (whether or
not they are utility securities) such as rated or unrated bonds, debentures and
commercial paper, U.S. government securities and money market instruments. The
Portfolio may invest up to 10% of its assets in securities rated BB or B by
Standard & Poor's Corporation ("S&P") or Ba or B by Moody's Investors Service,
Inc. ("Moody's") whenever the investment adviser believes that the incremental
yield on such securities is advantageous to the Portfolio in comparison to the
additional risk involved (such lower-rated securities are commonly known as
"junk bonds"). The yields on lower-rated fixed-income securities generally are
higher than the yields available on higher-rated securities. However,
investments in lower-rated securities may be subject to greater market
fluctuations and greater risks of loss of income or principal (including the
possibility of default by, or bankruptcy of, the issuers of such securities)
than higher-rated securities. Lower-rated securities also may have speculative
characteristics. In addition, the Portfolio may enter into repurchase
agreements. (For a description of the rating systems identified above, see the
Appendix to the SAI.)

The Utilities Portfolio has the ability to engage in a number of specialized
investment strategies and techniques designed to enable the Portfolio to achieve
its investment objectives. Included among these strategies are lending its
portfolio securities, selling securities "short against the box," writing
covered call and secured put options, as well as purchasing options on
securities, purchasing and selling interest rate futures contracts, options on
futures contracts, stock index put and call options and stock index futures
contracts, each of which are discussed in Exhibit A to this Prospectus.

SERIES-10
<PAGE> 91

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental and may not be
changed without a vote of a majority of the outstanding voting securities of the
Portfolio, as defined in the 1940 Act. The Utilities Portfolio will not:

1. purchase the securities of any issuer (other than U.S. government
securities) if as a result more than 5% of the value of the Portfolio's
total assets would be invested in the securities of the issuer, except
that up to 25% of the value of the Portfolio's total assets may be
invested without regard to this 5% limitation;

2. purchase more than 10% of the voting securities of any one issuer,
provided that this limitation shall not apply to investments in U.S.
government securities;

3. purchase securities on margin, except that the Portfolio may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase of securities on
margin by the Portfolio;

4. make short sales of securities or maintain a short position, except to
the extent of 5% of the Portfolio's net assets and except that the
Portfolio may engage in such activities without limit if, at all times
when a short position is open, the Portfolio owns an equal amount of the
securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issuer
as, and at least equal in amount to, the securities sold short;

5. borrow money, including reverse repurchase agreements, except that the
Portfolio may borrow from banks for temporary or emergency (not
leveraging) purposes including the meeting of redemption requests that
might otherwise require the untimely disposition of securities, in an
amount not exceeding 20% of the value of the Portfolio's total assets
(including the amount borrowed) valued at market less liabilities (not
including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the Portfolio's total
assets, the Portfolio will not make any additional investments;

6. pledge, hypothecate, mortgage or otherwise encumber more than 10% of the
value of the Portfolio's total assets as security for any indebtedness.
For purposes of this restriction (a) the deposit of assets in escrow in
connection with the writing of covered put or call options and the
purchase of securities on a when-issued or delayed-delivery basis and
(b) collateral arrangements with respect to (i) the purchase and sale of
stock options, options on foreign currencies and options on stock
indexes and (ii) initial or variation margin for futures contracts will
not be deemed to be pledges of the Portfolio's assets;

7. invest in commodities, except that the Portfolio may purchase or write
futures contracts and options on futures contracts as described in this
Prospectus;

8. make loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities and the entry into repurchase
agreements; and

9. concentrate in any industry, except that the Portfolio will concentrate
in excess of 25% of its assets in the securities of companies within the
utility industries.

In addition, the Portfolio will not purchase restricted securities, illiquid
securities (such as repurchase agreements with maturities in excess of seven
days) or other securities that are not readily marketable if more than 10% of
the total assets of the Portfolio would be invested in such securities.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Investment in the Utilities Portfolio may involve above-average risk of loss
because of, among other things, the Portfolio's use of strategies and techniques
that may be considered to be speculative. The

SERIES-11
<PAGE> 92

strategy followed by the Portfolio and certain of the strategies and techniques
used by the Portfolio depend on forecasts made by Greenwich Street Advisors that
may or may not prove to be correct.

Because the Portfolio concentrates its investments in one sector, its portfolio
may be subject to greater risk and market fluctuations than a portfolio of
securities representing a broader range of investment alternatives. The
Portfolio is particularly subject to risks that are inherent to the utility
industries that make up this sector, including difficulty in obtaining an
adequate return on invested capital, difficulty in financing large construction
programs during an inflationary period, restriction on operations and increased
cost and delays attributable to environmental consideration and regulation,
difficulty in raising capital in adequate amounts on reasonable terms in periods
of high inflation and unsettled capital markets, increased costs and reduced
availability of certain types of fuel, occasional reduced availability and high
costs of natural gas for resale, the effects of energy conservation, the effects
of a national energy policy and lengthy delays and greatly increased costs and
other problems associated with the design, construction, licensing, regulation
and operation of nuclear facilities for electric generation, including, among
other considerations, the problems associated with the use of radioactive
materials and disposal of radioactive wastes. There are substantial differences
between the regulatory practices and policies of various jurisdictions, and any
given regulatory agency may make major shifts in policy from time to time. There
is no assurance that regulatory authorities will grant rate increases in the
future or that such increases will be adequate to permit the payment of
dividends on common stocks. Additionally, existing and possible future
regulatory legislation may make it even more difficult for these utilities to
obtain adequate relief. Certain of the issuers of securities held by the
Portfolio may own or operate nuclear generating facilities. Governmental
authorities may from time to time review existing policies, and impose
additional requirements governing the licensing, construction and operation of
nuclear power plants.

Each of the risks referred to above could adversely affect the ability and
inclination of public utilities to declare or pay dividends and the ability of
holders of common stock to realize any value from the assets of the issuer upon
liquidation or bankruptcy. All of the utilities which are issuers of the
securities held by the Portfolio have been experiencing one or more of these
problems in varying degrees. Moreover, price disparities within selected utility
groups and discrepancies in relation to averages and indices have occurred
frequently for reasons not directly related to the general movements or price
trends of utility common stocks. Causes of these discrepancies include changes
in the overall demand for and supply of various securities (including the
potentially depressing effect of new stock offerings), and changes in investment
objectives, market expectations or cash requirements of other purchasers and
sellers of securities.

BOARD OF TRUSTEES
- --------------------------------------------------------------------------------

Under Massachusetts law, the Series Trust's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the
Series Trust. Subject to the provisions of the Declaration of Trust, the
business and affairs of the Series Trust shall be managed by the Trustees or
other parties so designated by the Trustees. Information relating to the Board
of Trustees, including its members and their compensation, is contained in the
SAI.

Additionally, the Board of Trustees annually selects an independent public
accountant, reviews the terms of the management and investment advisory
agreements, recommends any changes in the fundamental investment policies, and
takes any other actions necessary in connection with the operation and
management of the Series Trust.

SERIES-12
<PAGE> 93

INVESTMENT ADVISERS
- --------------------------------------------------------------------------------

As described above, the Board of Trustees monitors the activities of those
entities which provide investment advisory services to the Portfolios. Travelers
Asset Management International Corporation (TAMIC) and Smith Barney Mutual Funds
Management Inc. (SBMFM) (collectively, the "investment advisers") provide
investment advice and, in general, supervise the management and investment
programs of the Portfolios of the Series Trust.

TAMIC

PORTFOLIO MANAGER -- U.S. GOVERNMENT SECURITIES PORTFOLIO

The U.S. Government Securities Portfolio has been managed by Joseph M. Mullally
since mid-1995. Mr. Mullally is a 1989 graduate of the Massachusetts Institute
of Technology with a degree in Economics and minor in Mathematics. While at MIT
he worked three years as a research assistant at the Sloan School and the
Harvard Business School. Areas of research included interest rate expectations,
foreign exchange rate expectations and causality among price volatility, volume
and investor expectations. Prior to joining The Travelers, he spend six years at
CS First Boston. He was the Corporate Fixed Income Strategist, Chief Fixed
Income Strategist and Global Product Manager for Government Securities. He has
worked extensively with mortgages, corporates, treasuries, and other investment
grade securities. He also worked in the Portfolio Strategy Group for several
years, focusing on constructing portfolios to outperform benchmark indices.

ADVISORY FEES -- U.S. GOVERNMENT SECURITIES PORTFOLIO

Under its Advisory Agreement with the U.S. Government Securities Portfolio,
TAMIC is paid an amount equivalent to 0.3233%, on an annual basis, of the
average daily net assets of the Portfolio. The fee is computed daily and paid
weekly.

SBMFM

SBMFM is located at 388 Greenwich Street, New York, New York and has been in the
investment counseling business since 1968. SBMFM renders investment advice to a
wide variety of individual, institutional and investment company clients with
aggregate assets under management in excess of $54 billion. SBMFM is a wholly
owned subsidiary of Travelers Group Inc.

SBMFM manages the day-to-day operations of the Social Awareness Stock Portfolio
and the Utilities Portfolio pursuant to Investment Advisory Agreements entered
into by the Series Trust on behalf of the Portfolios. Under the Advisory
Agreements, SBMFM is responsible for furnishing or causing to be furnished to
the Portfolios advice and assistance with respect to the acquisition, holding or
disposal of securities and recommendations with respect to other aspects and
affairs of the Portfolios.

PORTFOLIO MANAGER -- SOCIAL AWARENESS STOCK PORTFOLIO

The Social Awareness Portfolio is managed by a team of investment professionals
from Greenwich Street Advisors. Robert J. Brady is a Managing Director and
portfolio manager for Greenwich Street Advisors and also a Chartered Financial
Analyst. Mr. Brady is also a Chartered Financial Analyst.

SERIES-13
<PAGE> 94

Mr. Brady has been with Smith Barney and its predecessor firms since 1976. Gene
H. Martino is Vice President and portfolio manager for Greenwich Street
Advisors. He has been involved with investment management for more than fifteen
years. Mr. Martino has been with Smith Barney and its predecessor firms since
1986. Previous positions also include portfolio management at Chase Manhattan
Bank and the Bankers Trust Company.

ADVISORY FEES -- SOCIAL AWARENESS STOCK PORTFOLIO

Under its Advisory Agreement with the Social Awareness Stock Portfolio, SBMFM is
paid an amount equivalent on an annual basis to the advisory fee schedule set
forth in the table below. The fee is computed daily and paid weekly.

<TABLE>
<CAPTION>
ANNUAL AGGREGATE NET ASSET
MANAGEMENT FEE VALUE OF THE FUND
--------------- --------------------
<S> <C> <C> <C>
0.65% of the first $ 50,000,000, plus
0.55% of the next $ 50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of amounts over $200,000,000
</TABLE>

PORTFOLIO MANAGER -- UTILITIES PORTFOLIO

The Utilities Portfolio is managed by a team of investment professionals from
Greenwich Street Advisors, a division of SBMFM. Jack S. Levande is a Managing
Director and Portfolio Manager for Greenwich Street Advisors. Prior to joining
Greenwich Street Advisors in 1987, Mr. Levande worked at E.F. Hutton as Product
Manager for convertible securities. In addition to managing the Utilities
Portfolio, Mr. Levande also manages the SB Convertible Bond Fund and serves as a
member of the Greenwich Street Advisors Investment Policy Committee. George
Mueller is a Senior Vice President of Taxable Fixed-Income Management at
Greenwich Street Advisors, specializing in corporate bond portfolios. Prior to
joining the firm in 1985, he was a Portfolio Manager for pension and charitable
foundation accounts at Chase Manhattan Bank. In addition to his responsibilities
associated with the Utilities Portfolio, Mr. Mueller is the Portfolio Manager
for the SB Investment Grade Bond Fund, and serves as a member of the Greenwich
Street Advisors Investment Policy Committee.

ADVISORY FEES -- UTILITIES PORTFOLIO

For the services provided under the Advisory Agreement with the Utilities
Portfolio, the Portfolio pays SBMFM a management fee equivalent on an annual
basis to 0.65% of its average daily net assets. The fee is calculated daily and
paid monthly.

FUND ADMINISTRATION
- --------------------------------------------------------------------------------

The Series Trust, on behalf of each portfolio entered into an Administrative
Services Agreement, whereby Travelers Insurance will be responsible for the
pricing and bookkeeping services for the Portfolio at an annualized rate of .06%
of the daily net assets of the Portfolio. The Travelers Insurance Company at its
expense may appoint a sub-administrator to perform these services. The sub-
administrator may be affiliated with The Travelers Insurance Company.

SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------

Under policies established by the Board of Trustees, the investment advisers
select broker-dealers to execute transactions subject to the receipt of best
execution. When selecting broker-dealers to execute portfolio transactions for
the Portfolios, the investment advisers may consider the number of

SERIES-14
<PAGE> 95

Portfolio shares sold by such broker-dealers. In addition, broker-dealers may
from time to time be affiliated with the Series Trust, the investment advisers
or their affiliates.

The Portfolios may pay higher commissions to broker-dealers that provide
research services. The investment advisers may use these services in advising
the Portfolios, as well as in advising their other clients.

FUND EXPENSES
- --------------------------------------------------------------------------------

In addition to the investment advisory fees discussed above, other expenses of
the Series Trust and the Portfolios include the charges and expenses of the
transfer agent, the custodian, the independent auditors, and any outside legal
counsel employed by either the Series Trust or the Board of Trustees; the
compensation for the unaffiliated members of the Board of Trustees; the costs of
printing and mailing the Series Trust's prospectus, proxy solicitation
materials, and annual, semiannual and periodic reports; brokerage commissions,
interest charges and taxes; and any registration, filing and other fees payable
to government agencies in connection with the registration of the Series Trust
and its shares under federal and state securities laws. Additional high
portfolio turnover may involve greater brokerage commissions and other
transaction costs, which will be borne directly by the Portfolios, as well as
additional gains and/or losses to shareholders.

Pursuant to Management Agreements dated May 1, 1993 between the Series Trust and
The Travelers Insurance Company and between the Series Trust and The Travelers
Life and Annuity Company, each Company agreed to reimburse the Series Trust for
the amount by which each Portfolio's aggregate annual expenses, including
investment advisory fees but excluding brokerage commissions, interest charges
and taxes, exceed 1.25% of each Portfolio's average net assets for any fiscal
year.

For the fiscal year ended December 31, 1996, the U.S. Government Securities
Portfolio, the Social Awareness Stock Portfolio and the Utilities Portfolio paid
.62%, 1.25% and 1.07%, respectively, of their average net assets in expenses.
For the Social Awareness Stock Portfolio, these expenses would have been 1.69%
of the Portfolios' average net assets if the Company had not paid for any of
their expenses. For the U.S. Government Securities Portfolio and the Utilities
Portfolio, there were no expense reimbursements for the fiscal year ended
December 31, 1996.

TRANSFER AGENT
- --------------------------------------------------------------------------------

The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183,
serves as the Series Trust's transfer agent and dividend disbursing agent.

SHARES OF THE SERIES TRUST
- --------------------------------------------------------------------------------

The Series Trust currently issues one class of shares divided into multiple
series. Under the Declaration of Trust, the Board of Trustees is authorized to
create new series of shares without the necessity of a vote of shareholders of
the Series Trust. All shares of each series of the Series Trust have equal
voting, dividend and liquidation rights. When issued and paid for, the shares
will be fully paid and nonassessable by the Series Trust and will have no
preference, conversion, exchange or preemptive rights.

Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of each series are entitled to vote
separately to approve investment advisory agreements or changes in fundamental
investment restrictions, but shares of all series vote together in the election
of Trustees and the selection of accountants. Shares are redeemable,
transferable and freely assignable as collateral. There are no sinking fund
provisions. (See the accompanying separate

SERIES-15
<PAGE> 96

account prospectus for a discussion of voting rights applicable to purchasers of
variable annuity and variable life insurance contracts.)

Under Massachusetts law, it is possible that a shareholder of any series may be
held personally liable for a Portfolio's obligations. However, the Series
Trust's Declaration of Trust provides that shareholders shall not be subject to
any personal liability for the Series Trust's obligations and provides
indemnification from Series Trust assets for any shareholder held personally
liable for the Series Trust's obligations. Disclaimers of such liability are
included in each agreement entered into by the Series Trust or its Portfolios.

Shares of the Series Trust are currently sold only to insurance company separate
accounts in connection with variable annuity and variable life insurance
contracts issued by the Company and The Travelers Life and Annuity Company.
Shares are not sold to the general public. Shares of the Series Trust are sold
on a continuing basis, without a sales charge, at the net asset value next
computed after payment is made by the insurance company to the Series Trust's
custodian. However, the separate accounts to which shares are sold may impose
sales and other charges, as described in the appropriate contract prospectus.

Although the Series Trust is not currently aware of any disadvantages to
contract owners of either variable annuity or variable life insurance contracts
because the Series Trust's shares are available with respect to both products,
an irreconcilable material conflict may conceivably arise between contract
owners of different separate accounts investing in the Series Trust due to
differences in tax treatment, management of the Trust's investments, or other
considerations. The Series Trust's Board of Trustees will monitor events in
order to identify any material conflicts between variable annuity contract
owners and variable life insurance policy owners, and will determine what
action, if any, should be taken in the event of such a conflict.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of a Portfolio share is computed as of the close of trading
on each day on which the New York Stock Exchange is open for trading, except on
days when changes in the value of the Portfolio's securities do not affect the
current net asset value of its shares. The net asset value per share is arrived
at by determining the value of the Portfolio's assets, subtracting its
liabilities, and dividing the result by the number of shares outstanding.

Portfolio shares are redeemed at the redemption value next determined after the
Portfolios receive a redemption request. The redemption value is the net asset
value adjusted for fractions of a cent and may be more or less than the
shareholder's cost depending upon changes in the value of the Portfolio's
securities between purchase and redemption.

The Portfolio computes the redemption value at the close of the New York Stock
Exchange ("Exchange") at the end of the day on which they have received all
proper documentation from the shareholder. Redemption proceeds are normally
wired or mailed either the same or the next business day, but in no event later
than seven days thereafter.

The Series Trust or the Portfolio may temporarily suspend the right to redeem
their shares when: (1) the Exchange is closed, other than customary weekend and
holiday closings; (2) trading on the Exchange is restricted; (3) an emergency
exists as determined by the SEC so that disposal of the Portfolio's investments
or determination of its net asset value is not reasonably practicable; or (4)
the SEC, for the protection of shareholders, so orders.

SERIES-16
<PAGE> 97

TAX STATUS
- --------------------------------------------------------------------------------

The Series Trust and its Portfolios have qualified and intend to qualify in the
future as a regulated investment company under Subchapter M of the Internal
Revenue Code, as amended. A Portfolio qualifies if, among other things, it
distributes to its shareholders at least 90% of its investment company taxable
income during each fiscal year.

DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

Capital gains and dividends are distributed in cash or reinvested in additional
shares of a Portfolio without a sales charge. Although purchasers of variable
contracts are not currently subject to federal income taxes on distributions
made by the Portfolios, they may be subject to state and local taxes and should
review the accompanying contract prospectus for a discussion of the tax
treatment applicable to purchasers of variable annuity and variable life
insurance contracts.

LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------

There are no pending material legal proceedings affecting the Series Trust or
the Portfolios.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Except as otherwise stated in this Prospectus or as required by law, the Series
Trust reserves the right to change the terms of the offer stated in this
Prospectus without shareholder approval, including the right to impose or change
fees for services provided.

