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Registration Statement No. 33-43628
811-6465
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 16
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16
THE TRAVELERS SERIES TRUST
(Exact name of Registrant)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (860) 277-0111
ERNEST J. WRIGHT
Secretary to the Board of Trustees
The Travelers Series Trust
One Tower Square
Hartford, Connecticut 06183
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b).
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on July 31, 1996 pursuant to paragraph (b).
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60 days after filing pursuant to paragraph (a)(1).
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on __________ pursuant to paragraph (a)(1) of Rule 485.
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75 days after filing pursuant to paragraph (a)(2).
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on __________ pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
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previously filed post- effective amendment.
AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE REGISTRANT WERE
REGISTERED PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940. A RULE
24F-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED DECEMBER 31, 1995 WAS FILED ON
FEBRUARY 27, 1996.
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THE TRAVELERS SERIES TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights (Not applicable to Portfolios
added by Post-Effective Amendment No. 16)
4. General Description of Registrant Cover Page; The Travelers Series Trust;
Investment Objectives and Policies
5. Management of the Fund Board of Trustees; Investment Manager; Investment Subadvisers;
Securities Transactions; Fund Expenses;
Additional Information
6. Capital Stock and Other Securities The Travelers Series Trust; Dividends
and Tax Status; Shares of the Series
Trust; Pricing Shares
7. Purchase of Securities Being Offered Shares of the Series Trust
8. Redemption or Repurchase Share Redemption
9. Legal Proceedings Legal Proceedings
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and Policies;
Investment Restrictions
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Advisory Services; Investment Subadvisers; Additional
Other Services Information
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Declaration of Trust
Securities
19. Purchase, Redemption and Pricing Valuation of Securities
of Securities Being Offered
20. Tax Status Distributions and Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Financial Statements
</TABLE>
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
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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
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 1-860-422-3985
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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.
Seven of the Portfolios of the Series Trust are described herein: Travelers
Quality Bond Portfolio, Lazard International Stock Portfolio, MFS Emerging
Growth Portfolio, Federated Stock Portfolio, Federated High Yield Portfolio,
Large Cap Portfolio and Equity Income Portfolio.
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
July 31, 1996 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
1-860-422-3985.
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.
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.
THE DATE OF THIS PROSPECTUS IS JULY 31, 1996.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
THE TRAVELERS SERIES TRUST............................................................ 3
FUNDAMENTAL INVESTMENT POLICIES....................................................... 3
TRAVELERS QUALITY BOND PORTFOLIO...................................................... 3
LAZARD INTERNATIONAL STOCK PORTFOLIO.................................................. 5
MFS EMERGING GROWTH PORTFOLIO......................................................... 7
FEDERATED HIGH YIELD PORTFOLIO........................................................ 11
FEDERATED STOCK PORTFOLIO............................................................. 15
LARGE CAP PORTFOLIO................................................................... 16
EQUITY INCOME PORTFOLIO............................................................... 19
PORTFOLIO TURNOVER.................................................................... 20
BOARD OF TRUSTEES..................................................................... 20
INVESTMENT MANAGER.................................................................... 20
INVESTMENT SUBADVISERS................................................................ 21
SECURITIES TRANSACTIONS............................................................... 25
FUND EXPENSES......................................................................... 25
COMPANY TRANSFER AGENT................................................................ 25
Shares of the Series Trust.......................................................... 26
PRICING SHARES........................................................................ 26
SHARE REDEMPTION...................................................................... 27
Dividends and Tax Status............................................................ 27
LEGAL PROCEEDINGS..................................................................... 27
ADDITIONAL INFORMATION................................................................ 27
EXHIBIT A............................................................................. 28
EXHIBIT B............................................................................. 45
</TABLE>
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THE TRAVELERS SERIES TRUST
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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 thirteen 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"). Seven 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")
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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
SERIES-3
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made if the Investment Adviser concludes that the investment yields justify a
longer term commitment. 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 5% 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.
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.
SERIES-4
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LAZARD INTERNATIONAL STOCK PORTFOLIO
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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).
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 affiliates, Lazard Freres &
Cie. in Paris, Lazard Brothers & Co. Ltd. in London, and Lazard Asset Management
K.K. in 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.
SERIES-5
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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 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 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.
SERIES-6
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MFS EMERGING GROWTH PORTFOLIO
("MFS PORTFOLIO")
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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.
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.
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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 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 interest 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
SERIES-8
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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).
In addition to the fundamental investment policies listed directly above, the
MFS Portfolio may engage in the following nonfundamental policies as well:
- 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.
SERIES-9
<PAGE> 13
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 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.
SERIES-10
<PAGE> 14
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 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 and the SAI 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 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.
SERIES-11
<PAGE> 15
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;
- 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; and (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
SERIES-12
<PAGE> 16
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;
- 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. 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,
SERIES-13
<PAGE> 17
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.
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.
SERIES-14
<PAGE> 18
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 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 and the SAI 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:
SERIES-15
<PAGE> 19
- 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% policy. The Large Cap 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.) 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;
- loans participation and other direct indebtedness;
- indexed securities;
- short sales "against the box" (see Exhibit A for more information about
this investment technique);
- swap agreements; and
- restricted securities.
Please review Exhibit A and the SAI 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.
SERIES-16
<PAGE> 20
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 many companies and industries.
The Portfolio may not buy all of these instruments or use all of these
techniques 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.
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.
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
SERIES-17
<PAGE> 21
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 ARE NONFUNDAMENTAL.
- 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.
- 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
SERIES-18
<PAGE> 22
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
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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 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.
More detailed information about the Portfolio's investments is contained in
Exhibit A and the Portfolio's SAI.
SERIES-19
<PAGE> 23
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
values.
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 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.
PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
Although none of the Portfolios intends 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. Because the Portfolios are
new, no Portfolio turnover information is presently available. We anticipate the
Portfolio turnover rates will be as follows: Quality Bond Portfolio, 200% or
less; Lazard International Stock Portfolio, 60% to 70%; MFS Emerging Growth
Portfolio, less than 100%; Federated High Yield Portfolio, less than 100%;
Federated Stock Portfolio, less than 100%; Large Cap Portfolio, 155% to 160%;
and Equity Income Portfolio, less than 100%.
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.
SERIES-20
<PAGE> 24
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 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 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%; and Equity Income Portfolio 0.30%.
Investment Advisory fees are computed daily and are paid monthly. These fees do
not reflect the Subadvisory fees paid to the Subadvisers. Additionally, TAMIC
receives a fee equal to a 0.323% of the average net asset value of the Travelers
Bond Portfolio for providing investment advisory services.
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.
SERIES-21
<PAGE> 25
QUALITY BOND PORTFOLIO
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 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.
LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD FRERES ASSET MANAGEMENT
Lazard Freres 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 Freres Asset Management is a division of Lazard Freres & Co. LLC ("Lazard
Freres"), 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 Freres 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 Freres is paid on 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 Freres, 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 Equity Portfolio, a
publicly traded mutual fund offered by Lazard Freres 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 $43.9 billion
on behalf of approximately 1.9 million investor accounts as of February 29,
1996. As of such date, MFS managed approximately $20 billion of assets invested
in equity securities and approximately $20 billion of assets invested in fixed
income securities. Approximately $3.8 billion of the assets managed by MFS are
invested in securities of foreign issuers and non-
SERIES-22
<PAGE> 26
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 the MFS Portfolio
manager 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.
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 $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December 31, 1995,
Federated Investors is one of the largest mutual fund investment managers in the
United States. Federated funds are presently at work in and through 4,000
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.
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.
SERIES-23
<PAGE> 27
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.
At present, the principal operating activities of FMR Corp. are those conducted
by three of its divisions as follows: FSC, which is the transfer and shareholder
servicing agent for certain of the funds advised by FMR; Fidelity Investments
Institutional Operations Company, which performs shareholder servicing functions
for institutional customers and funds sold through intermediaries; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
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.
SERIES-24
<PAGE> 28
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 Peterson is manager of Equity Income Portfolio. He also manages Fidelity
Equity Income Fund, a publicly traded mutual fund. Mr. Peterson is also Senior
Vice President of Fidelity Management Trust Co. Previously, he was vice
president and manager of several trust accounts. Mr. Peterson joined Fidelity in
October 1980.