SERIES-17
<PAGE> 98

EXHIBIT A
- --------------------------------------------------------------------------------

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE PORTFOLIOS

The following types of investments and investment techniques are available to
each of the Portfolios unless otherwise specifically indicated. Please refer to
the investment objective and policies of each Portfolio for a list of available
investments.

VARIABLE AMOUNT MASTER DEMAND NOTES

Variable amount master demand notes are unsecured obligations that permit the
investment of fluctuating amounts by a Portfolio at varying rates of interest
pursuant to direct arrangements between the Portfolio as lender and the issuer
as borrower. Master demand notes permit daily fluctuations in the interest rate
and daily changes in the amounts borrowed. A Portfolio has the right to increase
the amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes are direct
lending arrangements between the lender and the borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable and thus repayable by the
borrower at face value plus accrued interest at any time. Accordingly, a
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with master demand note
arrangements, the investment advisers consider earning power, cash flow and
other liquidity ratios of the issuer. These notes, as such, are not typically
rated by credit rating agencies. Unless they are so rated, the Portfolios will
invest in them only if, at the time of an investment, the issuer meets the
criteria set forth for all other commercial paper. Pursuant to procedures
established by the investment advisers, such notes are treated as instruments
maturing in one day and valued at their par value. The investment advisers
intend to continuously monitor factors related to the ability of the borrower to
pay principal and interest on demand.

REPURCHASE AGREEMENTS

Interim cash balances may be invested from time to time in repurchase agreements
with approved counterparties (i.e., national banks or reporting broker-dealers
meeting the investment advisor's credit quality standards as presenting minimal
risk of default). All repurchase transactions must be collateralized by U.S.
Government securities with market value no less than 102% of the amount of the
transaction, including accrued interest. Repurchase transactions generally
mature the next business day but, in the event of a transaction of longer
maturity, collateral will be marked to market daily and, when required,
additional cash or qualifying collateral will be required from the counterparty.

In executing a repurchase agreement, a Portfolio purchases eligible securities
subject to the seller's simultaneous agreement to repurchase them on a mutually
agreed upon date and at a mutually agreed upon price. The purchase and resale
prices are negotiated with the counterparty on the basis of current short-term
interest rates, which may be more or less than the rate on the securities
collateralizing the transaction. Physical delivery or, in the case of
"book-entry" securities, segregation in the counterparty's account at the
Federal Reserve for the benefit of the Portfolio is required to establish a
perfected claim to the collateral for the term of the agreement in the event the
counterparty fails to fulfill its obligation.

SERIES-18
<PAGE> 99

WHEN-ISSUED SECURITIES

The U.S. Government Securities Portfolio may, from time to time, purchase
new-issue Government or Agency securities on a "when-issued" or
"to-be-announced" ("TBA") basis ("when-issued securities"). The prices of such
securities will be fixed at the time the commitment to purchase is made, and may
be expressed in either dollar price or yield maintenance terms. Delivery and
payment may be at a future date beyond customary settlement time. It is the
customary practice of the Portfolio to make when-issued or TBA purchases for
settlement no more than 90 days beyond the commitment date.

The commitment to purchase a when-issued security may be viewed as a senior
security, and will be marked to market and reflected in the Portfolio's net
asset value daily from the commitment date. While it is the investment adviser's
intention to take physical delivery of these securities, offsetting transactions
may be made prior to settlement, if it is advantageous to do so. The Portfolio
does not make payment or begin to accrue interest on these securities until
settlement date. In order to invest its assets pending settlement, the Portfolio
will normally invest in short-term money market instruments and other securities
maturing no later than the scheduled settlement date.

The Portfolio does not intend to purchase when-issued securities for speculative
or "leverage" purposes. Consistent with Section 18 of the 1940 Act and the
General Policy Statement of the SEC thereunder, when the Portfolio commits to
purchase a when-issued security, it will identify and place in a segregated
account high-grade money market instruments and other liquid securities equal in
value to the purchase cost of the when-issued securities.

The investment adviser believes that purchasing securities in this manner will
be advantageous to the Portfolio. However, this practice does entail certain
additional risks, namely the default of the counterparty on its obligations to
deliver the security as scheduled. In this event, the Portfolio would experience
a gain or loss equal to the appreciation or depreciation in value from the
commitment date. The investment adviser employs rigorous credit quality
procedures in determining the counterparties with which it will deal in
when-issued securities, and in some circumstances, will require the counterparty
to post cash or some other form of security as margin to protect the value of
its delivery obligation pending settlement.

CERTIFICATES OF DEPOSIT

Certificates of deposit will be limited to U.S. dollar denominated certificates
of United States banks which have at least $1 billion in deposits as of the date
of their most recently published financial statements (including foreign
branches of U.S. banks, U.S. branches of foreign banks which are members of the
Federal Reserve System or the Federal Deposit Insurance Corporation, and savings
and loan associations which are insured by the FDIC).

The Portfolios will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Portfolios do not
currently intend to purchase such foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by foreign banks.

BANKERS' ACCEPTANCES

SERIES-19
<PAGE> 100

merchandise. The draft is then "accepted" by the bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Portfolios must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.

FUTURES CONTRACTS

The Portfolios may use exchange-traded financial futures contracts as a hedge to
protect against changes in interest rates or stock prices. Financial futures
contracts consist of stock index futures contracts and futures contracts on debt
securities ("interest rate futures"). An interest rate futures contract is a
contract to buy or sell specified debt securities at a future time for a fixed
price. A stock index futures contract is a contractual obligation to buy or sell
a specified index of stocks at a future date for a fixed price.

Hedging by use of interest rate futures seeks to establish, with more certainty
than would otherwise be possible, the effective rate of return on portfolio
securities. When hedging is successful, any depreciation in the value of
portfolio securities will substantially be offset by appreciation in the value
of the futures position. Conversely, any appreciation in the value of the
portfolio securities will substantially be offset by depreciation in the value
of the futures position. At no time will the Portfolios' transactions in such
financial futures be employed for speculative purposes.

When a futures contract is purchased, the Portfolios will set aside liquid
securities equal to the total market value of the futures contract, less the
amount of the initial margin. The Portfolios will not purchase or sell futures
contracts for which the aggregate initial margin exceeds five percent (5%) of
the fair market value of their respective assets, after taking into account
unrealized profits and unrealized losses on any such contracts they have entered
into.

Positions taken in the futures market are not normally held to maturity, but
instead are liquidated through offsetting transactions which may result in a
profit or a loss. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the debt security and the same
delivery date. If the offsetting purchase price is less than the original sale
price, the Portfolio realizes a gain; if it is more, the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Portfolio realizes a gain; if less, a loss. While futures
positions taken by the Portfolios will usually be liquidated in this manner, the
Portfolios may instead make or take delivery of the underlying securities
whenever it appears economically advantageous for them to do so. In determining
gain or loss, transaction costs must be taken into account. There can be no
assurance that the Portfolios will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time.

SERIES-20
<PAGE> 101

fluctuations in the price of any futures contracts that they use for hedging
purposes will be substantially related to fluctuations in the price of the
securities which they hold or which they expect to purchase, or for other risk
reduction strategies, though there can be no assurance the expected result will
always be achieved.

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

While certain futures contracts may be purchased and sold to reduce certain
risks, these transactions may entail other risks. Thus, while the Portfolios may
benefit from the use of such futures, changes in interest rates or stock price
movements may result in a poorer overall performance for the Portfolios than if
they had not entered into such futures contracts. Moreover, in the event of an
imperfect correlation between the futures position and the portfolio position
which is intended to be protected, the desired protection may not be obtained
and the Portfolios may be exposed to risk of loss. The investment advisers will
attempt to reduce this risk by engaging in futures transactions, to the extent
possible, where, in their judgment, there is a significant correlation between
changes in the prices of the futures contracts and the prices of any portfolio
securities sought to be hedged.

In addition to the possibility that there may be a less than perfect correlation
between movements in the futures contracts and securities in the portfolio being
hedged, the prices of futures contracts may not correlate perfectly with
movements in the underlying security due to certain market distortions. First,
rather than meeting variation margin deposit requirements should a futures
contract value move adversely, investors may close future contracts through
offsetting transactions which could distort the normal relationship between the
index and futures markets. Second, since margin requirements in the futures
market are less onerous than in the securities market, the futures market may
attract more speculators than the securities market. Increased participation by
speculators may cause temporary price distortions. Due to the possibility of
such price distortion, and also because of the imperfect correlation discussed
above, even a correct forecast of general market trends by the investment
advisers may not result in a successful hedging transaction in the futures
market over a short time period.

Successful use of futures contracts for hedging purposes is also subject to the
investment advisers' ability to predict correctly movements in the direction of
the market. However, the investment advisers believe that over time the value of
the investments of the Portfolios will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged.

WRITING COVERED CALL OPTIONS

The Portfolios may write (i.e., sell) covered call options. By writing a call
option, a Portfolio becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price.

The Portfolios may only write "covered" options. This means that as long as a
Portfolio is obligated as the writer of a call option, it will own the
underlying securities subject to the option or, in the case of call options on
U.S. Treasury bills, a Portfolio might own substantially similar U.S. Treasury
bills.

The principal reason for writing call options is to obtain, through a receipt of
premiums, a greater current return than would be realized on the underlying
securities alone. The Portfolios receive a premium from writing a call option
which they retain whether or not the option is exercised. By writing a call
option, a Portfolio might lose the potential for gain on the underlying security
while the option is open.

SERIES-21
<PAGE> 102

Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair a Portfolio's ability
to use such options to achieve its investment objectives.

BUYING PUT AND CALL OPTIONS

The Portfolios may purchase put options on securities held, or on futures
contracts whose price volatility is expected to closely match that of securities
held, as a defensive measure to preserve shareholders' capital when market
conditions warrant. The Portfolios may purchase call options on specific
securities, or on futures contracts whose price volatility is expected to
closely match that of securities eligible for purchase by the Portfolios, in
anticipation of or as a substitute for the purchase of the securities
themselves. These options may be listed on a national exchange or executed
"over-the-counter" with a broker-dealer as the counterparty. While the
investment advisers anticipate that the majority of option purchases and sales
will be executed on a national exchange, put or call options on specific
securities or for non-standard terms are likely to be executed directly with a
broker-dealer when it is advantageous to do so. Option contracts will be
short-term in nature, generally less than nine months in duration.

The Portfolios may sell the put and call options prior to their expiration and
thereby realize a gain or loss. A call option will expire worthless if the price
of the related security is below the contract strike price at the time of
expiration; a put option will expire worthless if the price of the related
security is above the contract strike price at the time of expiration.

SHORT SALES AGAINST THE BOX

The Utilities Portfolio may make short sales (except to the extent of 5% of the
Portfolio's net assets) if at all times when a position is open, the Portfolio
owns the stock or owns preferred stock or debt securities convertible or
exchangeable without payment of further consideration for, securities of the
same issue as the securities sold short. Short sales of this kind are referred
to as "against the box." Short sales against the box are used to defer
recognition of capital gains or losses.

Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested.

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

The sale of securities that are not publicly traded is typically restricted
under the federal securities laws. As a result, the Utilities Portfolio may be
forced to sell these securities at less than fair market value or may not be
able to sell them when the investment adviser believes it is desirable to do so.
The Portfolio's investments in illiquid securities are subject to the risk that
should the Portfolio desire to sell any of these securities when a ready buyer
is not available at a price that the Portfolio deems representative of their
value, the value of the Portfolio's net assets could be adversely affected. The
Portfolio currently limits its investments in such securities to 10% of the
Portfolio's assets.

SERIES-22
<PAGE> 103

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

The Utilities Portfolio may purchase foreign securities or American Depository
Receipts ("ADRs"). ADRs are U.S. dollar-denominated receipts issued generally by
domestic banks representing the deposit with the bank of a security of a foreign
issuer. ADRs are publicly traded on exchanges or over the counter in the United
States.

Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. Additionally, dividends payable on foreign
securities may be subject to foreign taxes withheld prior to distribution.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by the Portfolio will not be registered with, nor will
the issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about the
securities and the foreign company or government issuing them than is available
about a domestic company of government entity. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.

LENDING PORTFOLIO SECURITIES

The U.S. Government Securities Portfolio and the Utilities Portfolio are
authorized to lend their portfolio securities to brokers, dealers and other
financial organizations. The Portfolios' loan of securities will be
collateralized by cash, letters of credit or U.S. government securities that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities. By lending its securities, the Portfolio seeks to
generate income by continuing to receive interest on the loaned securities, by
investing the cash collateral in shortterm instruments or by obtaining yield in
the form of interest paid by the borrower when U.S. government securities are
used as collateral.

The risk associated with lending portfolio securities, as with other extensions
of credit, consists of possible loss of rights in the collateral should the
borrower fail financially.

SERIES-23
<PAGE> 104

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO

TIC Ed. 5-97
L-11788-U Printed in U.S.A.
<PAGE> 105

THE TRAVELERS SERIES TRUST

TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO
LARGE CAP PORTFOLIO
EQUITY INCOME PORTFOLIO
MID CAP DISCIPLINED EQUITY FUND

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 1-860-277-0111
- --------------------------------------------------------------------------------

The Travelers Series Trust (the "Series Trust") is a diversified open-end
management investment company (mutual fund) consisting of multiple series of
shares (the "Portfolios"), each with its own investment objectives and policies.
Eight of the Portfolios of the Series Trust are described herein: Travelers
Quality Bond Portfolio, Lazard International Stock Portfolio, MFS Emerging
Growth Portfolio, Federated High Yield Portfolio, Federated Stock Portfolio,
Large Cap Portfolio, Equity Income Portfolio and Mid Cap Disciplined Equity
Fund.

Shares of the Portfolios are currently offered without a sales charge to certain
separate accounts of The Travelers Insurance Company and Travelers Life and
Annuity Company (collectively, "Company" or "Travelers"). The Portfolios serve
as investment vehicles for variable annuity and variable life insurance
contracts issued by Travelers. All Portfolios described herein may not be
available under all variable contracts. The term "shareholder" as used herein
refers to any insurance company separate account that may use shares of the
Portfolios as investment vehicles now or in the future.

This Prospectus concisely sets forth the information about the Series Trust and
the Portfolios that you should know before investing. Please read it and retain
it for future reference. Additional information about the Series Trust and the
Portfolios is contained in a Statement of Additional Information ("SAI") dated
May 1, 1997 which has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. A copy may be
obtained, without charge, by writing to The Travelers Insurance Company, Annuity
Services, One Tower Square, Hartford, Connecticut 06183-5030, or by calling
1-800-842-8573.

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR A VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT ISSUED BY TRAVELERS. BOTH THIS
PROSPECTUS AND THE CONTRACT PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 106

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS.................................................................. 3
FUND DESCRIPTION...................................................................... 4
FUNDAMENTAL INVESTMENT POLICIES....................................................... 4
TRAVELERS QUALITY BOND PORTFOLIO...................................................... 4
LAZARD INTERNATIONAL STOCK PORTFOLIO.................................................. 5
MFS EMERGING GROWTH PORTFOLIO......................................................... 7
FEDERATED HIGH YIELD PORTFOLIO........................................................ 12
FEDERATED STOCK PORTFOLIO............................................................. 15
LARGE CAP PORTFOLIO................................................................... 16
EQUITY INCOME PORTFOLIO............................................................... 19
MID CAP DISCIPLINED EQUITY FUND....................................................... 21
PORTFOLIO TURNOVER.................................................................... 23
BOARD OF TRUSTEES..................................................................... 24
INVESTMENT MANAGER.................................................................... 24
INVESTMENT SUBADVISERS................................................................ 25
FUND ADMINISTRATION................................................................... 28
SECURITIES TRANSACTIONS............................................................... 29
FUND EXPENSES......................................................................... 29
SHARES OF THE SERIES TRUST............................................................ 29
NET ASSET VALUE....................................................................... 30
TAX STATUS............................................................................ 31
DIVIDENDS AND DISTRIBUTIONS........................................................... 31
LEGAL PROCEEDINGS..................................................................... 31
ADDITIONAL INFORMATION................................................................ 31
EXHIBIT A............................................................................. 32
EXHIBIT B............................................................................. 48
</TABLE>

SERIES-2
<PAGE> 107

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following information on per share data for all of the portfolios except
Equity Income and Large Cap Portfolios for the period ended December 31, 1996
has been audited by KPMG Peat Marwick, L.L.P. Per share data for the Equity
Income and Large Cap Portfolios for the periods shown were audited by Price
Waterhouse LLP. It should be noted that because Mid Cap Disciplined Equity Fund
commenced operations subsequent to December 31, 1996 there is no per share data
available for this Fund. Each auditor's report (as applicable) on the per share
data for this period is contained in the Fund's Annual Report which should be
read along with this information and which is incorporated by reference into the
SAI:

<TABLE>
<CAPTION>
LAZARD MFS
EQUITY LARGE TRAVELERS INTERNATIONAL EMERGING FEDERATED FEDERATED
INCOME CAP QUALITY BOND STOCK GROWTH HIGH YIELD STOCK
PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD... $10.00 $10.00 $10.00 $ 10.00 $10.00 $10.00 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment
income(4)........... 0.08 0.04 0.19 0.02 0.03 0.31 0.06
Net realized and
unrealized gains.... 1.09 1.29 0.16 0.76 0.57 0.46 1.20
- ------------------------------------------------------------------------------------------------------------------------------
Total Income From
Operations............ 1.17 1.33 0.35 0.78 0.60 0.77 1.26
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment
income.............. (0.08) (0.04) (0.19) -- (0.03) (0.31) (0.06)
Net realized gains.... -- -- (0.06) -- (0.01) (0.04) (0.09)
Capital............... -- -- -- -- (0.01) -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions..... (0.08) (0.04) (0.25) -- (0.05) (0.35) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................ $11.09 $11.29 $10.10 $ 10.78 $10.55 $10.42 $11.10
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++.......... 11.69% 13.30% 3.56% 7.80% 6.00% 7.61% 12.61%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
PERIOD (000'S)........ $3,600 $3,411 $5,273 $ 4,322 $ 12,924 $5,381 $3,380
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS+:
Expenses(4)........... 0.95% 0.95% 0.75% 1.25% 0.95% 0.95% 0.95%
Net investment
income.............. 2.34% 0.98% 5.62 0.42 0.55 8.78 1.55
- ------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER
RATE+................. 14% 57% 35% 9% 49% 23% 11%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER
SHARE PAID ON EQUITY
TRANSACTIONS(3)....... $.0168 $.0214 -- $ 0.01 $ 0.03 -- $ 0.05
- ---------------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.
(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.
(3) A fund is required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary from
period to period and Fund to Fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
(4) The Travelers has waived all of its fees for the period ended December 31,
1996. In addition, The Travelers has agreed to reimburse the Equity Income
Portfolio, Large Cap Portfolio, Travelers Quality Bond Portfolio, Lazard
International Stock Portfolio, MFS Emerging Growth Portfolio, Federated High
Yield Portfolio, and Federated Stock Portfolio for $31,911, $32,035,
$10,901, $12,454, $16,407, $9,268, and $15,460, respectively, of the
Portfolios' expenses for the period ended December 31, 1996. If such fees
were not waived or reimbursed, the per share effect on net investment income
and the expense ratios would have been as follows:

<TABLE>
<CAPTION>
PER SHARE DECREASE EXPENSE RATIOS WITHOUT
PORTFOLIO IN NET INVESTMENT INCOME FEE WAIVERS AND REIMBURSEMENT+
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio................................. $ 0.12 4.64%
Large Cap Portfolio..................................... 0.15 4.66
Travelers Quality Bond Portfolio........................ 0.03 1.76
Lazard International Stock Portfolio.................... 0.07 2.87
MFS Emerging Growth Portfolio........................... 0.06 2.09
Federated High Yield Portfolio.......................... 0.04 2.19
Federated Stock Portfolio............................... 0.08 3.03
</TABLE>

++ Total return is not annualized, as it may not be representative of the
total return for the year. The total return would have been lower had
expenses not been reduced during the period shown.
+ Annualized.