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
- --------------------------------------------------------------------------------
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 originally executed on May 1, 1993, and
amended as of July 31, 1996, 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 1.25% of
each Portfolio's average net assets for any fiscal year. This agreement will
remain in effect until terminated by either party upon sixty days' notice.
COMPANY TRANSFER AGENT
- --------------------------------------------------------------------------------
The Travelers Insurance Company, One Tower Square, Hartford, Connecticut 06183,
serves as the Series Trust's transfer agent and dividend disbursing agent.
Travelers Insurance Company 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.
SERIES-25
<PAGE> 29
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.
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 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.
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.
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.
PRICING SHARES
- --------------------------------------------------------------------------------
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.
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
SERIES-26
<PAGE> 30
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.
SHARE REDEMPTION
- --------------------------------------------------------------------------------
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.
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.
DIVIDENDS AND 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.
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-27
<PAGE> 31
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
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, and Lazard
International Stock 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-l 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 (iv) repurchase
agreements relating to the foregoing.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES
Certain of the Portfolios, including the Federated High Yield, Large Cap, Equity
Income 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.
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).
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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 Large Cap and Equity Income, 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 are 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 Portfolio's may be permitted to invest in
such lower-quality debt securities.
FLOATING AND VARIABLE RATE INSTRUMENTS
The Lazard International Stock Portfolio, Large Cap, Equity Income and the
Federated High Yield Portfolios may purchase obligations that have a floating or
variable rate of 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.
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The 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. The 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 that 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.
To the extent that floating and variable rate instruments without demand
features are not readily marketable, they will be subject to the investment
restriction that the Portfolio may not invest an amount equal to 10% or more of
the current value of its net assets in illiquid securities. See "Illiquid
Securities" and "Investment Restrictions" below.
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 and Equity Income 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 (i.e., banks or reporting 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.
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.
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, and Equity Income 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.
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.
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 be
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viewed as a senior security, and generally will be marked to market and
reflected in the Portfolio's 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 securities are limited to
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, and Lazard
International Stock 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
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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 any Portfolios' futures trading
transactions be employed for speculative purposes.
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.
When a futures contract is purchased, the Portfolios will set aside, in an
identifiable manner, an amount of cash and cash equivalents 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.
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.
As evidence of its hedging intent, the Portfolios expect that on seventy-five
percent (75%) or more of the occasions on which they purchase a long futures
contract, they will effect the purchase of securities in the cash market or take
delivery as they close out a futures position. In particular cases, however,
when it is economically advantageous, a long futures position may be terminated
without the corresponding purchase of securities.
TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS: Several of the
Portfolios, including the Large Cap, Equity Income, Lazard International Stock
and MFS Portfolios 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
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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
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. 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
and MFS 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.
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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.
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
and MFS 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 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.
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.
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
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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 and Lazard
International Stock 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 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, and Lazard International Stock 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, and Lazard
International Stock 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
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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 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.
"NON-PUBLICLY TRADED" OR "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.
Such securities are referred to as "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.
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<PAGE> 41
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,
and Lazard International Stock 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 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.
SERIES-38
<PAGE> 42
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).
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
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<PAGE> 43
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.
LENDING PORTFOLIO SECURITIES
The Lazard International Stock, MFS, Federated High Yield, Federated Stock,
Large Cap and Equity Income Portfolios are each authorized to lend their
portfolio securities to brokers, dealers and other financial organizations. 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 creditworthi-
SERIES-40
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ness 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 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 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.
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<PAGE> 45
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.
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
SERIES-42
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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.
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.
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<PAGE> 47
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.
SERIES-45
<PAGE> 49
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 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 DD 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-46
<PAGE> 50
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 51
STATEMENT OF ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)
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
- -------------------------------------------------------------------------------
JULY 31, 1996
This Statement of Additional Information ("SAI") is not a prospectus but
relates to, and should be read in conjunction with, The Travelers Series
Trust's (the "Trust") prospectus dated July 31, 1996. A copy of the Prospectus
is available from the office of the Series Trust at The Travelers Insurance
Company, Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030
or by calling 860-422-3985.