SERIES-3
<PAGE> 108

FUND DESCRIPTION
- --------------------------------------------------------------------------------

The Series Trust is registered with the SEC as an open-end management investment
company. The Series Trust is organized as a business trust under the laws of the
Commonwealth of Massachusetts. An Agreement and Declaration of Trust dated
October 11, 1991 (the "Declaration of Trust") authorizes the shares of the
Series Trust to be divided into two or more series related to separate
portfolios of investments, and further allows the Board of Trustees to establish
additional portfolios at any time.

The Series Trust is currently divided into fourteen series (the "Portfolios"),
each with its own investment objective and policies, all of which are
diversified portfolios under the Investment Company Act of 1940, as amended
("1940 Act"). Eight Portfolios, as described below, are contained in this
prospectus. The other Portfolios are described in a separate prospectus. While
there is no assurance that a Portfolio will achieve its objective, each
Portfolio endeavors to do so by following its investment policies as described
below.

FUNDAMENTAL INVESTMENT POLICIES

Each of the Portfolios follows certain investment policies and adopts specific
investment techniques which cannot be modified without shareholder approval.
These "fundamental" investment policies are mandated by either the provisions of
the The Investment Company Act of 1940, as amended (the "1940 Act") or pursuant
to procedures that the Board of Trustees has decided to adopt. In contrast, each
Portfolio also follows certain nonfundamental investment policies. Unlike the
fundamental investment policies, nonfundamental policies may be changed, subject
to the approval of the Board, at the discretion of the Investment Adviser or
Subadviser for the affected Portfolio without shareholder approval. Except as
noted, all of the investment policies discussed herein are nonfundamental.

TRAVELERS QUALITY BOND PORTFOLIO
("TRAVELERS BOND PORTFOLIO")
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The basic investment objective of Travelers Bond Portfolio is to seek current
income, moderate capital volatility and total return.

INVESTMENT POLICIES

The assets of Travelers Bond Portfolio will be primarily invested in the
following securities:

- - money market obligations;
- - treasury bills;
- - repurchase agreements;
- - commercial paper;
- - bank certificates of deposit and bankers' acceptances; and
- - publicly traded debt securities, including bonds, notes, debentures, equipment
trust certificates and short-term instruments.

These securities may carry certain equity features such as conversion or
exchange rights or warrants for the acquisition of stocks of the same or
different issuer, or participation based on revenues, sales or profits. It is
currently anticipated that the market value-weighted average maturity of the
portfolio will not exceed five years. (In the case of mortgage-backed
securities, the estimated average life of cash flows will be used instead of
average maturity.) Investment in longer term obligations may be made if the
Investment Adviser concludes that the investment yields justify a longer term
commit-

SERIES-4
<PAGE> 109

ment. No more than 25% of the value of Travelers Bond Portfolio's assets will be
invested in any one industry.

The Portfolio will be actively managed and investments may be sold prior to
maturity if deemed advantageous in light of factors such as market conditions or
brokerage costs. While the investments of Travelers Bond Portfolio are generally
not listed securities, there are firms which make markets in the type of debt
instruments that Travelers Bond Portfolio holds. No problems of liquidity are
anticipated with regard to the investments of Travelers Bond Portfolio.

From time to time, Travelers Bond Portfolio may commit to purchase new-issue
government or agency securities on a "when-issued" basis (referred to throughout
as "when-issued securities"). Travelers Bond Fund may also purchase and sell
interest rate futures contracts to hedge against changes in interest rates that
might otherwise have an adverse effect upon the value of the Travelers Bond
Portfolios securities. See attached Exhibit A for a more complete description of
these investment techniques.

INVESTMENT RESTRICTIONS

The Travelers Bond Portfolio is subject to certain investment restrictions.
Specifically, the Investment Adviser, on behalf of Travelers Bond Portfolio may:

- - invest up to 15% of the value of its assets in the securities of any one
issuer (exclusive of obligations of the United States government and its
instrumentalities, for which there is no limit);
- - borrow from banks in amounts of up to 5% of its assets, but only for emergency
purposes;
- - purchase interests in real estate represented by securities for which there is
an established market;
- - make loans through the acquisition of a portion of a privately placed issue of
bonds, debentures or other evidences of indebtedness of a type customarily
purchased by institutional investors;
- - acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Travelers Bond Portfolio not to exceed 5% of the voting
securities of any one issuer);
- - make purchases on margin in the form of short-term credits which are necessary
for the clearance of transactions; and place up to 5% of its net asset value
in total margin deposits for positions in futures contracts; and
- - invest up to 15% of its assets in restricted securities (securities which may
not be publicly offered without registration under the Securities Act of
1933).

RISK FACTORS

The Investment Adviser will weigh considerations of risks, yield and ratings in
implementing Travelers Bond Portfolio's fundamental investment policies. There
are no specific criteria with regard to quality or ratings of the investments of
Travelers Bond Portfolio, but it is anticipated that they will be of investment
grade or its equivalent. Debt instruments that the Portfolio purchases may,
however, not be rated since such instruments may be government securities or of
short durations. There may or may not be more risk in investing in debt
instruments where there are no specific criteria with regard to quality or
ratings of the investments.

LAZARD INTERNATIONAL STOCK PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Lazard International Stock Portfolio is to seek
capital appreciation through investing primarily in the equity securities of
non-United States companies (i.e., incorporated or organized outside the United
States).

SERIES-5
<PAGE> 110

INVESTMENT POLICIES

The Portfolio expects to invest its assets principally in the following:

- - equity securities of non-U.S. companies, (although the Portfolio may have
substantial investments in American Depository Receipts), ("ADRs" and Global
Depository Receipts -- "GDRs");
- - convertible bonds; and
- - other convertible securities.

There is no requirement, however, that the Portfolio invest exclusively in
common stocks or other equity securities, and, if deemed advisable, it may
invest up to 20% of the value of its total assets in fixed-income securities and
short-term money market instruments. The Portfolio will not invest in
fixed-income securities rated lower than investment grade.

It is the present intention of the Subadviser to invest the Portfolio's assets
in companies based in Continental Europe, the United Kingdom, the Pacific Basin
and in such other areas and countries as the Subadviser may determine from time
to time. Under normal market conditions, the Portfolio will invest at least 80%
of the value of its total assets in the equity securities of companies within
not less than three different countries (not including the United States). The
percentage of the Portfolio's assets invested in particular geographic sectors
may shift from time to time in accordance with the judgment of the Subadviser.

In selecting investments for the Portfolio, the Subadviser attempts to identify
inexpensive markets world-wide through traditional measures of value, including
low price to earnings ratio, high yield, unrecognized assets, potential for
management change and/or the potential to improve profitability. In addition,
the Subadviser seeks to identify companies that it believes are financially
productive and undervalued in those markets. The Subadviser focuses on
individual stock selection (a "bottom-up" approach) rather than on forecasting
stock market trends (a "top-down" approach).

The Subadviser recognizes that some of the best opportunities are in securities
not generally followed by investment professionals. Thus the Subadviser relies
on its research capability and also maintains a dialogue with foreign brokers
and with the management of foreign companies in an effort to gather the type of
"local knowledge" that it believes is critical to successful investment abroad.
To this end, the Subadviser communicates with its offices in Paris, London and
Tokyo, for information concerning current business trends, as well as for a
better understanding of the management of local businesses. The information
supplied by these affiliates will be limited to statistical and factual
information, advice regarding economic factors and trends or advice as to
occasional transactions in specific securities.

The Portfolio may enter into foreign currency forward exchange contracts in
order to protect against anticipated changes in foreign currency exchange rates.

When, in the judgment of the Subadviser, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in the equity securities of U.S. Companies or short-term money
market instruments or hold its assets in cash.

Please review Exhibit A attached hereto for a more detailed discussion of the
investment techniques the Portfolio will use to attempt to achieve its
investment objectives. In addition, the Lazard International Stock Portfolio may
engage in certain investment activities described in greater detail in the
Exhibit A.

INVESTMENT RESTRICTIONS

The following represents the fundamental investment policies of the Portfolio.
Please consult the SAI for additional information concerning investment
restrictions.

The Lazard International Stock Portfolio may not:

- - issue senior securities, borrow money or pledge or mortgage its assets, except
that the Portfolio may borrow from banks for temporary purposes, including the
meeting of redemption requests which might require the untimely disposition of
securities. For purposes of this investment restriction, the

SERIES-6
<PAGE> 111

Portfolio's entry into options, forward contracts, futures contracts,
including those related to indexes shall not constitute borrowing;
- - make loans, except loans of portfolio securities not having a value in excess
of 10% of the Portfolio's total assets and except that the Portfolio may
purchase debt obligations in accordance with its investment objectives and
policies;
- - invest in illiquid securities if immediately after such investment more than
10% of the value of the Portfolio's net assets, taken at market value, would
be invested in such securities;
- - purchase securities of other investment companies, except in connection with a
merger, consolidation, acquisition or reorganization; provided, however, the
Lazard International Stock Portfolio may purchase securities in an amount up
to 5% of the value of its total assets in any one closed-end fund and may
purchase in the aggregate securities of closed-end funds in an amount of up to
10% of the value of the Portfolio's total assets;
- - purchase the securities of issuers conducting their principal business in the
same industry, if the value of the Portfolio's investment exceeds 25% of the
Portfolio's then current net asset value;
- - purchase or sell real estate except in a manner consistent with specific rules
described in greater detail in the SAI;
- - purchase securities on margin;
- - underwrite securities; or
- - make investments for the purpose of exercising control or management.

RISK FACTORS

Lazard International Stock Portfolio may invest without limitation in foreign
securities.

Investing in securities issued by foreign governments and corporations or
entities involves considerations and possible risks not typically associated
with investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations, and could be
subject to extended settlement periods.

In addition, many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
In an attempt to control inflation, wage and price controls have been imposed in
certain countries. In many cases, emerging market countries are among the
world's largest debtors to commercial banks, foreign governments, international
financial organizations and other financial institutions. In recent years, the
governments of some of these countries have encountered difficulties in
servicing their external debt obligations, which led to defaults on certain
obligations and the restructuring of certain indebtedness.

MFS EMERGING GROWTH PORTFOLIO
("MFS PORTFOLIO")
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

MFS Portfolio's investment objective is to seek to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if any, is
incidental to the MFS Portfolio's investment objective.

SERIES-7
<PAGE> 112

INVESTMENT POLICY

MFS Portfolio's policy is to invest primarily (i.e., at least 80% of its assets
under normal circumstances) in common stocks of companies that the Subadviser
believes are early in their life cycle but which have the potential to become
major enterprises (emerging growth companies). Such companies generally would be
expected to show earnings growth over time that is well above the growth rate of
the overall economy and the rate of inflation, and would have the products,
technologies, management and market and other opportunities which are usually
necessary to become more widely recognized as growth companies.

Emerging growth companies can be of any size, and the MFS Portfolio may also
invest in more established companies whose rates of earnings growth are expected
to accelerate because of special factors, such as rejuvenated management, new
products, changes in consumer demand, or basic changes in the economic
environment.

The MFS Portfolio is aggressively managed and, therefore, the value of its
shares is subject to greater fluctuation and investments in its shares involve
the assumption of a higher degree of risk than would be the case with an
investment in a conservative equity fund or a growth fund investing entirely in
proven growth equities.

The MFS Portfolio will invest primarily in common stocks. Other investments are
allowed, including, but not limited to those described below. (Refer to Exhibit
A for a discussion of these investment techniques.) MFS may invest in, or write
(as applicable), the following:

- - foreign or convertible securities and warrants when relative values make such
purchases appear attractive either as individual issues or as types of
securities in certain economic environments (see Exhibit A);

- - foreign currency and forward foreign currency exchange contracts for the
purchase or sale of foreign currency for hedging purposes and non-hedging
purposes, including transactions entered into for the purpose of profiting
from anticipated changes in foreign currency exchange rates, as well as
options on foreign currencies;

- - foreign securities (up to 25% of its total assets) which may be traded on
foreign exchanges (not including American Depository Receipts ("ADRs")). (It
expects generally to invest between 0% to 10% in such securities.);

- - emerging market securities;

- - cash equivalents or other forms of debt securities as a reserve for future
purchases of common stock or to meet liquidity needs;

- - corporate asset-backed securities;

- - covered call and put options and may purchase call and put options on
securities and stock indices in an effort to increase current income and for
hedging purposes;

- - stock index futures contracts and options thereon for hedging purposes and for
non-hedging purposes, subject to applicable law;

- - portfolio securities purchased on a "when-issued" or on a "forward delivery"
basis; and

- - loan participations.

While it is not generally MFS Portfolio's policy to invest or trade for
short-term profits, it may dispose of a portfolio security whenever the
Subadviser is of the opinion that such security no longer has an appropriate
appreciation potential or when another security appears to offer relatively
greater appreciation potential. Subject to tax requirements, portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in a profit or loss.

The nature of investing in emerging growth companies involves greater risk than
is customarily associated with investments in more established companies.
Emerging growth companies often have limited product lines, markets or financial
resources, and they may be dependent on one-person management. In addition,
there may be less research available on many promising small and medium sized
emerging growth companies making it more difficult to find and analyze these
companies. The

SERIES-8
<PAGE> 113

securities of emerging growth companies may have limited marketability and may
be subject to more abrupt or erratic market movements than securities of larger,
more established growth companies or the market averages in general. Shares of
the MFS Portfolio, therefore, are subject to greater fluctuation in value than
shares of a conservative equity portfolio or of a growth portfolio which invests
entirely in proven growth stocks.

During periods of unusual market conditions when the Subadviser believes that
investing for defensive purposes is appropriate, or in order to meet anticipated
redemption requests, a large portion or all of the assets of MFS Portfolio may
be invested in cash or cash equivalents including, but not limited to,
obligations of banks with assets of $1 billion or more (including certificates
of deposit, bankers' acceptances and repurchase agreements), commercial paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its agencies, authorities or instrumentalities and related repurchase
agreements. U.S. Government securities also include interests in trusts or other
entities representing interests in obligations that are issued or guaranteed by
the U.S. Government, its agencies, authorities or instrumentalities. See Exhibit
A to this Prospectus for a description of U.S. Government obligations and
certain short-term investments.

In addition, please see Exhibit A for a discussion of the following investment
activities in which MFS Portfolio may engage: (i) lending of Portfolio
securities; (ii) repurchase agreements; (iii) purchase and sales of restricted
securities; (iv) when-issued securities; (v) corporate asset-backed securities;
(vi) loan participation and other direct indebtedness; (vi) foreign securities;
(vii) ADRs; (viii) emerging market securities; (ix) various futures and option
trading techniques; and (x) lending of Portfolio securities.

INVESTMENT RESTRICTIONS

The MFS Portfolio is subject to certain fundamental investment restrictions
listed below. The MFS Portfolio may not:

- borrow amounts in excess of 33 1/3% of its assets including amounts
borrowed and then only as a temporary measure for extraordinary or
emergency purposes;

- underwrite securities issued by other persons except insofar as the
Portfolio may technically be deemed an underwriter under the Securities
Act of 1933, as amended (the "1933 Act") in selling a portfolio security;

- purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interest therein and
securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (excluding currencies
and any type of option, future contracts and forward contracts) in the
ordinary course of its business. The Portfolio does however, reserve the
right to hold and sell real estate, mineral leases, commodities or
commodity contracts (including currencies and any type of option, future
contracts and forward contracts) acquired as a result of the ownership of
securities;
- issue any senior securities except as permitted by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect to any
type of swap, option, forward contract and futures contracts and
collateral arrangements with respect to initial and variation margin are
not deemed to be the issuance of a senior security;

- make loans to other persons. For these purposes, the purchase of
commercial paper, the purchase of a portion or all of an issue of debt
securities, the lending of portfolio securities, or the investment of the
Portfolio's assets in repurchase agreements, shall not be considered the
making of a loan; or

- purchase any securities of an issuer of a particular industry, if as a
result, more than 25% of its gross assets would be invested in securities
of issuers whose principal business activities are in the same industry
(except there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities
and repurchase agreements collateralized by such obligations).

SERIES-9
<PAGE> 114

In addition to the fundamental investment restrictions listed directly above,
the MFS Portfolio may not:

- invest in illiquid investments, including securities subject to legal or
contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended, or, in the
case of unlisted securities, where no market exists) if more than 15% of
the Portfolio's assets (taken at market value) would be invested in such
securities. Repurchase agreements maturing in more than seven days will
be deemed to be illiquid for purposes of the Portfolio's limitation on
investment in illiquid securities. Securities that are not registered
under the 1933 Act and issued in reliance on Rule 144A thereunder, but
are determined to be liquid by the Trust's Board of Trustees (or its
delegee), will not be subject to this 15% limitation;

- purchase securities issued by any other investment company in excess of
the amount permitted by the 1940 Act, except when such purchase is part
of a plan of merger or consolidation;

- purchase any securities or evidences of interest therein on margin,
except that the Portfolio may obtain such short-term credit as may be
necessary for the clearance of any transaction and except that the
Portfolio may make margin deposits in connection with any type of swap,
option, futures contracts and forward contracts;

- sell any security which the Portfolio does not own unless by virtue of
its ownership of other securities the Portfolio has at the time of sale a
right to obtain securities without payment of further consideration
equivalent in kind and amount to the securities sold and provided that if
such right is conditional, the sale is made upon the same conditions;

- pledge, mortgage or hypothecate in excess of 33 1/3% of its gross assets.
For purposes of this restriction, collateral arrangements with respect to
any type of swap, option, futures contracts and forward contracts and
payments of initial and variation margin in connection therewith, are not
considered a pledge of assets;

- purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent the purchase, ownership, holding or
sale of (i) warrants where the grantor of the warrants is the issuer of
the underlying securities or (ii) put or call options or combinations
thereof with respect to securities, indices of securities, swaps, foreign
currencies and Futures Contracts;

- invest for the purposes of exercising control or management; or

- invest in the securities of any government agency or instrumentality, at
the end of any calendar quarter (or within 30 days thereafter), to the
extent such holdings would cause the Series to fail to comply with the
diversification requirements imposed by Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury regulations
issued thereunder on segregated asset accounts that fund variable
contracts.

RISK FACTORS

RISK FACTORS REGARDING LOWER RATED SECURITIES -- MFS Portfolio may invest to a
limited extent in lower-rated fixed income securities or comparable unrated
securities. Investments in lower-rated fixed income securities, while generally
providing greater income and opportunity for gain than investments in higher
rated securities, usually entail greater risk of principal and income (including
the possibility of default or bankruptcy of the issuers of such securities), and
involve greater volatility of price (especially during periods of economic
uncertainty or change) than investments in higher rated securities. Because
yields may vary over time, no specified level of income can ever be assured. In
particular, securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Services ("S&P") or by Fitch
Investors Services, Inc. ("Fitch") or comparable unrated securities (commonly
known as "junk bonds") are considered speculative.