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRAVELERS SERIES TRUST .................................. 4
U.S. GOVERNMENT SECURITIES PORTFOLIO ........................ 4
Investment Objectives and Policies ...................... 4
Investment Restrictions ................................. 4
SOCIAL AWARENESS STOCK PORTFOLIO ............................ 5
Investment Objectives and Policies ...................... 5
Social Criteria ......................................... 5
Investment Restrictions ................................. 6
UTILITIES PORTFOLIO ......................................... 7
Investment Objectives and Policies ...................... 7
Investment Restrictions ................................. 7
ZERO COUPON BOND FUND PORTFOLIOS (Series 1998, 2000, 2005) .. 8
Investment Objectives and Policies ...................... 8
Investment Securities, Strategies and Techniques ........ 9
Investment Restrictions ................................. 9
TRAVELERS QUALITY BOND PORTFOLIO ............................ 10
Investment Objectives and Policies ...................... 10
Investment Restrictions ................................. 11
LAZARD INTERNATIONAL STOCK PORTFOLIO ........................ 11
Investment Objectives and Policies ...................... 11
Investment Restrictions ................................. 12
MFS EMERGING GROWTH PORTFOLIO ............................... 13
Investment Objectives and Policies ...................... 13
Investment Restrictions ................................. 14
FEDERATED HIGH YIELD PORTFOLIO .............................. 14
Investment Objectives and Policies ...................... 14
Investment Restrictions ................................. 15
FEDERATED STOCK PORTFOLIO ................................... 16
Investment Objectives and Policies ...................... 16
Investment Restrictions ................................. 17
LARGE CAP PORTFOLIO ......................................... 17
Investment Objectives and Policies ...................... 17
Investment Restrictions ................................. 18
EQUITY INCOME PORTFOLIO ..................................... 19
Investment Objectives and Policies ...................... 19
Investment Restrictions ................................. 20
VALUATION OF SECURITIES ..................................... 20
DISTRIBUTIONS AND TAXES ..................................... 21
TRUSTEES AND OFFICERS ....................................... 21
DECLARATION OF TRUST ........................................ 23
INVESTMENT ADVISORY SERVICES ................................ 24
</TABLE>
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<PAGE> 53
<TABLE>
<S> <C>
INVESTMENT SUBADVISERS ...................................... 24
General ................................................. 24
TAMIC ................................................... 24
Lazard .................................................. 25
MFS ..................................................... 25
Federated ............................................... 26
Fidelity ................................................ 27
SBMFM ................................................... 28
Securities Transactions ................................. 29
The Advisory Agreements ................................. 29
REDEMPTIONS IN KIND ......................................... 30
BROKERAGE ................................................... 30
ADDITIONAL INFORMATION ...................................... 31
APPENDIX .................................................... 33
FINANCIAL STATEMENTS ........................................ 34
</TABLE>
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<PAGE> 54
THE TRAVELERS SERIES TRUST
The Travelers Series Trust (the "Series Trust") is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company, and 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 thirteen series (the
"Portfolios"), each with its own investment objective and policies, each of
which are diversified portfolios under the Investment Company Act of 1940 as
amended (the "1940 Act").
U.S. GOVERNMENT SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the U.S. Government Securities Portfolio is
the selection of investments from the point of view of an investor concerned
primarily with highest credit quality, current income and total return. To
achieve this objective, the Portfolio invests primarily in direct obligations of
the United States Government, in obligations of its instrumentalities supported
by its full faith and credit, and in obligations issued or guaranteed by Federal
Agencies which are independent corporations sponsored by the United States and
which are subject to its general supervisory oversight, but which do not carry
the full faith and credit obligations of the United States.