These lower rated high yielding fixed income securities generally tend to
reflect economic changes (and the outlook for economic growth), short-term
corporate and industry developments and the market's perception of their credit
quality (especially during times of adverse publicity) to a greater

SERIES-10
<PAGE> 115

extent than higher rated securities which react primarily to fluctuations in the
general level of interest rates (although these lower rated fixed income
securities are also affected by changes in interest rates). In the past,
economic downturns or an increase in interest rates have under certain
circumstances caused a higher incidence of default by the issuers of these
securities and may do so in the future, especially in the case of highly
leveraged issuers. During certain periods, the higher yields on MFS Portfolio's
lower rated high yielding fixed income securities are paid primarily because of
the increased risk of loss of principal and income, arising from such factors as
the heightened possibility of default or bankruptcy of the issuers of such
securities. Due to the fixed income payments of these securities, MFS Portfolio
may continue to earn the same level of interest income while its net asset value
declines due to portfolio losses, which could result in an increase in MFS
Portfolio's yield despite the actual loss of principal. The prices for these
securities may be affected by legislative and regulatory developments.

Changes in the value of securities subsequent to their acquisition will not
affect cash income or yield to maturity to MFS Portfolio but will be reflected
in the net asset value of shares of MFS Portfolio. The market for these lower
rated fixed-income securities may be less liquid than the market for investment
grade fixed-income securities. Furthermore, the liquidity of these lower rated
securities may be affected by the market's perception of their credit quality.
Therefore, the Subadviser's judgment may at times play a greater role in valuing
these securities than in the case of investment grade fixed-income securities,
and it also may be more difficult during times of certain adverse market
conditions to sell these lower rated securities at their fair value to meet
redemption requests or to respond to changes in the market. No minimum rating
standard is required by MFS Portfolio. To the extent MFS Portfolio invests in
these lower rated fixed-income securities, the achievement of its investment
objective may be more dependent on the Subadviser's own credit analysis than in
the case of a Portfolio investing in higher quality bonds. While the Subadviser
may refer to ratings issued by established credit rating agencies, it is not a
policy of MFS Portfolio to rely exclusively on ratings issued by these agencies,
but rather to supplement such ratings with the Subadviser's own independent and
ongoing review of credit quality.

MFS Portfolio may also invest in fixed income securities rated Baa by Moody's or
BBB by S&P and Fitch and comparable unrated securities. These securities, while
normally exhibiting adequate protection parameters, may have speculative
characteristics and changes in economic conditions and other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade fixed income securities.

ADDITIONAL RISK FACTORS -- The net asset value of the shares of an open-end
investment company which may invest to a limited extent in fixed income
securities changes as the general levels of interest rates fluctuate. When
interest rates decline, the value of a fixed income portfolio can be expected to
rise. Conversely, when interest rates rise, the value of a fixed income
portfolio can be expected to decline.

THE USE OF OPTIONS, FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS, FORWARD
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES MAY RESULT IN THE LOSS OF PRINCIPAL,
PARTICULARLY WHERE SUCH INSTRUMENTS ARE TRADED FOR OTHER THAN HEDGING PURPOSES
(E.G., TO ENHANCE CURRENT YIELD).

As a result of its investments in foreign securities, MFS Portfolio may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are denominated.
In that event, MFS Portfolio may promptly convert such currencies into dollars
at the then current exchange rate. Under certain circumstances, however, such as
where the Subadviser believes that the applicable exchange rate is unfavorable
at the time the currencies are received or the Subadviser anticipates, for any
other reason, that the exchange rate will improve, MFS Portfolio may hold such
currencies for an indefinite period of time.

In addition, MFS Portfolio may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by MFS Portfolio is exercised or
MFS Portfolio is unable to close out a forward contract. MFS Portfolio may hold
foreign currency in anticipation of purchasing foreign securities. MFS Portfolio
may also elect to take delivery of the currencies underlying options or forward
contracts if, in the

SERIES-11
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judgment of the Subadviser, it is in the best interest of MFS Portfolio to do
so. In such instances as well, MFS Portfolio may promptly convert the foreign
currencies to dollars at the then current exchange rate, or may hold such
currencies for an indefinite period of time.

While the holding of currencies will permit MFS Portfolio to take advantage of
favorable movements in the applicable exchange rate, it also exposes MFS
Portfolio to risk of loss if such rates move in a direction adverse to MFS
Portfolio's position. Such losses could reduce any profits or increase any
losses sustained by MFS Portfolio from the sale or redemption of securities, and
could reduce the dollar value of interest or dividend payments received. In
addition, the holding of currencies could adversely affect MFS Portfolio's
profit or loss on currency options or forward contracts, as well as its hedging
strategies.

See Exhibit A for further discussion of foreign securities and the holding of
foreign currency as well as the associated risks.

The policies described above are not fundamental and may be changed without
shareholder approval, as may MFS Portfolio's investment objective. A change in
MFS Portfolio's investment objective may result in MFS Portfolio having an
investment objective different from the objective which the shareholder
considered appropriate at the time of investment in MFS Portfolio.

The SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern MFS Portfolio's investment
policies. The specific investment restrictions listed in the SAI may not be
changed without shareholder approval (see "Investment Restrictions" in the SAI).
MFS Portfolio's investment limitations, policies and rating standards are
adhered to at the time of purchase or utilization of assets; a subsequent change
in circumstances will not be considered to result in a violation of policy.

FEDERATED HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Federated High Yield Portfolio is to seek high
current income by investing primarily in a professionally managed, diversified
portfolio of fixed income securities.

INVESTMENT POLICIES

The Federated High Yield Portfolio will invest primarily in fixed rate corporate
debt obligations. The fixed rate corporate debt obligations in which the
Federated High Yield Portfolio intends to invest are expected to be lower-rated
(and higher risk), but may include investment grade securities as well. The
fixed income securities in which the Portfolio may invest may involve equity
features. Permitted investments currently include, but are not limited to, the
following:

- corporate debt obligations having fixed or floating rates of interest and
which generally are rated BBB or lower by nationally recognized
statistical rating organizations;
- preferred stocks; foreign securities and ADRs;
- asset backed securities;
- equipment trust and lease certificates;
- commercial paper;
- zero coupon bonds;
- pay-in-kind securities;
- obligations of the United States;
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; Student Loan Marketing Association; National
Credit Union Administration and Tennessee Valley Authority;

SERIES-12
<PAGE> 117

- time and savings deposits (including certificates of deposit) in
commercial or savings banks whose deposits are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), including certificates of deposit issued by and other time
deposits in foreign branches of BIF-insured banks;
- bankers' acceptances issued by a BIF-insured bank, or issued by the
bank's Edge Act subsidiary and guaranteed by the bank, with remaining
maturities of nine months or less;
- general obligations of any state, territory, or possession of the United
States, or their political subdivisions; and
- equity securities, including unit offerings that combine fixed rate
securities common stock and common stock equivalents such as warrants,
rights, and options.

The investment policies and limitations of the Federated High Yield Portfolio
described herein may be changed without approval of shareholders, unless
otherwise noted.

The corporate debt obligations in which the Federated High Yield Portfolio may
invest are generally rated BBB or lower by Standard & Poor's Ratings Group
("S&P") or Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or are
not rated but are determined by the Federated High Yield Portfolio's investment
Subadviser to be of comparable quality. See Exhibit B for a discussion of the
rating agency criteria.

The Federated High Yield Portfolio is aggressively managed and, therefore, the
value of its shares is subject to greater fluctuation and investments in its
shares involve the assumption of a higher degree of risk than would be the case
with an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities.

Certain of the following investment techniques in which The Federated High Yield
Portfolio may engage are described in greater detail in the attached Exhibit A:
(i) restricted securities; (ii) when-issued securities; (iii) temporary
investments; (iv) repurchase agreements; (v) reverse repurchase agreements; (vi)
various futures trading techniques; (vii) lending of portfolio securities;
(viii) floating and variable rate instruments; (ix) ADRs; (x) emerging market
securities; (xi) temporary bank borrowing; (xii) corporate asset backed
securities; (xiii) loan participation, and other direct indebtedness.

INVESTMENT RESTRICTIONS

The following investment restrictions are fundamental. The Federated High Yield
Portfolio will not:

- borrow money directly or through reverse repurchase agreements
(arrangements in which the Federated High Yield Portfolio sells a
portfolio instrument for a percentage of its cash value with an agreement
to buy it back on a set date) except, under certain circumstances, the
Federated High Yield Portfolio may borrow up to one-third of the value of
its net assets;
- sell securities short except, under strict limitations, the Federated
High Yield Portfolio may maintain open short positions so long as not
more than 10% of the value of its net assets is held as collateral for
those positions; or
- pledge assets except to secure permitted borrowing.

The following investment policies are nonfundamental and, subject to the Board's
approval, may be changed without shareholder approval. The Portfolio will not:

- commit more than 5% of the value of its total assets to premiums on open
put option positions;
- invest more than 5% of the value of its total assets in securities of one
issuer (except cash and cash items, repurchase agreements, and U.S.
government obligations) or acquire more than 10% of any class of voting
securities of any one issuer;
- invest more than 10% of the value of its total assets in foreign
securities (foreign securities are defined for these purposes as either
non-U.S. dollar denominated or which are not publicly traded in the
United States); invest directly in minerals;
- underwrite securities;
- invest more than 5% in put options;
- write covered call options unless the securities are held by the
Portfolio;

SERIES-13
<PAGE> 118

- invest in real estate, (although the Federated High Yield Portfolio may
invest in the securities of companies whose business involves the
purchase or sale of real estate or in securities which are secured by
real estate or interest in real estate); or
- purchase the securities of other investment companies, except in limited
situations.

RISK FACTORS

The corporate debt obligations in which the Federated High Yield Portfolio
invests are usually not in the three highest rating categories of a nationally
recognized statistical rating organization (AAA, AA, or A for S&P and Aaa, Aa,
or A for Moody's -- see Exhibit B for a more detailed discussion) but are in the
lower rating categories or are unrated but are of comparable quality and have
speculative characteristics or are speculative. Lower-rated or unrated bonds are
commonly referred to as "junk bonds." There is no minimum acceptable rating for
a security to be purchased or held in the Federated High Yield Portfolio's
portfolio, and the Federated High Yield Portfolio may, from time to time,
purchase or hold securities rated in the lowest rating category and may include
bonds in default. It should be borne in mind that credit ratings evaluate the
safety of the principal and interest payments, and not the market value of high
yield bonds. Further, the value of such bonds is likely to fluctuate over time.

Lower-rated securities will usually offer higher yields than higher-rated
securities. However, there is more risk associated with these investments. There
is an increased risk associated with such lower rated bonds that the issuer of
such bonds will default on principal and interest payments. This is because of
reduced creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments to a
greater extent than higher-rated securities which react primarily to
fluctuations in the general level of interest rates. Short-term corporate and
market developments affecting the price or liquidity of lower-rated securities
could include adverse news affecting major issuers, underwriters, or dealers of
lower-rated corporate debt obligations. In addition, since there are fewer
investors in lower-rated securities, it may be harder to sell the securities at
an optimum time.

As a result of these factors, lower-rated securities tend to have more price
volatility and carry more risk to principal and income than higher-rated
securities.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased. In the event of a restructuring, the Federated High Yield
Portfolio may bear additional legal or administrative expenses in order to
maximize recovery from an issuer. Additionally, an increase in interest rates
may also adversely impact the value of high yield bonds.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

The Federated High Yield Portfolio may, from time to time, own zero coupon bonds
and pay-in-kind securities. A zero coupon bond makes no periodic interest
payments and the entire obligation becomes due only upon maturity. Pay-in-kind
securities make periodic payments in the form of additional securities (as
opposed to cash). The price of zero coupon bonds and pay-in-kind securities is
generally more sensitive to fluctuations in interest rates than are conventional
bonds. Additionally, federal tax law requires that interest on zero coupon bonds
be reported as income to the Federated High Yield Portfolio even though the
Federated High Yield Portfolio receives no cash interest until the maturity or
payment date of such securities.

SERIES-14
<PAGE> 119

Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Federated High Yield
Portfolio owns a bond which is called, the Federated Portfolio will receive its
return of principal earlier than expected and would likely be required to
reinvest the proceeds at lower interest rates, thus reducing income to the
Federated Portfolio.

EVALUATING THE RISKS OF LOWER-RATED SECURITIES. The Federated Portfolio's
Subadviser will follow certain steps to evaluate the risks associated with
investing in lower-rated securities. These techniques include:

CREDIT RESEARCH. The Federated High Yield Portfolio's Subadviser will
perform its own credit analysis in addition to using nationally recognized
statistical rating organizations and other sources, including discussions
with the issuer's management, the judgment of other investment analysts,
and its own informed judgment. The Federated High Yield Portfolio's
Subadviser's credit analysis will consider the issuer's financial
soundness, its responsiveness to changes in interest rates and business
conditions, and its anticipated cash flow, interest or dividend coverage
and earnings. In evaluating an issuer, the Federated High Yield Portfolio's
investment adviser places special emphasis on the estimated current value
of the issuer's assets rather than historical costs.

DIVERSIFICATION. The Federated High Yield Portfolio invests in
securities of many different issuers, industries, and economic sectors to
reduce portfolio risk.

ECONOMIC ANALYSIS. The Federated High Yield Portfolio's investment
adviser will also analyze current developments and trends in the economy
and in the financial markets. When investing in lower-rated securities,
timing and selection are critical and analysis of the business cycle can be
important.

Achievement of the Federated High Yield Portfolio's investment objectives may be
more dependent on the Subadviser's credit analysis of lower rated bonds than
would be the case if the Portfolio invested exclusively in higher rated bonds.

FEDERATED STOCK PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is to provide growth of income and
capital by investing principally in a professionally managed and diversified
portfolio of common stock of high-quality companies. These companies generally
are leaders in their industries and are characterized by sound management and
the ability to finance expected growth. While there is no assurance that the
Portfolio will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. Unless otherwise
noted the investment policies and limitations described below for the Federated
Stock Portfolio can be changed without the approval of shareholders.

INVESTMENT POLICIES

The Portfolio's investment approach is based on the conviction that over the
long term the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of major
corporations. The Portfolio invests primarily in common stocks of companies
selected by the Portfolio's Subadviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of the company's industry. Ordinarily, these
companies will be in the top 25% of their industries with regard to revenues.
However, other factors, such as product position or market share, will be
considered by

SERIES-15
<PAGE> 120

the Portfolio's Subadviser and may outweigh revenues. Other permitted
investments include, but are not limited to:

- preferred stocks, corporate bonds, notes, and warrants of these
companies. The prices of fixed income securities generally fluctuate
inversely to the direction of interest rates;
- U.S. government securities;
- repurchase agreements;
- reverse repurchase agreements;
- money market instruments;
- securities of foreign issuers which are freely traded on United States
securities exchanges or in the over-the-counter market in the form of
American Depository Receipts ("ADRs") (in an amount of not more than 10%
if its assets);
- when-issued securities;
- restricted and illiquid securities;
- lending of portfolio securities; and
- temporary bank borrowing.

See Exhibit A for a more detailed discussion of the above investments.

RISK FACTORS

As with other mutual funds that invest primarily in equity securities, the
Federated Stock Portfolio is subject to market risks. That is, the possibility
exists that common stocks will decline in value over short or extended periods
of time, and equity markets tend to be cyclical, experiencing both periods of
when prices generally increase and periods when common stock prices generally
decline.

INVESTMENT RESTRICTIONS

The fundamental investment restrictions of the Federated Stock Portfolio are set
forth below. The Federated Stock Portfolio will not:

- borrow money or pledge securities except, under certain circumstances,
the Portfolio may borrow up to one-third of the value of its total assets
and pledge up to 10% of the value of those assets to secure such
borrowings;
- invest more than 5% of its total assets in the securities of one issuer
(except cash and cash items and U.S. government securities);
- acquire more than 10% of the voting securities of any one issuer;
- invest in real estate, (although the Federated Stock Portfolio may invest
in the securities of companies whose business involves the purchase or
sale of real estate or in securities which are secured by real estate or
interests in real estate).
- issue senior securities;
- trade in puts and calls; or
- underwrite securities.

LARGE CAP PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES

Large Cap Portfolio seeks long-term growth of capital by investing primarily in
equity securities of companies with large market capitalizations.

INVESTMENT POLICIES

The Subadviser normally invests at least 65% of the Portfolio's total assets in
equity securities of companies with large market capitalizations. For purposes
of the Portfolio's investment policies, large market capitalization companies
are defined as those companies with market capitalizations of $1 billion or more
at the time of the Portfolio's investment. Companies whose market capitalization
falls below this level after purchase continue to be considered
large-capitalized for purposes of the 65%

SERIES-16
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policy. The Large Cap Portfolio will invest primarily in common stocks. Other
investments are allowed, including, but not limited to those described below.
The Subadviser, on behalf of the Portfolios, may invest in, or write (as
applicable), the following:

- cash investments;
- equity securities;
- debt securities;
- foreign securities;
- repurchase agreements;
- reverse repurchase agreements;
- various futures and option related techniques and instruments;
- ADRs;
- emerging market securities;
- lending of portfolio securities;
- real estate related instruments;
- corporate asset-backed securities;
- loan participations and other direct indebtedness;
- indexed securities;
- short sales "against the box";
- cash instruments;
- swap agreements; and
- restricted securities.

Please review Exhibit A for a detailed discussion of these investment
techniques.

The Portfolio also reserves the right to invest without limitation in preferred
stocks and investment-grade debt instruments for temporary, defensive purposes,
and to lend portfolio securities.

Policies and limitations are considered at the time of purchase; the sale of
instruments is not required in the event of a subsequent change in
circumstances.

The Large Cap Portfolio may use various investment techniques to hedge a portion
of the fund's risks, but there is no guarantee that these strategies will work
as intended. The Portfolio seeks to spread investment risk by diversifying its
holdings among companies and industries.

The Portfolio may not buy all of these instruments or use all of these
techniques, and those described in Exhibit A, to the full extent permitted
unless it believes that doing so will help achieve its goals. Current holdings
and recent investment strategies are described in the Portfolio's financial
reports which are sent to shareholders twice a year.

Purchase of a debt security is consistent with the Portfolio's debt quality
policy if it is rated at or above the stated level by Moody's Investors Service,
Inc., in the equivalent categories by Standard & Poor's Corporation, or is
unrated but judged to be of equivalent quality by the Portfolio Investment
Adviser. The Portfolio currently intends to limit its investments in lower than
Baa-quality debt securities to less than 35% of its assets.

The Portfolio may invest in money market securities, in a pooled account of
repurchase agreements, and in a money market fund available only to funds and
accounts managed by the Subadviser or its affiliates, whose goal is to seek a
high level of current income while maintaining a stable $1.00 share price. A
major change in interest rates or a default on the money market fund's
investments could cause its share price to change.

More detailed information about the Portfolio's investments policies and
restrictions is contained in the SAI.

ADJUSTING INVESTMENT EXPOSURE. The Portfolio can use various techniques to
increase or decrease its exposure to changing security prices, interest rates,
currency exchange rates, commodity prices or other factors that affect security
prices.

SERIES-17
<PAGE> 122

RISK FACTORS

Companies with large market capitalizations typically have a large number of
publicly held shares and a high trading volume, resulting in a high degree of
liquidity. These tend to be quality companies with strong management
organizations. Large capitalization companies may have less growth potential
than smaller companies and may be able to react less quickly to changes in the
marketplace.

The value of the Portfolio's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. Investments in
foreign securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to currency
fluctuations.

INVESTMENT RESTRICTIONS

Set forth below are the Large Cap Portfolio's fundamental investment policies.
The Portfolio may not:

- with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities of other investment
companies or securities issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities) if, as a result, (a) more than
5% of the Portfolio's total assets would be invested in the securities of
that issuer, or (b) the Portfolio's would hold more than 10% of the
outstanding voting securities of that issuer;
- issue senior securities, except as permitted under the 1940 Act;
- borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
- underwrite securities issued by others, except to the extent that the
Portfolio may be considered to be an underwriter within the meaning of
the 1933 Act in the disposition of restricted securities;
- purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
- purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate
or securities or companies engaged in the real estate business);
- purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Portfolio from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities);
- lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to
repurchase agreements;
- the Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all the assets in the securities of a single
open-end management investment company managed by the Subadviser or any
affiliate or successor with substantially the same investment objective,
policies, and limitations as the Portfolio.

THE FOLLOWING INVESTMENT LIMITATIONS ALONG WITH ALL OTHER POLICIES OR
LIMITATIONS NOT SPECIFICALLY IDENTIFIED AS FUNDAMENTAL, ARE NOT FUNDAMENTAL.

- The Portfolio does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.

SERIES-18
<PAGE> 123

- The Portfolio does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transaction, and provided that margin payments in
connection with futures contracts and options on futures shall not
constitute purchasing securities on margin.
- The Portfolio may borrow money only (a) from a bank or from a registered
investment company or portfolio for which the Subadviser or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation
definitions). The Portfolio will not borrow money in excess of 25% of net
assets so long as this limitation is required for certification by
certain state insurance departments. Any borrowings that come to exceed
this amount will be reduced within seven days (not including Sundays and
holidays) to the extent necessary to comply with the 25% limitation. The
Portfolio will not purchase any security while borrowings representing
more than 5% of its total assets are outstanding. The Portfolio will not
borrow from other funds advised by the Subadviser or its affiliates if
total outstanding borrowings immediately after such borrowing would
exceed 15% of the Portfolio's total assets. The Portfolio will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The Portfolio will not borrow from other
funds advised by the Subadviser or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the
fund's total assets.
- The Portfolio does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the
prices at which they are valued.
- The Portfolio does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which the Subadviser or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations (where such participations have not
been securitized), or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities
or to repurchase agreements.)
- The Portfolio does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than
three years of continuous operation. For the purposes of this limitation
pass through entities and other special purpose vehicles or pools of
financial assets such as issuers of asset backed securities or investment
companies are not considered "business enterprises."
- The Portfolio does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of the Subadviser who individually own more than 1/2 of 1% of
the securities of such issuer together own more than 5% of such issuer's
securities.
- The Portfolio does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
sub-advised by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment objective,
policies, and limitations as the Portfolio.

EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The Portfolio seeks reasonable income by investing primarily in income-producing
equity securities. Normally, at least 65% of the Portfolio's total assets will
be invested in these securities. The Portfolio

SERIES-19
<PAGE> 124

has the flexibility, however, to invest the balance in all types of domestic and
foreign securities, including bonds. The Portfolio seeks to achieve a yield that
exceeds that of the securities comprising the S&P 500. The Portfolio does not
expect to invest in debt securities of companies that do not have proven
earnings or credit. When choosing the Portfolio's investments, the Subadviser
also considers the potential for capital appreciation.

INVESTMENT POLICIES

The value of the Portfolio's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. The value of
bonds fluctuates based on changes in interest rates and in the credit quality of
the issuer. Investments in foreign securities may involve risks in addition to
those of U.S. investments, including increased political and economic risk, as
well as exposure to currency fluctuations. The Subadviser may use various
investment techniques to hedge the Portfolio's risks, but there is no guarantee
that these strategies will work as the Subadviser intends. The Portfolio seeks
to spread investment risk by diversifying its holdings among many companies and
industries.

The Subadviser normally invests the Portfolio's assets according to its
investment strategy. The Portfolio also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary, defensive purposes.

Policies and limitations are considered at the time of purchase; the sale of
instruments is not required in the event of a subsequent change in
circumstances.

Equity Income Portfolio may engage in trade of certain other securities and use
other investment techniques as described more fully in Exhibit A attached hereto
including: (i) equity securities; (ii) debt securities; (iii) foreign securities
(including ADRs); (iv) repurchase agreements; (v) reverse repurchase agreements;
(vi) restricted securities; (vii) Portfolio lending (viii) various futures and
options trading activities and techniques; (ix) emerging market securities; (x)
real estate related instruments; (xi) loan participations and other direct
indebtedness; (xii) indexed securities; (xiii) short sales "against the box;"
(xiv) cash instruments; and (xv) swap agreements.

RISK FACTORS

Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty.

INVESTMENT RESTRICTIONS

The Equity Income Portfolio is subject to the same fundamental and
nonfundamental investment limitations as the Large Cap Portfolio described
above. Please refer to "Large Cap -- Investment Restrictions" section of this
prospectus and to the SAI for a complete discussion of such applicable
limitations.

In addition to those limitations, the Equity Income Portfolio will conform its
purchases of debt security to a stated debt quality policy. The Portfolio
currently intends to limit its investments in lower than Baa-quality debt
securities to 20% of its assets. (See Exhibit B for a discussion of rating
agency procedures.) For example, the Portfolio may make purchases of lower-rated
debt securities if such

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securities are rated at or above the stated level by Moody's or rated in the
equivalent categories of S&P, or is unrated but judged to be of equivalent
quality by the Subadviser.

More detailed information about the Portfolio's investments is contained in
Exhibit A and the Portfolio's SAI.

MID CAP DISCIPLINED EQUITY FUND
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Mid Cap Disciplined Equity Fund is to seek
growth of capital by investing primarily in a broadly diversified portfolio of
U.S. common stocks.

The investment Subadviser's approach to equity management is designed to provide
diversified exposure to the mid and small capitalization segments of the U.S.
equity market. Travelers Investment Management Company ("TIMCO") selects stocks
with a primarily quantitative screening process that seeks attractive relative
value and earnings growth. In order to achieve consistent relative performance,
TIMCO manages the portfolio to mirror the overall risk, sector weightings and
style characteristics of the Standard & Poor's 400 stock index ("S&P 400
Index"). The S&P 400 Index is a value-weighted stock index consisting of 400
mid-sized U.S. companies.

Stock selection is based on the intersection of various appraisal models
reflecting valuation, earnings, and relative price performance. Valuation
rankings are derived by comparing price/earnings ratios relative to expected
long-term earnings growth. Stocks are also ranked on the trend and magnitude of
reported earnings, earnings surprises and changes in analysts' earnings
estimates. These fundamental appraisal factors are supplemented by an analysis
of short-term price changes exhibited by individual securities that deviate
significantly from related industry group performance.

Portfolio decision-making follows a disciplined process. Stocks which are ranked
favorable by TIMCO's appraisal models are reviewed by a team of senior portfolio
managers. A sophisticated risk model is used to evaluate each stock's potential
contribution to overall portfolio risk. Stocks that are determined to be
underpriced on a risk-adjusted basis are overweighted in the portfolio relative
to the S&P 400 Index.

Conversely, TIMCO will sell a stock holding if the earnings outlook for the
issuing company becomes less favorable or the stock's valuation is no longer
attractive relative to the company's expected growth rate or risk.

The Mid Cap Disciplined Equity Fund will use exchange-traded financial futures
contracts consisting of stock index futures contracts and futures contracts on
debt securities ("interest rate futures") as a hedge to protect against changes
in stock prices or interest rates. A stock index futures contract is a
contractual obligation to buy or sell a specified index of stocks at a future
date for a fixed price.

The Mid Cap Disciplined Equity Fund will not purchase or sell futures contracts
for which the aggregate initial margin exceeds 5% of the fair market value of
its assets, after taking into account unrealized profits and losses on any such
contracts which it has entered into. When a futures contract is purchased, the
Mid Cap Disciplined Equity Fund will set aside an amount of cash and cash
equivalents equal to the total market value of the futures contact, less the
amount of the initial margin. At no time will the Mid Cap Disciplined Equity
Fund's transactions in such futures be used for speculative purposes.

All financial futures contracts will be traded on exchanges that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC"). To ensure
that its futures transactions meet CFTC standards, the Mid Cap Disciplined
Equity Fund will enter into futures contracts for hedging purposes only (i.e.,
for the purposes or with the intent specified in CFTC regulations and
interpretations, subject to the requirements of the Securities and Exchange
Commission).

The Mid Cap Disciplined Equity Fund may write covered call options on portfolio
securities for which call options are available and which are listed on a
national securities exchange. It may also purchase

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index or individual equity call options as an alternative to holding stocks or
stock index futures, or purchase index or individual equity put options as a
defensive measure.

RISK FACTORS

There can, of course, be no assurance that the Mid Cap Disciplined Equity Fund
will achieve its investment objective since there is uncertainty in every
investment. Equity securities are subject to financial risks relating to the
earning stability and overall financial soundness of an issue. They are also
subject to market risks relating to the effect of general changes in the
securities market on the price of a security. In addition, there may be more
risk associated with the Mid Cap Disciplined Equity Fund to the extent that it
invests in small or mid-sized companies. More risk is associated with investment
in small or mid-sized companies than with larger companies because such
companies may be dependent on only one or two products and may be more
vulnerable to competition from larger companies with greater resources and to
economic conditions affecting their market sector. Small or mid-sized companies
may be new, without long business or management histories, and perceived by the
market as unproven. Their securities may be held primarily by insiders or
institutional investors, which may affect marketabilty. The prices of these
stocks often fluctuate more than the overall stock market.

FUNDAMENTAL INVESTMENT POLICIES

The investment policies of the Mid Cap Disciplined Equity Fund are fundamental
and may not be changed without a vote of the majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940 ("1940
Act"). These policies permit the Fund to:

1. invest up to 5% of its assets in the securities of any one issuer;

2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;

3. pledge up to 10% of its assets to secure borrowings;

4. invest up to 25% of its assets in the securities of issuers in the same
industry; and

5. invest up to 10% of its assets in repurchase agreements maturing in
more than seven days and securities for which market quotations are not
readily available.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental and may not be
changed without a vote of a majority of the outstanding voting securities of the
Mid Cap Disciplined Equity Fund, as defined in the 1940 Act. The Mid Cap
Disciplined Equity Fund may not:

1. invest more than 5% of its total assets, computed at market value, in
the securities of any one issuer;

2. invest in more than 10% of any class of securities of any one issuer;

3. invest more than 5% of the value of its total assets in companies which
have been in operation for less than three years;

4. borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of up to
33 1/3% of its gross assets computed at cost; while outstanding, a
borrowing may not exceed one-third of the value of its net assets,
including the amount borrowed; the Mid Cap Disciplined Equity Fund has
no intention of attempting to increase its net income by means of
borrowing and all borrowings will be repaid before additional
investments are made; assets pledged to secure borrowings shall be no
more than the lesser of the amount borrowed or 10% of the gross assets
of the Mid Cap Disciplined Equity Fund computed at cost;

5. underwrite securities, except that the Mid Cap Disciplined Equity Fund
may purchase securities from issuers thereof or others and dispose of
such securities in a manner consistent

SERIES-22
<PAGE> 127

with its other investment policies; in the disposition of restricted
securities the Account may be deemed to be an underwriter, as defined
in the Securities Act of 1933 (the "1933 Act");

6. purchase real estate or interests in real estate, except through the
purchase of securities of a type commonly purchased by financial
institutions which do not include direct interest in real estate or
mortgages, or commodities or commodity contracts, except transactions
involving financial futures in order to limit transaction and borrowing
costs and for hedging purposes as described above;

7. invest for the primary purpose of control or management;

8. make margin purchases or short sales of securities, except for
short-term credits which are necessary for the clearance of
transactions, and to place not more than 5% of its net asset value in
total margin deposits for positions in futures contracts;

9. make loans, except that the Mid Cap Disciplined Equity Fund may
purchase money market securities, enter into repurchase agreements, buy
publicly and privately distributed debt securities and lend limited
amounts of its portfolio securities to broker-dealers; all such
investments must be consistent with the Account's investment objective
and policies;

10. invest more than 25% of its total assets in the securities of issuers
in any single industry;

11. purchase the securities of any other investment company, except in the
open market and at customary brokerage rates and in no event more than
3% of the voting securities of any investment company;

12. invest in interests in oil, gas or other mineral exploration or
development programs; or

13. invest more than 5% of its net assets in warrants, valued at the lower
of cost or market; warrants acquired by the Account in units or
attached to securities will be deemed to be without value with regard
to this restriction. The Mid Cap Disciplined Equity Fund is subject to
restrictions in the sale of portfolio securities to, and in its
purchase or retention of securities of, companies in which the
management personnel of TIMCO have a substantial interest.

The Mid Cap Disciplined Equity Fund may make investments in an amount of up to
15% of the value of its net assets in restricted securities which may not be
publicly sold without registration under the 1933 Act. In most instances such
securities are traded at a discount from the market value of unrestricted
securities of the same issuer until the restriction is eliminated. If and when
the Mid Cap Disciplined Equity Fund sells such portfolio securities, it may be
deemed an underwriter, as such term is defined in the 1933 Act, with respect
thereto, and registration of such securities under the 1933 Act may be required.
The Mid Cap Disciplined Equity Fund will not bear the expense of such
registration. The Mid Cap Disciplined Equity Fund intends to reach agreements
with all such issuers whereby they will pay all expenses of registration. In
determining securities subject to the 15% limitation, the Mid Cap Disciplined
Equity Fund will include, in addition to restricted securities, repurchase
agreements maturing in more than seven days and other securities not having
readily available market quotations.

PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------

Although none of the Portfolios intend to invest for the purpose of seeking
short-term profits, securities held by each Portfolio will be sold whenever the
Portfolio's investment adviser or Subadviser believes it is appropriate to do so
in light of the Portfolio's investment objective, without regard to the length
of time a particular security may have been held. For 1996, the Portfolio
turnover rates were as follows: Quality Bond Portfolio, 35%; Lazard
International Stock Portfolio, 9%; MFS Emerging Growth Portfolio, 49%; Federated
High Yield Portfolio, 23%; Federated Stock Portfolio, 11%; Large Cap Portfolio,
57% (annualized); and Equity Income Portfolio, 14% (annualized). Because the Mid
Cap Disciplined Equity Portfolio is new, no Portfolio turnover information is
presently available. We anticipate this Portfolio turnover rate to be
approximately 100-125%.

SERIES-23
<PAGE> 128

BOARD OF TRUSTEES
- --------------------------------------------------------------------------------

INVESTMENT MANAGER
- --------------------------------------------------------------------------------

As described above, the Board of Trustees monitors the activities of those
entities which provide investment management and Subadvisory services to the
Portfolios. The Travelers Asset Management International Corporation ("TAMIC,"
also referred to throughout this prospectus as the "Investment Adviser")
provides investment supervision to the Portfolios described herein (with the
exception of the Quality Bond Portfolio) in accordance with each Portfolio's
investment objectives, policies and restrictions. TAMIC'S responsibilities
generally include the following:

(1) engaging the services of one or more firms to serve as investment
adviser to the Portfolios;

(2) reviewing from time to time the investment policies and restrictions of
the Portfolios in light of the Portfolio's performance and otherwise
and after consultation with the Board, recommending any appropriate
changes to the Board;

(3) supervising the investment program prepared for the Portfolios by the
Subadviser;

(4) monitoring, on a continuing basis, the performance of the Portfolio's
securities;

(5) arranging for the provision of such economic and statistical data as
TAMIC shall determine or as may be requested by the Board; and

(6) providing the Board with such information concerning important economic
and political developments as TAMIC deems appropriate or as the Board
requests.

TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. TAMIC is an indirect wholly owned
subsidiary of Travelers Group, Inc., and its principal offices are located at
One Tower Square, Hartford, Connecticut, 06183. In addition to providing
investment advice to the Portfolio, TAMIC also acts as investment adviser for
other investment companies used to fund variable insurance products. TAMIC also
provides investment advice to individual and pooled pension and profit-sharing
accounts and non-affiliated insurance companies. For serving as investment
adviser to the Trust, TAMIC receives a fee, equal to the average daily net asset
value of each of the following Portfolios: Lazard International Stock Portfolio
0.35%; MFS Emerging Growth 0.375 %; Federated High Yield Portfolio 0.25%;
Federated Stock Portfolio 0.25%; Large Cap Portfolio 0.30%; Equity Income
Portfolio 0.30%; and Mid Cap Disciplined Equity Fund 0.70%. Investment Advisory
fees are computed daily and are paid monthly. These fees do not reflect the
Subadvisory fees paid to the Subadvisers. Additionally, TAMIC provides
investment advisory services to the Travelers Bond Quality Portfolio.

QUALITY BOND PORTFOLIO
INVESTMENT ADVISER: TAMIC

Under its Investment Advisory Agreement with the Trust, TAMIC is paid an amount
equivalent on an annual basis to .3233% of the average daily net assets of the
Portfolio. The fee is computed daily and paid monthly.

PORTFOLIO MANAGER

The Portfolio is managed by F. Denney Voss. Mr. Voss joined The Travelers
Insurance Company in 1980 and currently Mr. Voss is a Senior Vice President of
The Travelers Insurance Company. Mr. Voss is also a Vice President of TAMIC. Mr.
Voss has also managed TAMIC's Quality Bond Account for

SERIES-24
<PAGE> 129

Variable Annuities since March 1995 and has been responsible for managing the
Travelers portfolios backing general account insurance products since August
1994. Prior to transferring to the Travelers Securities Department in 1994, Mr.
Voss performed various sales and trading functions for Smith Barney Inc., a
Travelers Group subsidiary.

INVESTMENT SUBADVISERS
- --------------------------------------------------------------------------------

GENERAL

Under the terms of the Investment Advisory and Subadvisory Agreements, the
Subadviser provides an investment program for the Portfolios. The Subadvisers
make all determinations with respect to the purchase and sale of the portfolio
securities (subject to the terms and conditions of the investment objectives,
policies, and restrictions of the Portfolio and to the supervision of the Board
of Trustees and TAMIC) and places, in the name of the Portfolio, call orders for
execution of the portfolio transactions. In addition, only Fidelity Management
Resource, Inc. ("FMR") also executes the offers, while MFS, Lazard and Federated
only place the orders for TAMIC to execute.

For services rendered to the Portfolios, the Subadvisers charge a fee to TAMIC.
The Portfolios do not pay the Subadvisers' fee nor any part thereof, nor will
they have any obligation or responsibility to do so. The Subadvisory fees that
TAMIC pays to the various Subadvisers are not dependent on the particular
Portfolio's performance.

LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD ASSET MANAGEMENT

Lazard Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New York
10020, has entered into an investment Subadvisory agreement (the "Lazard
Subadvisory Agreement") on behalf of the Portfolio with TAMIC to provide
Subadvisory services to the Lazard International Stock Portfolio. Pursuant to
the Lazard Subadvisory Agreement, Lazard will regularly provide the Portfolio
with investment research, advice and supervision and furnish continuously an
investment program for the Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.