INVESTMENT RESTRICTIONS
The following restrictions 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 U.S. Government Securities
Portfolio will not:
(1) invest more than 5% of its total assets, computed at market value, in
the securities of any one issuer (exclusive of securities issued by
the United States Government, its agencies or instrumentalities, for
which there is no limit);
(2) invest in more than 10% of any class of securities of any one issuer;
(3) borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of up
to 10% of its gross assets computed at cost; while outstanding
according to the 1940 Act, a borrowing may not exceed one-third of the
value of the net assets, including the amount borrowed; the Portfolio
has no intention of attempting to increase its net income by 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 computed at
cost;
(4) underwrite securities, except that the Portfolio may purchase
securities from issuers thereof or others and dispose of such
securities in a manner consistent with its other investment policies;
in the is position of restricted securities, the Portfolio may be
deemed to be an underwriter, as defined in the Securities Act of 1933;
(5) 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
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<PAGE> 55
mortgages, or commodities or commodity contracts, except transactions
involving financial futures in order to limit transactions and
borrowing costs and for hedging purposes;
(6) invest for the primary purpose of control or management;
(7) 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;
(8) make loans, except that the Portfolio 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 investment objective and policies;
(9) invest more than 25% of its total assets in the securities of issuers
in any single industry (other than securities issued by the United
States Government, its agencies or instrumentalities); or
(10) purchase securities of other investment companies, 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; when consistent
with its investment objectives, the Portfolio may purchase securities
of brokers, dealers, underwriters or investment advisers.
SOCIAL AWARENESS STOCK PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Social Awareness Stock 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 Smith Barney Mutual Fund Management, Inc. ("SBMFM")
determines meet certain social criteria, based on analysis of data. It is up to
the discretion of the investment adviser to determine the source for the data.
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.
SOCIAL CRITERIA
The Social Awareness Stock Portfolio utilizes certain social criteria to
define a universe of common stocks that are acceptable investment vehicles for
the Portfolio. Companies will not meet the social criteria established for the
Portfolio if a 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 gambling services. These investment restrictions are not
fundamental and may be changed without shareholder approval.
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.
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<PAGE> 56
INVESTMENT RESTRICTIONS
The investment restrictions set forth in Items 1 through 9 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.
Items 10 through 13 may be changed by a vote of the Board of Trustees. The
Social Awareness Stock Portfolio will not:
(1) invest more than 5% of its total assets in securities of any one
issuer, except obligations of the United States Government and its
instrumentalities;
(2) borrow money, except that the right is reserved to borrow from banks
for emergency purposes, provided that such borrowings will not exceed
5% of the value of the assets of the Portfolio and that immediately
after the borrowing, and at all times thereafter, and while any such
borrowing is unrepaid, there will be asset coverage of at least 300%
for all borrowings of the Portfolio;
(3) underwrite securities of other issuers, except that the Portfolio
could be deemed an underwriter when engaged in the sale of restricted
securities (see item 13);
(4) purchase interests in real estate, except as may be represented by
securities for which there is an established market;
(5) purchase commodities or commodity contracts, except transactions
involving financial futures in order to limit transaction and
borrowing costs and for hedging purposes;
(6) make loans, except through the acquisition of a portion of privately
placed issue of bonds, debentures or other evidences of indebtedness
of a type customarily purchased by institutional investors (see item
13);
(7) invest in the securities of a company for the purpose of exercising
management or control;
(8) acquire more than 10% of the voting securities of any one issuer (it
is the present practice of the Portfolio not to exceed 5% of the
voting securities of any one issuer);
(9) issue senior securities;
(10) make short sales of securities;
(11) make purchases on margins, 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;
(12) invest in securities of other investment companies, except as part of
a plan of merger, consolidation or acquisition of assets; or
(13) invest more than 5% of the value of the assets of the Portfolio in
restricted securities (securities which may not be publicly offered
without registration under the Securities Act of 1933).
Changes in the investments of the Portfolio may be made from time to time
to take into account changes in the outlook for particular industries or
companies. The Portfolio's investments will not, however, be concentrated in any
one industry; that is, no more than twenty-five percent (25%) of the value of
its assets will be
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<PAGE> 57
invested in any one industry. While the Portfolio may occasionally invest in
foreign securities, it is not anticipated that such investments will, at any
time, account for more than ten percent (10%) of its investment portfolio.
The assets of the Portfolio will be kept fully invested except that (a)
sufficient cash may be kept on hand reasonably to provide for variable annuity
contract obligations, and (b) reasonable amounts of cash, United States
Government or other liquid securities, such as short-term bills and notes, may
be held for limited periods, pending investments in accordance with their
respective investment policies.