Lazard Asset Management is a division of Lazard & Co. LLC ("Lazard"), a New York
limited liability company, which is registered as an investment adviser with the
Commission and is a member of the New York, American and Midwest Stock
Exchanges. Lazard provides its clients with a wide variety of investment
banking, brokerage and related services in addition to asset management
services.

Under its Subadvisory Agreement with TAMIC, Lazard is paid an amount equivalent
on an annual basis of .475% of the average daily net assets of the Portfolio.
The fee is accrued daily and paid monthly.

MANAGEMENT OF LAZARD PORTFOLIO

Herbert Gullquist is primarily responsible for the day-to-day management of the
assets of the Portfolio. Mr. Gullquist is a Managing Director and Chief
Investment Officer of Lazard, and has been with the Subadviser since 1982. He
has been the President of The Lazard Funds, Inc., which includes several mutual
funds including the Lazard International Stock Portfolio, a publicly traded
mutual fund offered by Lazard since that fund's inception in 1991.

MFS PORTFOLIO
SUBADVISER: MFS

MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of MFS were approximately $52.8 billion
on behalf of approximately 2.3 million investor accounts as of Febru-

SERIES-25
<PAGE> 130

ary 28, 1997. As of such date, MFS managed approximately $28.9 billion of assets
invested in equity securities and approximately $19.9 billion of assets invested
in fixed income securities. Approximately $4.0 billion of the assets managed by
MFS are invested in securities of foreign issuers and non-U.S. dollar
denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life of
Canada (U.S.), which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada ("Sun Life").

Under its Subadvisory Agreement with TAMIC, MFS is paid an amount equivalent on
an annual basis to .375% of the average daily net assets of the Portfolio. The
fee is accrued daily and paid monthly.

MANAGEMENT OF MFS PORTFOLIO

John W. Ballen a Senior Vice President of MFS, serves as a co-manager of the MFS
Portfolio and in such capacity Mr. Ballen is charged with responsibility for the
day-to-day operations of the MFS Portfolio. Mr. Ballen has been employed as a
portfolio manager by MFS since 1984. Mr. Ballen is a graduate of Harvard
College, University of New South Wales, and Stanford University Graduate School
of Business Administration.

Also charged with management of the Fund is Toni Shimura, who joined MFS in 1987
as a member of the Research Department. A graduate of Wellesley College and the
Sloan School of Management at the Massachusetts Institute of Technology, she was
named Investment Officer in 1990, Assistant Vice President -- Investments in
1991, and Vice President -- Investments in 1992. She also manages MFS Emerging
Growth Series, Series of MFS Variable Insurance Trust, since November 1995.

FEDERATED HIGH YIELD PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING

Federated Investment Counseling ("Federated") a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the 1940
Act. It is a subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.

Federated and other subsidiaries of Federated Investors serve as investment
advisers to a number of investment companies and private accounts. Certain other
subsidiaries also provide administrative services to a number of investment
companies. With over $110 billion invested across more than 300 funds under
management and/or administration by its subsidiaries, as of December 31, 1996,
Federated Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to be led by
the management who founded the company in 1955. Federated funds are presently at
work in and through 4,500 financial institutions nationwide.

Pursuant to an agreement between TAMIC and Federated, Federated acts as the
Subadviser for the Federated High Yield Portfolio. In its capacity as
Subadviser, Federated continually conducts investment research and supervision
for the Federated Portfolio and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the investment
adviser.

Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to .40% of the average daily net assets of the
Portfolio. The fee is accrued daily and paid monthly.

MANAGEMENT OF THE FEDERATED HIGH YIELD PORTFOLIO

Mark E. Durbiano serves as the Federated High Yield Portfolio manager. Mr.
Durbiano joined Federated Investors in 1982 and has been a Senior Vice President
of an affiliate of the Portfolio's subadviser since January, 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of an affiliate of Federated.
Mr. Durbiano is a Chartered Financial Analyst and received his MBA in Finance
from the University of Pittsburgh.

SERIES-26
<PAGE> 131

FEDERATED STOCK PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING

Federated also serves as the Subadviser to the Federated Stock Portfolio. (See
"Federated High Yield Portfolio--Background" above for a discussion of
Federated.)

Federated serves as Subadviser to the Federated Stock Portfolio pursuant to an
agreement between itself and TAMIC. Pursuant to this agreement, Federated will
continually conduct investment research and supervision for the Portfolio and is
responsible for the purchase or sale of portfolio instruments.

Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to .375% of the average daily net assets of the
Portfolio. The fee is accrued daily and paid monthly.

MANAGEMENT OF FEDERATED STOCK PORTFOLIO

Peter R. Anderson serves as the Federated Stock Portfolio's co-manager. Anderson
joined Federated Investors in 1972 as, and is presently, a Senior Vice President
of an affiliate of the Subadviser. Mr. Anderson is a Chartered Financial Analyst
and received his M.B.A. in Finance from the University of Wisconsin.

Scott B. Schermerhorn serves as the Federated Stock Portfolio's co-manager. Mr.
Schermerhorn joined Federated Investors in 1996 as Vice President of an
affiliate of the Subadviser. From 1990 through 1996, Mr. Schermerhorn was a
Senior Vice President and Senior Investment Officer at J W Seligman & Co., Inc.
Mr. Schermerhorn received his M.B.A. in Finance and International Business from
Seton Hall University.

LARGE CAP PORTFOLIO
SUBADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY

Fidelity Management & Research Company ("FMR"), pursuant to a Subadvisory
Agreement with TAMIC, serves as the investment Subadviser to the Large Cap
Portfolio. FMR is an investment adviser registered as such with the SEC. Its
principal office is located at 82 Devonshire Street, Boston, MA 02109-3614.

All of the stock of FMR is owned by FMR Corp., its parent company organized in
1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3rd, Johnson family members,
and various trusts for the benefit of the Johnson family form a controlling
group with respect to FMR. Corp.

Under its Subadvisory Agreement with TAMIC, FMR is paid an amount equivalent on
an annualized basis to .45% of the average daily net assets of the Portfolio.
The fee is accrued daily and paid monthly.

FMR has sub-subadvisory agreements with FMR U.K. and FMR Far East. TAMIC is also
a party to these agreements in its capacity as Investment Adviser. These
sub-Subadvisers provide FMR with investment research and advice on issuers based
outside the United States. Under the sub-subadvisory agreements, FMR pays FMR
U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the costs of
providing such services.

The sub-Subadvisers may also provide investment management services. In return,
FMR pays FMR U.K. and FMR Far East a fee equal to 60% of its management fee rate
with respect to a Portfolio's investments that the sub-Subadviser manages on a
discretionary basis.

MANAGEMENT OF LARGE CAP PORTFOLIO

Thomas B. Sprague is the manager of Large Cap Portfolio. Mr. Sprague is also the
manager of Fidelity Adviser Large Cap Fund and Fidelity Large Cap Stock Fund
which are publicly offered retail mutual funds. He joined Fidelity in 1985. Mr.
Sprague is a graduate of Cornell University and Wharton School of Business.

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<PAGE> 132

EQUITY INCOME PORTFOLIO
SUBADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY

FMR, pursuant to a Subadvisory Agreement with TAMIC, also serves as the
Subadviser to the Equity Income Portfolio. See "Large Cap
Portfolio -- Subadviser: Fidelity Resource Management" above for a discussion of
FMR.

Under its Subadvisory Agreement with TAMIC, FMR is paid an amount equivalent on
an annual basis to .45% of the average daily net assets of the Portfolio. The
fee is accrued daily and paid monthly.

Stephen Petersen is manager of Equity Income Portfolio. He also manages Fidelity
Equity Income Fund, a publicly traded mutual fund. Mr. Petersen is also Senior
Vice President of Fidelity Management Trust Co. Previously, he was vice
president and manager of several trust accounts. Mr. Petersen joined Fidelity in
October 1980.

MID CAP DISCIPLINED EQUITY FUND
SUBADVISER: TRAVELERS INVESTMENT MANAGEMENT COMPANY (TIMCO)

The subadviser to the Portfolio is Travelers Investment Management Company
(TIMCO), a registered investment adviser that has provided investment advisory
services since its incorporation in 1967. Its principal offices are located at
One Tower Square, Hartford, Connecticut, and it is a wholly owned subsidiary of
Smith Barney Holdings Inc., which is a wholly owned subsidiary of Travelers
Group Inc. TIMCO also acts as investment adviser or subadviser for other
investment companies used to fund variable products, as well as for individual
and pooled pension and profit-sharing accounts, and for affiliated companies of
The Travelers Insurance Company. For its investment subadvisory services, TIMCO
receives a fee from TAMIC equal, on an annual basis, to 0.35% of the Portfolio's
average daily net assets.

MANAGEMENT OF MID CAP DISCIPLINED EQUITY FUND

The investment professionals responsible for the daily operations of the Fund
are Kent A. Kelley, Sandip A. Bhagat and Jake E. Hurwitz. Mr. Kelley is Chief
Executive Officer, and a director of TIMCO. He has been with Travelers since
1976. In addition to earning a Bachelors degree from New York University and a
Masters degree from Yale University, Mr. Kelley is also a Chartered Financial
Analyst.

Mr. Bhagat is President and a director of TIMCO. He has been with Travelers
since 1987. In addition to a Bachelors of Science degree from the University of
Bombay, he also earned two Masters degrees (in Chemical Engineering and in
Finance) from the University of Connecticut. Mr. Bhagat was designated a
Chartered Financial Analyst in 1991.

Mr. Hurwitz is a senior portfolio manager for TIMCO. He has been with Travelers
since 1986. Mr. Hurwitz earned a Bachelors of Arts degree from Vanderbilt
University and two Masters degrees; one from the University of California
(History) and one from New York University (Business Administration: Finance and
International Business). Mr. Hurwitz received his Chartered Financial Analyst
designation in 1984.

FUND ADMINISTRATION
- --------------------------------------------------------------------------------

The Series Trust, on behalf of MFS Emerging Growth Portfolio, Federated High
Yield Portfolio, Federated Stock Portfolio, Lazard International Stock
Portfolio, Travelers Quality Bond Portfolio and Mid Cap Disciplined Equity Fund
entered into an Administrative Services Agreement, whereby Travelers Insurance
will be responsible for the pricing and bookkeeping services for the portfolios
at an annualized rate of .06% of the daily net assets of the Portfolios. The
Travelers Insurance Company at its expense may appoint a sub-administrator to
perform these services. The sub-administrator may be affiliated with The
Travelers Insurance Company.

The Series Trust, on behalf of the Large Cap Portfolio and Equity Income
Portfolio entered into a Service Agent Agreement with Fidelity Service Company
to provide pricing and bookkeeping services

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to the two Portfolios at an annualized rate of .06% of the daily net assets of
the Portfolios under $500 million, and .03% over $500 million. There is a
minimum total annual fee of $60,000 per Portfolio.

The Series Trust has entered into a sub-contract with Fidelity Investments
Institutional Operations Company ("FIIOC"), an affiliate of FMR, under the terms
of which FIIOC performs certain transfer and dividend-disbursing services for
Large Cap and Equity Income Portfolios.

SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------

Under policies established by the Board of Trustees, the Subadvisers select
broker-dealers to execute transactions subject to the receipt of best execution.
When selecting broker-dealers to execute portfolio transactions for the
Portfolios, the Subadvisers may follow a policy of considering as a factor the
number of shares of a Portfolio sold by such broker-dealers. In addition,
broker-dealers may from time to time be affiliated with the Series Trust, the
investment advisers or their affiliates.

The Portfolios may pay higher commissions to broker-dealers which provide
research services. The Subadvisers may use these services in advising the
Portfolios, as well as in advising their other clients.

FUND EXPENSES
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In addition to the investment advisory fees discussed above, the other principal
expenses of the Series Trust and the Portfolios include the charges and expenses
of the transfer agent, the custodian, the independent auditors, and any outside
legal counsel employed by either the Series Trust or the Board of Trustees; the
compensation for the unaffiliated members of the Board of Trustees; the costs of
printing and mailing the Series Trust's prospectus, proxy solicitation
materials, and annual, semiannual and periodic reports; brokerage commissions,
interest charges and taxes; and any registration, filing and other fees payable
to government agencies in connection with the registration of the Series Trust
and its shares under federal and state securities laws. Higher portfolio
turnover may involve correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Portfolios, as well as
additional gains and/or losses to shareholders.

Pursuant to a Management Agreement dated May 1, 1993, between the Series Trust
and the Company, the Company agreed to reimburse the Series Trust for the amount
by which each Portfolio's aggregate annual expenses, including investment
advisory fees but excluding brokerage commissions, interest charges and taxes,
exceed a certain maximum percentage of each Portfolio's average net assets for
any fiscal year. For Lazard International Stock Portfolio the maximum amount is
1.25%, Travelers Quality Bond Portfolio is 0.75%. For all other Portfolios
described herein, the amount is 0.95%. This agreement will remain in effect
until terminated by either party upon sixty days' notice.

SHARES OF THE SERIES TRUST
- --------------------------------------------------------------------------------

The Series Trust currently issues one class of shares divided into thirteen
separate series. Under the Declaration of Trust, the Board of Trustees is
authorized to create new series of shares without the necessity of a vote of
shareholders of the Series Trust. All shares of each series of the Series Trust
have equal voting, dividend and liquidation rights. When issued and paid for,
the shares will be fully paid and nonassessable by the Series Trust and will
have no preference, conversion, exchange or preemptive rights.

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account prospectus for a discussion of voting rights applicable to purchasers of
variable annuity and variable life insurance contracts.)

Shares of the Series Trust are currently sold only to insurance company separate
accounts in connection with variable annuity and variable life insurance
contracts issued by the Company. Shares are not sold to the general public. The
Trust reserves the right to reject any purchase request. Shares of the Series
Trust are sold on a continuing basis, without a sales charge, at the net asset
value next computed after payment is made by the insurance company to the Series
Trust's custodian. However, the separate accounts to which shares are sold may
impose sales and other charges, as described in the appropriate contract
prospectus.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Portfolios value short-term money market instruments with maturities of
sixty days or less at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market. All other investments are valued at
market value, or where market quotations are not readily available, at fair
value as determined in good faith by the Series Trust's Board of Trustees or by
a committee appointed by the Trustees. The procedure set forth above need not be
used to determine the value of the securities owned by a portfolio if, in the
opinion of the Trustees or the committee appointed by the Trustees, some other
method (e.g., closing over-the-counter bid prices in the case of debt
instruments traded off an exchange) would more accurately reflect the fair
market value of such securities.

Full and fractional shares of the Portfolios may be redeemed on any business
day. Redemptions are effected at the per share net asset value next determined
after receipt by the Portfolio of a proper redemption request. The redemption
value is the net asset value adjusted for fractions of a cent and may be more or
less than the shareholder's cost depending upon changes in the value of the
Portfolio's securities between purchase and redemption.

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TAX STATUS
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DIVIDENDS AND DISTRBUTIONS
- --------------------------------------------------------------------------------

LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------

There are no pending material legal proceedings affecting the Series Trust or
the Portfolios.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

SERIES-31
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EXHIBIT A
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DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE PORTFOLIOS

The following types of investments and investment techniques are available to
the Portfolios as set forth herein or in the prospectus. Please refer to the
investment objective and policies of each Portfolio for a list of available
investments.

CASH INSTRUMENTS

The Portfolios may invest temporarily in cash and cash items during times of
unusual market conditions for defensive purposes and to maintain liquidity. Cash
items may include, but are not limited to, obligations such as: commercial paper
(generally lower-rated); short-term notes; obligations issued or guaranteed as
to principal and interest by the U.S. government or any of its agencies or
instrumentalities (see "U.S. Government Obligations" below).

SHORT-TERM MONEY MARKET INSTRUMENTS

Certain of the Portfolios, including the Large Cap, Equity Income, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may at any time
invest funds awaiting investment or held as reserves for the purposes of
satisfying redemption requests, payment of dividends or making other
distributions to shareholders, in cash and short-term money market instruments;
provided, however, that, for the Lazard International Stock Portfolio only, such
investments will not ordinarily exceed 5% of the total assets of the Portfolio.
Short-term money market instruments in which the Portfolio may invest include
(i) short-term U.S. Government Securities and, short-term obligations of foreign
sovereign governments and their agencies and instrumentalities, (ii) interest
bearing savings deposits on, and certificates of deposit and bankers'
acceptances of, United States and foreign banks, (iii) commercial paper of U.S.
or of foreign issuers rated A-1 or higher by S&P or Prime-1 by Moody's, issued
by companies which have an outstanding debt issue rated AA or higher by S&P or
Aa or higher by Moody's or, if not rated, determined by the Investment
Subadviser to be of comparable quality to those rated obligations which may be
purchased by the Portfolio and, for Lazard International Stock, Portfolios.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES

Certain of the Portfolios, including the Federated High Yield, Large Cap, Equity
Income, Mid Cap Disciplined Equity and the Lazard Stock International Portfolio
may purchase certificates of deposit. Certificates of deposit are receipts
issued by a bank in exchange for the deposit of funds. The issuer agrees to pay
the amount deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate can usually be traded in the
secondary market prior to maturity.

Bankers' Acceptances are short-term credit arrangements designed to enable
business to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted " by a bank that, in effect, unconditionally guarantees to pay
the face value of the instrument on its maturity date. The acceptance may then
be held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. The MFS
Portfolio may use this investment technique.

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U.S. GOVERNMENT OBLIGATIONS

All of the Portfolios may invest in direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These securities
are backed by the full faith and credit of the U.S. Treasury.

The Federated, Large Cap, and Equity Income Portfolios may also invest in U.S.
Government obligations which may not always receive financial support from the
U.S. government including obligations of the:

- Federal Land Banks;
- Central Bank for Cooperatives;
- Federal Intermediate Credit Banks;
- Federal Home Loan Banks;
- Farmers Home Administration; and
- Federal National Mortgage Association.

EQUITY SECURITIES

Certain of the Portfolios, including MFS, Large Cap, Equity Income and Mid Cap
Disciplined Equity, may invest in equity securities. By definition, equity
securities include common stocks, convertible securities, and warrants. Common
stocks, the most familiar type, represent an equity (ownership) interest in a
corporation. Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's financial
condition and on overall market and economic conditions. Smaller companies are
especially sensitive to these factors. The Federated High Yield, Large Cap, and
Equity Income Portfolios may invest in debt obligations which involve equity
features such as conversion or exchange rights, warrants for the acquisition of
common stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered as a
unit).

DEBT SECURITIES

Additionally, the Portfolios' investments may be made in bonds and other debt
instruments used by issuers to borrow money from investors. Debt instruments
involve the promise, by the issuer of the instrument to pay the investor a fixed
or variable rate of interest. Such repayment will occur at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. In general, bond prices rise
when interest rates fall, and vice versa. Debt securities have varying degrees
of quality and varying levels of sensitivity to changes in interest rates.
Longer-term bonds are generally more sensitive to interest rate changes than
short-term bonds.

Investment-grade debt securities are medium- and high-quality securities. Some,
however, may possess speculative characteristics and may be more sensitive to
economic changes and to changes in the financial condition of issuers.

Lower-quality debt securities (sometimes called "junk bonds") are considered to
have speculative characteristics and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty. Certain of the Portfolios may be permitted to invest in
such lower-quality debt securities.

If market quotations are unavailable, lower-quality debt securities are valued
in accordance with procedures established by the Board of Trustees, including
the use of outside pricing services. Adverse publicity and changing investor
perceptions may effect the ability of outside pricing services to value
lower-quality debt securities, and the Portfolios' ability to dispose of those
securities.

FLOATING AND VARIABLE RATE INSTRUMENTS

The Lazard International Stock Portfolio, Large Cap, Equity Income, Federated
High Yield and Mid Cap Disciplined Equity Portfolios may purchase obligations
that have a floating or variable rate of

SERIES-33
<PAGE> 138

interest. Such obligations bear interest at rates that are not fixed, but vary
with changes in specified market rates or indices, such as the prime rate, and
at specified intervals. Certain of these obligations may carry a demand feature
that would permit the holder to tender them back to the issuer at par value
prior to maturity. Each Portfolio limits its purchases of floating and variable
rate obligations to those of the same quality as it otherwise is allowed to
purchase. The Investment Subadviser monitors on an ongoing basis the ability of
an issuer of a demand instrument to pay principal and interest on demand. Each
Portfolio's right to obtain payment at par on a demand instrument can be
affected by events occurring between the date the Portfolio elects to demand
payment and the date payment is due, such events may affect the ability of the
issuer of the instrument to make payment when due, except when such demand
instruments permit same-day settlement. To facilitate settlement, these same-day
demand instruments may be held in book entry form at a bank other than the
Portfolio's custodian, subject to a subcustodian agreement approved by the
Portfolio between that bank and the Portfolio's custodian.

The floating and variable rate obligations that the Portfolio may purchase
include certificates of participation in obligations purchased from banks. A
certificate of participation gives the Portfolio an undivided interest in the
underlying obligations in the proportion that the Portfolio's interest bears to
the total principal amount of such obligations. Certain of such certificates of
participation may carry a demand feature that would permit the holder to tender
them back to the issuer prior to maturity.

VARIABLE AMOUNT MASTER DEMAND NOTES

Variable amount master demand notes are unsecured obligations that permit the
investment of fluctuating amounts by a Portfolio at varying rates of interest
pursuant to direct arrangements between the Portfolio as lender and the issuer
as borrower. Master demand notes permit daily fluctuations in the interest rate
and daily changes in the amounts borrowed. A Portfolio has the right to increase
the amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes are direct
lending arrangements between the lender and the borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable and thus repayable by the
borrower at face value plus accrued interest at any time. Accordingly, a
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with master demand note
arrangements, the Investment adviser and Subadvisers will consider the earning
power, cash flow and other liquidity ratios of the issuer. These notes, as such,
are not typically rated by credit rating agencies. Unless they are so rated, the
Portfolios will invest in them only if, at the time of an investment, the issuer
meets the criteria set forth for all other commercial paper. Pursuant to
procedures established by the Investment adviser or Subadviser, such notes are
treated as instruments maturing in one day and valued at their par value. The
investment adviser and Subadviser intend to continuously monitor factors related
to the ability of the borrower to pay principal and interest on demand.

REPURCHASE AGREEMENTS

The Travelers Quality Bond, Lazard International Stock, MFS, Federated High
Yield, Federated Stock, Large Cap, Equity Income and Mid Cap Disciplined Equity
Portfolios each may enter into repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities and or other securities to a
Portfolio and each agrees at the time of the sale to repurchase the securities
at a mutually agreed upon time and price. Interim cash balances may be invested
from time to time in repurchase agreements with approved counterparties (e.g.,
banks or broker-dealers meeting the investment advisor's credit quality
standards as presenting minimal risk of default). Repurchase transactions
generally mature the next business day but, in the event of a transaction of
longer maturity, collateral will be marked to market daily and, when required,
additional cash or qualifying collateral will be required from the counterparty.

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In any repurchase agreement, the risk that the original seller does not
repurchase the securities as called for in the repurchase agreement exists. A
Portfolio could receive less than the repurchase price on any sale of such
securities. Additionally, if the seller becomes subject to a proceeding under
the bankruptcy laws or its assets are otherwise subject to a stay order, a
Portfolio's right to liquidate the securities may be restricted (during which
time the value of the securities could decline). The Investment Adviser and
Subadviser, however, each believe that under the regular procedures normally in
effect for custody of the Portfolio's securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Portfolio and allow retention or disposition of such securities.

Each of the Portfolios may adopt rules concerning the collateralization of
repurchase agreements so long as the repurchase agreement is collateralized
fully.

The Portfolios will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers that are found by the
particular Portfolio's adviser to be creditworthy pursuant to guidelines
established for the Portfolio.

The Portfolio or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.

REVERSE REPURCHASE AGREEMENTS

The Federated High Yield, Federated Stock, Large Cap, Lazard International
Stock, Equity Income, and Mid Cap Disciplined Equity Portfolios may enter into
reverse repurchase agreements. This transaction is similar to borrowing cash. In
a reverse repurchase agreement the Portfolio transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Portfolio will repurchase the
portfolio instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable the
Portfolio to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Portfolio will be able to avoid selling
portfolio instruments at a disadvantageous time.

The Large Cap and Equity Income Portfolios will enter into reverse repurchase
agreements only with parties whose creditworthiness has been found satisfactory
to the Subadviser. Such transactions may increase fluctuations in the
Portfolio's yield or in the market value of its assets.

When effecting reverse repurchase agreements, liquid assets of the Portfolio, in
a dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled. During the period any
reverse repurchase agreement are outstanding, but only to the extent necessary
to assure completion of the reverse repurchase agreements, the Portfolio will
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.
The foregoing sentence does not apply to the Large Cap or Equity Income
Portfolios.

WHEN-ISSUED SECURITIES

Each of the Portfolios may purchase securities on a when-issued or delayed
delivery basis. Transactions of this type are arrangements in which the
particular Portfolio purchases securities with payment and delivery scheduled
for a future time. Their purpose is to help to ensure the availability of
suitable securities.

The prices of such securities will be fixed at the time the commitment to
purchase is made, and may be expressed in either dollar price or yield
maintenance terms. Such commitment to purchase may be viewed as a senior
security, and generally will be marked to market and reflected in the
Portfolio's

SERIES-35
<PAGE> 140

Accumulation Unit Value daily from the commitment date. Delivery and payment may
be at a future date beyond customary settlement time.

It is the customary practice of Travelers Quality Bond Portfolio to make
when-issued purchases for settlement no more than 90 days beyond the commitment
date. The Travelers Quality Bond Portfolio may only purchase when issued
securities of new issue government or agency securities.

While it is the intention of each Portfolio to take physical delivery of these
securities, offsetting transactions may be made prior to settlement, if it is
advantageous to do so. For example, Travelers Quality Bond Portfolio does not
make payment or begin to accrue interest on these securities until settlement
date. In order to invest its assets pending settlement, Travelers Quality Bond
Portfolio will normally invest in short-term money market instruments and other
securities maturing no later than the scheduled settlement date.

Travelers Quality Bond Portfolio does not intend to purchase when-issued
securities for speculative or "leverage" purposes. Consistent with Section 18 of
the 1940 Act and the General Policy Statement of the SEC thereunder, when
Travelers Quality Bond Portfolio commits to purchase a when-issued security, it
will identify and place in a segregated account high-grade money market
instruments and other liquid securities equal in value to the purchase cost of
the when-issued securities

The Investment Adviser and Subadvisers engaged in trades of when issued
securities each believes that purchasing securities in this manner will be
advantageous. This practice, however does include certain risks, namely the
default of the counterparty on its obligation to deliver the security as
scheduled. In this event, an affected Portfolio would endure a loss (or gain)
equal to the price appreciation (or depreciation) in value from the commitment
date. Further, such failure to complete a transaction may cause the affected
Portfolio to miss other opportunities.

To guard against such risks, the Investment Adviser and Subadviser employ a
rigorous credit quality procedure in determining the counterparties with which
it will deal in when-issued securities and, in some circumstances, will require
the counterparty to post cash or some other form of security as margin to
protect the value of its delivery obligation pending settlement.

It is expected that, under normal circumstances, the Portfolios will take
delivery of such securities. In general, the Portfolios do not pay for the
securities until received and the Portfolios do not start earning interest on
the obligations until the contractual settlement date. While awaiting delivery
of the obligations purchased on such bases, the Portfolios will establish a
segregated account consisting of cash, short-term money market instruments or
high quality debt securities equal to the amount of the commitments to purchase
when-issued securities.

The MFS Portfolio may engage in trades of when-issued securities. The value of
this Portfolio's securities, together with the value of all securities of the
issuer of the "when-issued security" may not exceed 5% of the value of the
Portfolio's total assets at the time that the initial commitment to purchase
such securities is made. An increase in the percentage of the Portfolio's assets
committed to the purchase of securities on a when-issued basis may increase the
volatility of its net asset value.

A Portfolio may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Portfolio may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. A Portfolio may realize short-term profits or losses upon the sale of
such commitments.

FUTURES CONTRACTS

Certain of the Portfolios including Large Cap, Equity Income, MFS, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may use
exchange-traded financial futures for various purposes including contracts as a
hedge to protect against changes in interest rates or stock prices. Financial
futures contracts consist of stock index futures contracts and futures contracts
on debt securities. An interest rate futures contract is a contract to buy or
sell specified debt securities at a future time for a fixed price. A stock index
futures contract is a contractual obligation to buy or sell a specified index of
stocks at a future date for a fixed price.

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Hedging by use of interest rate futures seeks to establish, with more certainty
than would otherwise be possible, the effective rate of return on portfolio
securities. When hedging is successful, any depreciation in the value of
portfolio securities will substantially be offset by appreciation in the value
of the futures position. Conversely, any appreciation in the value of the
portfolio securities will substantially be offset by depreciation in the value
of the futures position. At no time will any Portfolios' futures trading
transactions be employed for speculative purposes.

When a futures contract is purchased, the Portfolios will set aside liquid
securities equal to the total market value of the futures contract, less the
amount of the initial margin.

Positions taken in the futures market are not normally held to maturity, but
instead are liquidated through offsetting transactions which may result in a
profit or a loss. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the debt security and the same
delivery date. If the offsetting purchase price is less than the original sale
price, the Portfolio realizes a gain; if it is more, the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Portfolio realizes a gain; if less, a loss. While futures
positions taken by the Portfolios will usually be liquidated in this manner, the
Portfolios may instead make or take delivery of the underlying securities
whenever it appears economically advantageous for them to do so. In determining
gain or loss, transaction costs must be taken into account. There can be no
assurance that the Portfolios will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time.

All interest rate and stock index futures contracts will be traded on exchanges
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC"). To ensure that its futures transactions meet CFTC standards, the
Portfolios will enter into futures contracts for hedging purposes only, i.e.,
for the purposes or with the intent specified in CFTC regulations and
interpretations, subject to the requirements of the SEC. The Portfolios will
further seek to assure that fluctuations in the price of any futures contracts
that they use for hedging purposes will be substantially related to fluctuations
in the price of the securities which they hold or which they expect to purchase,
or for other risk reduction strategies, though there can be no assurance the
expected result will always be achieved.

TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS: Several of the
Portfolios, including the Large Cap, Equity Income, Lazard International Stock,
MFS and Mid Cap Disciplined Equity may enter into transactions in options,
futures and forward contracts on a variety of instruments and indices, in order
to protect against declines in the value of portfolio securities or increases in
the cost of securities or other assets to be acquired and, subject to applicable
law, to increase MFS Portfolio's gross income or in the case of Large Cap and
Equity Income Portfolios to adjust investment exposure.

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

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<PAGE> 142

In addition to the possibility that there may be a less than perfect correlation
between movements in the futures contracts and securities in the Portfolio being
hedged, the prices of futures contracts may not correlate perfectly with
movements in the underlying security due to certain market distortions. First,
rather than meeting variation margin deposit requirements should a futures
contract value move adversely, investors may close future contracts through
offsetting transactions which could distort the normal relationship between the
index and futures markets. Second, since margin requirements in the futures
market are less onerous than in the securities market, the futures market may
attract more speculators than the securities market. Increased participation by
speculators may cause temporary price distortions. Due to the possibility of
such price distortion, and also because of the imperfect correlation discussed
above, even a correct forecast of general market trends by the investment
advisers may not result in a successful hedging transaction in the futures
market over a short time period.

Successful use of futures contracts for hedging purposes is also subject to the
investment advisers' ability to predict correctly movements in the direction of
the market. The Investment Adviser and Subadvisers believe that over time the
value of the investments of the Portfolios will tend to move in the same
direction as the market indices which are intended to correlate to the price
movements of the portfolio securities sought to be hedged.

WRITING COVERED CALL OPTIONS

The Federated High Yield, Large Cap, Equity Income, Lazard International Stock,
MFS and Mid Cap Disciplined Equity Portfolios may write (i.e., sell) covered
call options. By writing a call option, a Portfolio becomes obligated during the
term of the option to deliver the securities underlying the option upon payment
of the exercise price.

The principal reason for writing call options is to obtain, through a receipt of
premiums, a greater current return than would be realized on the underlying
securities alone. Purchases of puts or sales of calls are intended to protect
against price movements in particular securities in a Portfolio's portfolio.
Sales of calls may also generate income. The Portfolios receive a premium from
writing a call option which they retain whether or not the option is exercised.

Certain risks exist in this practice. By writing a call option, a Portfolio
might lose the potential for gain on the underlying security while the option is
open. Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange for call or put options which may or may not
exist for any particular call or put option at any specific time. The absence of
a liquid secondary market also may limit the Portfolio's ability to dispose of
the securities underlying an option. The inability to close options also could
have an adverse impact on the Portfolio's ability to effectively hedge.

Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair a Portfolio's ability
to use such options to achieve its investment objectives.

BUYING PUT AND CALL OPTIONS

The Large Cap, Equity Income, Federated High Yield, Lazard International Stock,
MFS and Mid Cap Disciplined Equity Portfolios may purchase put options on
securities held, or on futures contracts whose price volatility is expected to
closely match that of securities held, as a defensive measure to preserve
shareholders' capital when market conditions warrant. The Portfolios may
purchase call options on specific securities, or on futures contracts whose
price volatility is expected to closely match that of securities eligible for
purchase by the Portfolios, in anticipation of or as a substitute for the
purchase of the securities themselves. These options may (must, in the case of
the Federated Portfolios) be listed on a national exchange or executed
"over-the-counter" with a broker-dealer as

SERIES-38
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the counterparty. While the investment advisers anticipate that the majority of
option purchases and sales will be executed on a national exchange, put or call
options on specific securities or for non-standard terms are likely to be
executed directly with a broker-dealer when it is advantageous to do so. Option
contracts will be short-term in nature, generally less than nine months in
duration.

The Portfolios will pay a premium in exchange for the right to purchase (call)
or sell (put) a specific par value of a fixed income or equity security or
futures contract at a specified price (the strike price) on or before the
expiration date of the option contract. In either case, a Portfolio's risk is
limited to the option premium paid and the risk of depreciation in value of
securities on which it has written call options. By writing a call option on a
security, however, a Portfolio limits its opportunity to profit from any
increase in the market value of the underlying security, since the holder will
usually exercise the call option when the market value of the underlying
security exceeds the exercise price of the call.

Liquid securities sufficient to fulfill a call option delivery obligation will
be identified and segregated in an account; deliverable securities sufficient to
fulfill the put option obligation will be similarly identified and segregated.
In the case of put options on futures contracts, portfolio securities whose
price volatility is expected to match that of the underlying futures contract
will be identified and segregated.

If a Portfolio writes an option which expires unexercised or is closed out by
the Portfolio at a profit, it will retain the premium paid for the option which
will increase its gross income and will offset in part the reduced value of the
portfolio security underlying the option, or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the underlying
security moves adversely to the Portfolio's position, the option may be
exercised and the Portfolio will be required to purchase or sell the underlying
security at a disadvantageous price, which may only be partially offset by the
amount of the premium. MFS Portfolio may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.

The Portfolios that engage in buying put and call options may also purchase put
or call options in anticipation of market fluctuations which may adversely
affect the value of its portfolio or the prices of securities that such
Portfolio wants to purchase at a later date. In the event that the expected
market fluctuations occur, the Portfolio may be able to offset the resulting
adverse effect on its portfolio, in whole or in part, through the options
purchased. The premium paid for a put or call option plus any transaction costs
will reduce the benefit, if any, realized by such Portfolio upon exercise or
liquidation of the option, and, unless the price of the underlying security
changes sufficiently, the option may expire without value to the Portfolio.

In certain instances, the Portfolio may enter into options on Treasury
securities which may be referred to as "reset" options or "adjustable strike"
options. These options provide for periodic adjustment of the strike price and
may also provide for the periodic adjustment of the premium during the term of
the option.

OPTIONS ON STOCK INDICES -- MFS, Large Cap, Equity Income, Lazard International
Stock and Mid Cap Disciplined Equity Portfolios may write (sell) covered call
and put options and purchase call and put options on stock indices. These
Portfolios may write options on stock indices for the purpose of increasing its
gross income and to protect its portfolio against declines in the value of
securities it owns or increases in the value of securities to be acquired. When
such Portfolios write an option on a stock index, and the value of the index
moves adversely to the holder's position, the option will not be exercised, and
the Portfolio will either close out the option at a profit or allow it to expire
unexercised. The Portfolio writing the covered call or put option will thereby
retain the amount of the premium, less related transaction costs, which will
increase its gross income and offset part of the reduced value of portfolio
securities or the increased cost of securities to be acquired. Such

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transactions, however, will constitute only partial hedges against adverse price
fluctuations, since any such fluctuations will be offset only to the extent of
the premium received by the Portfolio for the writing of the option, less
related transaction costs. In addition if the value of an underlying index moves
adversely to the Portfolios' option position, the option may be exercised, and
the Portfolios will experience a loss which may only be partially offset by the
amount of the premium received.

The MFS, Lazard International Stock, Large Cap, Equity Income Portfolios may
also purchase put or call options on stock indices in order, respectively, to
hedge its investments against a decline in value or to attempt to reduce the
risk of missing a market or industry segment advance.

INDEX FUTURES CONTRACTS

FUTURES CONTRACTS -- MFS Portfolio, Large Cap Portfolio, Equity Income
Portfolio, Lazard International Stock Portfolio and Mid Cap Disciplined Equity
Portfolio may enter into stock index futures contracts (Index Futures). The
Portfolios will utilize Index Futures for hedging and non-hedging purposes,
subject to applicable law. Purchases or sales of stock index futures contracts
for hedging purposes are used to attempt to protect the Portfolios' current or
intended stock investments from broad fluctuations in stock prices. In the event
that an anticipated decrease in the value of portfolio securities occurs as a
result of a general stock market decline, a general increase in interest rates
or a decline in the dollar value of foreign currencies in which portfolio
securities are denominated, the adverse effects of such changes may be offset,
in whole or part, by gains on the sale of futures contracts. Conversely, the
increased cost of portfolio securities to be acquired, caused by a general rise
in the stock market, a general decline in interest rates or a rise in the dollar
value of foreign currencies, may be offset, in whole or part, by gains on Index
Futures contracts purchased by the Portfolios. A Portfolio will incur brokerage
fees when it purchases and sells Index Futures contracts, and it will be
required to make and maintain margin deposits.