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 seeks to achieve its objectives by investing
in equity and debt securities of companies in the utility industries, which
industries are deemed for these purposes to be comprised of companies
principally engaged (that is, 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) 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. 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, United States 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. 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.
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;
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<PAGE> 58
(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 maintaining 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;
(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.
ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)
INVESTMENT OBJECTIVE AND POLICIES
The objective of each of the three Zero Coupon Bond Portfolios is to
provide as high an investment return as is consistent with the preservation of
capital. Each Portfolio's investment objective may be changed only with the
approval of a majority of the Portfolio's outstanding shares. There can be no
assurance that a Portfolio will achieve its investment objective.
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<PAGE> 59
Each Portfolio seeks to return a reasonably assured targeted dollar amount,
predictable at the time of investment, on a specific target date in the future
by investing in primarily zero coupon securities that pay no cash income but are
acquired by the Portfolio at substantial discounts from their value at maturity.
The Zero Coupon Bond Portfolios may not be appropriate for contract owners who
do not plan to have their premiums invested in shares of the Portfolios for the
long-term or until maturity.
INVESTMENT SECURITIES, STRATEGIES AND TECHNIQUES
Under normal circumstances, each Zero Coupon Bond Portfolio will invest at
least 65% of its net assets in "Stripped Securities," a term used collectively
for Stripped Treasury Securities, Stripped Government Securities, Stripped
Corporate Securities and Stripped Eurodollar Obligations and other stripped
securities, all described below. The Stripped Securities in which each Portfolio
will invest consist of:
(1) debt obligations issued by the U.S. Treasury that have been stripped
of their unmatured interest coupons, interest coupons that have been
stripped from debt obligations issued by the U.S. Treasury, and
receipts and certificates for stripped debt obligations and stripped
coupons, including U.S. government trust certificates (collectively,
"Stripped Treasury Securities") (but currently not anticipated to be
in excess of 55% of the Funds' assets);
(2) other zero coupon securities issued by the U.S. government and its
agencies and instrumentalities, by a variety of tax-exempt issuers
such as state and local governments and their agencies and
instrumentalities and by "mixed-ownership government corporations"
(collectively, "Stripped Government Securities");
(3) zero coupon securities issued by domestic corporations which consist
of corporate debt obligations without interest coupons, and, if
available, interest coupons that have been stripped from corporate
debt obligations, and receipts and certificates for such stripped debt
obligations and stripped coupons (collectively, "Stripped Corporate
Securities");
(4) zero coupon securities issued by certain entities which consist of
stripped debt obligations and stripped coupons of asset-backed
securities, which zero coupon-type securities may exist today or may
be developed in the future. These securities may be illiquid and are
subject to the 10% limitation for such restricted securities, as
described on page 4.
(5) stripped Eurodollar obligations, which are debt securities denominated
in U.S. dollars that are issued by foreign issuers, often subsidiaries
of domestic corporations ("Stripped Eurodollar Obligations").
As to the remaining 35% of each Zero Coupon Bond Portfolio, the assets may
be invested in non-zero coupon securities such as common stock and other equity
securities, bonds and other debt securities, and money market instruments.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental and may not be
changed without a vote of majority of the outstanding voting securities of each
Zero Coupon Bond Portfolio, as defined in the Investment Company Act of 1940, as
amended. Each of the Zero Coupon Bond Portfolios 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;
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<PAGE> 60
(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 each 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 a Portfolio;
(4) make short sales of securities or maintain a short position, except to
the extent of 5% of each Portfolio's net assets and except that a
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
each 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 a 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 a 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 a
Portfolio's assets;
(7) invest in commodities, except that each Portfolio may purchase or
write futures contracts and options on futures contracts;
(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.
In addition, the Portfolios 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 a Portfolio would be invested in such securities.
TRAVELERS QUALITY BOND PORTFOLIO ("TRAVELERS BOND PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
The basic investment objective of Travelers Bond Portfolio is to seek current
income, moderate capital volatility and total return.
The assets of Travelers Bond Portfolio will be primarily invested in money
market obligations, including, but not limited to:
- - treasury bills;
- - repurchase agreements;
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- - 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
commitment. 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 Exhibit A to the prospectus 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 5% of its assets in restricted securities (securities which may
not be publicly offered without registration under the Securities Act of
1933).