OPTIONS ON INDEX FUTURES CONTRACTS -- MFS, Large Cap, Equity Income, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may purchase and
write options on stock index futures contracts. Such investment strategies will
be used for hedging and non-hedging purposes, subject to applicable law. Put and
call options on futures contracts may be traded by the Portfolios in order to
protect against declines in the values of portfolio securities or against
increases in the cost of securities to be acquired. Purchases of options on
futures contracts may present less risk in hedging the portfolios of the
Portfolios than the purchase or sale of the underlying futures contracts since
the potential loss is limited to the amount of the premium plus related
transaction costs. The writing of such options, however, does not present less
risk than the trading of futures contracts and will constitute only a partial
hedge, up to the amount of the premium received. In addition, if an option is
exercised, the Portfolios may suffer a loss on the transaction.

FORWARD CONTRACTS ON FOREIGN CURRENCY -- MFS Portfolio, Large Cap Portfolio,
Equity Income Portfolio, and Lazard International Stock Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date at a
price set at the time of the contract (a "Forward Contract"). The Portfolios
will enter into Forward Contracts for hedging and non-hedging purposes,
including transactions entered into for the purpose of profiting from
anticipated changes in foreign currency exchange rates. Transactions in Forward
Contracts entered into for hedging purposes may include forward purchases or
sales of foreign currencies for the purpose of protecting the dollar value of
securities denominated in a foreign currency or protecting the dollar equivalent
of interest or dividends to be paid on such securities. The Portfolios may also
enter into Forward Contracts for "cross hedging" purposes, e.g., the purchase or
sale of a Forward Contract on one type of currency as a hedge against adverse
fluctuations in the value of a second type of currency. By entering into such
transactions, however, the Portfolios may be required to forgo the benefits of
advantageous changes in exchange rates. The Portfolios may also enter into
transactions in Forward Contracts for other than hedging purposes. For example,
if the Subadviser believes that the value of a particular foreign currency will
increase or decrease relative to the value of the U.S. dollar, the Portfolios
may purchase or sell such currency, respectively, through a Forward Contract. If
the expected changes in the value of the currency occur, the Portfolios will
realize profits which will increase its gross income. Such

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transactions, however, may be considered speculative and could involve
significant risk of loss, as set forth below. the Portfolios have established
procedures consistent with statements of the SEC and its staff regarding the use
of Forward Contracts by registered investment companies, which requires use of
segregated assets or "cover" in connection with the purchase and sale of such
Contracts.

Forward Contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in the Futures and Options contracts
described above.

OPTIONS ON FOREIGN CURRENCIES -- MFS Portfolio, Large Cap Portfolio, Equity
Income Portfolio, and Lazard International Stock Portfolio may purchase and
write put and call options on foreign currencies for the purpose of protecting
against declines in the dollar value of portfolio securities, and against
increases in the dollar cost of securities to be acquired. As in the case of
other types of options, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium received,
and the Portfolios could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Portfolio's position, it may forfeit the entire amount of the premium
plus related transaction costs. As in the case of Forward Contracts, certain
options on foreign currencies are traded over-the-counter and involve risks
which may not be present in the case of exchange-traded instruments.

RESTRICTED AND ILLIQUID SECURITIES

Lazard International Stock, MFS, Federated High Yield, Federated Stock, Large
Cap, and Equity Income Portfolios may purchase and sell securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act")
("restricted securities"), including those that can be offered and sold to
"qualified institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). Sale of this type of security is typically restricted under the
federal securities laws. The above mentioned Portfolios may also purchase and
sell securities that are subject to transfer restrictions, and may therefore be
illiquid.

Some restricted securities may be "illiquid" because sale of these securities
may be difficult and the Portfolio engaging in trading of illiquid securities
may not be able to sell them (or sell them at fair market value) when the
investment adviser or Subadviser believes it is desirable to do so. Accordingly
such sales may be made at less than fair market value or may not be able to sell
them when the investment adviser believes it is desirable to do so.

The following Portfolios currently limit the amount of net assets that may be
invested in illiquid securities to 15% of their respective Portfolio's net
assets: Large Cap, Equity Income, MFS, Federated Stock, Federated High Yield,
Lazard International Stock and Mid Cap Disciplined Equity Portfolios.

Securities may be illiquid securities for different reasons including, among
others, (i)absence of a readily available market or legal or contractual
restrictions on resale; and (ii) repurchase agreements not terminable within
seven days. Securities eligible for resale under Rule 144A under the Securities
Act that have legal or contractual restrictions on resale but have a readily
available market are not deemed illiquid securities for this purpose.

Each Subadviser will monitor the liquidity of such restricted securities. This
monitoring process will involve a continuing review of the trading markets for
the specific Rule 144A security, whether such security is illiquid and thus
subject to the particular Portfolio's limitation on investing its net assets in
illiquid investments. In monitoring a restricted security, the Investment
adviser or Subadviser will review the current value of the security based on
currently available information. The Subadviser, however, will retain sufficient
oversight and be ultimately responsible for the determinations.

Subject to the limitation on investments in illiquid investments, the Portfolios
may also invest in restricted securities that may not be sold under Rule 144A,
which presents certain risks. As a result, a Portfolio might not be able to sell
these securities when the Subadviser wishes to do so, or might

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have to sell them at less than fair value. In addition, market quotations are
less readily available. Therefore, the judgment of the Subadviser may at times
play a greater role in valuing these securities than in the case of unrestricted
securities.

Additionally, the Equity Income, Large Cap and the Federated Portfolios may
engage in trading of commercial paper which is illiquid. The limitation for
illiquid securities are not applicable to commercial paper issued under Section
4(2) of the Securities Act of 1933. As a matter of investment practice, which
may be changed without shareholder approval, the Federated Portfolios will limit
investments in illiquid securities, including certain restricted securities not
determined by the Subadviser to be liquid, and repurchase agreements providing
for settlement in more than seven days after notice, to 15% of net assets.

The Equity Income, Large Cap and the Federated Portfolios may also invest in
commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as
to disposition under federal securities law and is generally sold to
institutional investors, such as the Portfolio, who agree that it is purchasing
the paper for investment purposes and not with a view to public distribution.
Any resale by the purchaser must be pursuant to an exempt transaction. Section
4(2) commercial paper is normally resold to other institutional investors like
the Portfolio through or with the assistance of the issuer or the investment
dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity. These Portfolios believe that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Portfolios' Subadviser are quite liquid. The
Portfolios may, therefore, treat the restricted securities which meet the
criteria for liquidity established by the Subadviser, including Section 4(2)
commercial paper, as determined by the Subadviser of the Portfolio, as liquid
and not subject to the investment limitation applicable to illiquid securities.

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

The MFS, Large Cap, Lazard International Stock, Federated High Yield, and Equity
Income Portfolios may each purchase foreign securities or American Depository
Receipts ("ADRs"). ADRs are U.S. dollar-denominated receipts issued generally by
domestic banks representing the deposit with the bank of a security of a foreign
issuer. ADRs are publicly traded on exchanges or over the counter in the United
States.

Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks include differences in accounting, auditing and financial reporting
standards, changes in currency rates, generally higher brokerage or commission
rates on foreign trades, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investments in foreign countries,
potential difficulties in enforcing contractual relationships, and potential
restrictions on the flow of international capital. Additionally, dividends
payable on foreign securities may be subject to foreign taxes withheld prior to
distribution. Foreign securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility. Changes
in foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by a Portfolio will not be registered with, nor will the
issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, foreign securities are subject to less supervision and there may be
less publicly available information about the securities and the foreign company
or government issuing them than is available about a domestic company of
government entity. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.

Certain restrictions may apply concerning the amount of a Portfolio's net assets
which may be invested in foreign securities. For example MFS Portfolio may
invest up to 25% of its net assets in such securities, although it generally
expects to invest between 0% and 10% of its total assets in foreign securities
(not including ADRs).

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The Portfolios may hold foreign currency received in connection with investments
in foreign securities when, in the judgment of the Subadviser, it would be
beneficial to convert such currency into U.S. dollars at a later date, based on
anticipated changes in the relevant exchange rate. MFS Portfolio may also hold
foreign currency in anticipation of purchasing foreign securities.

AMERICAN DEPOSITORY RECEIPTS

As noted above, ADRs are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Because ADRs trade on
United States securities exchanges, the Subadviser does not treat them as
foreign securities. However, they are subject to many of the risks of foreign
securities described above.

EMERGING MARKET SECURITIES

The MFS, Large Cap, Federated High Yield, Lazard International Stock, and Equity
Income Portfolios may invest in countries or regions with relatively low gross
national product per capita compared to the world's major economies, and in
countries or regions with the potential for rapid economic growth (emerging
markets). Emerging markets will include any country: (i) having an "emerging
stock market" as defined by the International Finance Corporation; (ii) with
low-to-middle-income economies according to the International Bank for
Reconstruction and Development (the "World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by the Subadviser to be an
emerging market as defined above. Additionally, the Portfolios may invest in
securities of: (i) companies the principal securities trading market for which
is an emerging market country; (ii) companies organized under the laws of, and
with a principal office in, an emerging market country; (iii) companies whose
principal activities are located in emerging market countries; or (iv) companies
traded in any market that derives 50% or more of their total revenue from either
goods or services produced in an emerging market or sold in an emerging market.

The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions. Delays in settlement could result in temporary periods
when a portion of the assets of a Portfolio is uninvested and no return is
earned thereon. The inability of a Portfolio to make intended security purchases
due to settlement problems could cause the Portfolio to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result in losses to a Portfolio. Emerging nations may
suffer from extreme and volatile debt burdens or inflation rates. Securities of
issuers located in countries with emerging markets may have limited
marketability and may be subject to more abrupt or erratic price movements.

Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. A Portfolio could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to a Portfolio of any
restrictions on investments. Investments in certain foreign emerging market debt
obligations may be restricted or controlled to varying degrees. These
restrictions or controls may at times preclude investment in certain foreign
emerging market debt obligations and increase the expenses of a Portfolio.

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LENDING PORTFOLIO SECURITIES

The Lazard International Stock, MFS, Federated High Yield, Federated Stock,
Large Cap, Equity Income and Mid Cap Disciplined Equity Portfolios are each
authorized to lend their portfolio securities to brokers, dealers and other
financial organizations. The Large Cap and Equity Income Portfolios may lend
portfolio securities to Fidelity. The purpose of this lending activity is to
generate additional income. The primary risk associated with lending portfolio
securities, as with other extensions of credit, consists of possible loss of
rights in the collateral should the borrower fail financially.

As with any securities lending, a risk exists that when the Portfolio lends
portfolio securities, the securities may not be available to the Portfolio on a
timely basis and the Portfolio may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities files for bankruptcy or becomes insolvent, disposition of the
securities may be delayed pending court action.

Each of the Portfolios engaging in securities lending will follow certain
guidelines in determining whether a particular potential securities borrower is
appropriate. For example, MFS will usually only make loans to member banks of
the Federal Reserve System and member firms (and subsidiaries thereof) of the
New York Stock Exchange (the "Exchange") and would be required to be secured
continuously by collateral in cash, cash equivalents or U. S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. MFS Portfolio would continue to collect
the equivalent of the interest on the securities loaned and would also receive
either interest (through investment of cash collateral) or a fee (if the
collateral is U. S. Government securities or a letter of credit). The Lazard
International Stock and Federated Portfolios may lend securities from its
portfolio to brokers, dealers and financial institutions if cash or cash
equivalent collateral, including letters of credit, marked-to-market daily and
equal to at least 100% of the current market value of the securities loaned
(including accrued interest and dividends thereon) plus the interest payable to
the Portfolio with respect to the loan is maintained by the borrower with the
Portfolio in a segregated account.

In determining whether to lend a security to a particular broker, dealer or
financial institution, the Investment Subadviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer or
financial institution. A Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that the Portfolio may receive as collateral will not become part of the
Portfolio's investment Portfolio at the time of the loan and, in the event of a
default by the borrower, the Portfolio will, if permitted by law, dispose of
such collateral except for such part thereof that is a security in which the
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Portfolio any accrued income on those securities and the
Portfolio may invest the cash collateral and earn additional income or receive
an agreed upon fee from a borrower that has delivered cash equivalent
collateral. The Portfolio will not lend securities having a value that exceeds
10% of the current value of its total assets. Loans of securities will be
subject to termination at the Portfolio's or the borrower's option. The
Portfolio may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.

TEMPORARY BANK BORROWING

All of the Portfolios may borrow from banks for temporary purposes, including
the meeting of redemption requests which might require the untimely disposition
of securities. The Federated Portfolios may borrow up to 33% of their respective
assets for such reasons as well.

Temporary or emergency borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not exceed 5%, of the
value of the Lazard International Stock Portfolio's total assets (including the
amount borrowed) less liabilities (including the amount borrowed) at the time
the borrowing is made. Securities may not be purchased by the Portfolio while
borrowings in excess of 5% of the value of the Lazard International Stock
Portfolio's

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total assets are outstanding. The foregoing policies do not apply to MFS, Equity
Income, and Large Cap Portfolios, whose policies permit borrowing of up to
33 1/3% of total assets.

LETTERS OF CREDIT

The Lazard International Stock Portfolio and Mid Cap Disciplined Equity Fund may
also engage in trades of municipal obligations, certificates of participation
therein, commercial paper and other short-term obligations that are backed by
irrevocable letters of credit issued by banks which assume the obligation for
payment of principal and interest in the event of default by an issuer. Only
banks the securities of which, in the opinion of the Investment Subadviser, are
of investment quality comparable to other permitted investments of the Lazard
International Stock Portfolio may be used for letter of credit-backed
investment.

INVESTMENT IN UNSEASONED COMPANIES

The Lazard International Stock, Equity Income, and Large Cap Portfolios may also
invest Portfolio assets in securities of companies that have operated for less
than three years, including the operations of predecessors. The Lazard
International Stock Portfolio has undertaken that it will not make investments
that will result in more than 5% of its total assets being invested in the
securities of newly formed companies and equity securities that are not readily
marketable. Investing in securities of unseasoned companies may, under certain
circumstances, involve greater risk than is customarily associated with
investment in more established companies.

REAL ESTATE-RELATED INSTRUMENTS

The Large Cap and Equity Income Portfolios may engage in the purchase and sale
of real estate related instruments including real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such as
real estate values and property taxes, interest rates, cash flow of underlying
real estate assets, over building, and the management skill and creditworthiness
of the issuer. Real estate-related instruments may also be affected by tax and
regulatory requirements, such as those relating to the environment.

CORPORATE ASSET-BACKED SECURITIES

Federated High Yield, MFS Portfolio, Large Cap Portfolio and Equity Income
Portfolio may invest in corporate asset-backed securities. These securities,
issued by trusts and special purpose corporations, are backed by a pool of
assets, such as credit card or automobile loan receivables, representing the
obligations of a number of different parties. Corporate asset-backed securities
present certain risks. For instance, in the case of credit card receivables,
these securities may not have the benefit of any security interest in the
related collateral.

ASSET-BACKED MORTGAGE SECURITIES

Securities of this type include interests in pools of lower-rated debt
securities, or consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities. The
value of these securities may be significantly affected by changes in interest
rates, the market's perception of the issuers, and the creditworthiness of the
parties involved. Some securities may have a structure that makes their reaction
to interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.

LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS

MFS Portfolio, Federated High Yield, Large Cap and Equity Income Portfolios may
invest a portion of their assets in "loan participations" and other direct
indebtedness. By purchasing a loan participation, the Portfolios acquire some or
all of the interest of a bank or other lending institution in a loan to a
corporate borrower. Many such loans are secured, and most impose restrictive
covenants which must be met by the borrower. These loans are made generally to
finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. Such loans may be in default at the
time of purchase.

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MFS, Large Cap and Equity Income Portfolios may also purchase other direct
indebtedness such as trade or other claims against companies, which generally
represent money owed by the company to a supplier of goods and services. These
claims may also be purchased at a time when the company is in default. Certain
of the loan participations and other direct indebtedness acquired by these
Portfolios may involve revolving credit facilities or other standby financing
commitments which obligate the Portfolios to pay additional cash on a certain
date or on demand.

The highly leveraged nature of many such loans and other direct indebtedness may
make such loans especially vulnerable to adverse changes in economic or market
conditions. Loan participations and other direct indebtedness may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may exist to resell such instruments. As a result, the
Portfolios may be unable to sell such investments at an opportune time or may
have to resell them at less than fair market value. For a further discussion of
loan participations, other direct indebtedness and the risks related to
transactions therein, please review the SAI.

INVESTMENT COMPANY SECURITIES

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
purchase and sell securities of closed-end investment companies.

AFFILIATED BANK TRANSACTIONS

The Large Cap and Equity Income Portfolios may engage in transactions with
financial institutions that are, or may be considered to be "affiliated persons"
of the fund under the Investment Company Act of 1940. These transactions may
include repurchase agreements with custodian banks; short-term obligations of,
and repurchase agreements with, the 50 largest U.S. banks (measured by
deposits): municipal securities, U. S. government securities with affiliated
financial institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. The Board of Trustees and the
Subadvisers of Portfolios engaged in affiliated bank transactions have
established and will periodically review procedures applicable to transactions
involving affiliated financial institutions.

INDEXED SECURITIES

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
purchase securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price of
gold, resulting, in a security whose price tends to rise and fall together with
gold prices. Currency-indexed securities typically are short-term to
intermediate-term debt securities whose maturity values or interest rates are
determined by reference to the values of one or more specified foreign
currencies, and may offer higher yields than U.S. dollar-denominated securities
of equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency,
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Recent
issuers of indexed securities have included banks, corporations, and certain
U.S. government agencies. Indexed securities may be more volatile than the
underlying instruments.

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SHORT SALES "AGAINST THE BOX"

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
enter into a short sale against the box. If a Portfolio decides to enter into
such transitions, it will be required to set aside securities equivalent in kind
and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such securities
while the short sale is outstanding.

SWAP AGREEMENTS

The Large Cap and Equity Income Portfolios may engage in swap agreements which
can be individually negotiated and structured to include exposure to a variety
of different types of investments or market factors. Depending on their
structure, swap agreements may increase or decrease a fund's exposure to long-
or short-term interest rates (in the United States or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. A Portfolio is not limited to any
particular form of swap agreement if the Subadviser determines it is consistent
with the fund's investment objective and policies.

In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

Swap agreements will tend to shift a Portfolio's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a fund's
investments and its share price.

The most significant factor in the performance of swap agreements is the change
in the specific interest rate, currency, or other factors that determine the
amounts of payments due to and from a fund. If a swap agreement calls for
payments by the fund, the fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declined, the value of a
swap agreement would be likely to decline, potentially resulting in losses. Each
Portfolio expects to be able to eliminate its exposure under swap agreements
either by assignment or other disposition, or by entering into an offsetting
swap agreement with the same party or a similarly creditworthy party.

Each Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a Portfolio
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the Portfolio's accrued
obligations under the swap agreement over the accrued amount the Portfolio is
entitled to receive under the agreement. If a Portfolio enters into a swap
agreement on other than a net basis, it will segregate assets with a value equal
to the full amount of the Portfolio's accrued obligations under the agreement.

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EXHIBIT B
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A. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS

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 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 susceptibility to impairment sometime 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 thereby 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 the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.

Caa -- Bonds rate Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca -- Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other market short-comings.

C -- Bonds rate C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

B. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issued only in small degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or

SERIES-48
<PAGE> 153

changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.

BB -- Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B -- Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest or repay principal.

CC -- Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

SERIES-49
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THE TRAVELERS SERIES TRUST

L-11788-3NC 5/97