Please see the prospectus for additional information concerning this Portfolio.
LAZARD INTERNATIONAL STOCK PORTFOLIO ("LAZARD INTERNATIONAL STOCK PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
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).
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"The Portfolio expects to invest its assets principally in the common stocks of
non-U.S. companies, (although the Portfolio may have substantial investments in
American Depository Receipts ("ADRs" and Global Depository Receipts),
convertible bonds, and other convertible securities.
There is no requirement, however, that the Lazard International Stock 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 Lazard International
Stock 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
Lazard International Stock 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 Lazard International Stock 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 affiliates, Lazard Freres &
Cie. in Paris, Lazard Brothers & Co. Ltd. in London, and Lazard Freres K.K. in
Japan, 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 Lazard International Stock 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.
In addition, the Lazard International Stock Portfolio may engage in the
following additional investment activities described in greater detail in
Exhibit A to the prospectus: (i) trading of short term money market instruments;
(ii) lending of Portfolio securities; (iii) floating and variable rate
instruments; (iv) letters of credit; (v) purchase and sales of restricted
securities; (vi) investments in emerging or unseasoned companies.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of the Lazard
International Stock Portfolio. 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 Portfolio's
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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 15% 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 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 prospectus;
- - purchase securities on margin;
- - underwrite securities; or
- - make investments for the purpose of exercising control or management.
MFS EMERGING GROWTH PORTFOLIO ("MFS PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
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. MFS Portfolio's policy
is to invest primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of small and medium-sized companies that 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,
management and market opportunities which are usually necessary to become more
widely recognized as growth companies.
However, 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 to the prospectus 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;
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- - 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.
In addition, MFS Portfolio may engage in certain investment activity described
in greater detail in Exhibit A to the prospectus: (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; and (ix) various futures and
option trading techniques.
INVESTMENT RESTRICTIONS
The MFS Portfolio is subject to certain fundamental investment restrictions
listed below. The MFS Portfolio will not:
- - borrow money in an amount in excess of 33 1/3% of its net assets;
- - underwrite securities;
- - concentrate its investments in any particular industry in excess of 25% of
its total net assets;
- - purchase or sell real estate in the ordinary course of its business;
Additionally, certain other nonfundamental restrictions apply, including the
following:
- - make loans except by the purchase of obligations in which the Portfolio is
authorized to invest;
- - purchase the securities of any issuer if such purchase, at the time thereof,
would cause more than 15% of its total assets to be invested in the
securities of such issuer;
- - invest for the purpose of control or management;
- - purchase securities on margin, except as provided in the prospectus;
- - issue any senior security; and
- - purchase, except on a limited basis, securities issued by any other
registered investment company.
FEDERATED HIGH YIELD PORTFOLIO ("FEDERATED HIGH YIELD PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
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. The fixed income securities in which the
Federated High Yield Portfolio intends to invest are expected to be lower-rated
corporate debt obligations. The investment objective stated above cannot be
changed without approval of shareholders.
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.
Permitted investments currently include, but are not limited to, the following:
- - corporate debt obligations having fixed or floating rates of interest and
which are rated BBB or lower by nationally recognized statistical rating
organizations;
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- - 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;
- - 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, so long as they are either (1)
rated in one of the four highest grades by nationally recognized statistical
rating organizations, or (2) issued by a public housing agency and backed by
the full faith and the United States; and
- - equity securities, including unit offerings that combine fixed rate
securities and common stock and common stock equivalents such as warrants,
rights and options.
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.
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.
In addition to the investment techniques described above, the Federated High
Yield Portfolio may also engage in the following investment techniques described
in greater detail in Exhibit A to the prospectus: (i) restricted securities;
(ii) when-issued securities; (iii) temporary investments; (iv) repurchase
agreements; (v) put and call options; and (vi) lending of portfolio securities.
INVESTMENT RESTRICTIONS
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.
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The above are the fundamental investment limitations of the Federated High
Yield Portfolio. The following limitations, however, are nonfundamental. The
Federated High Yield Portfolio will not:
- - invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations;
- - 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
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;
- - invest in real estate; or
- - purchase the securities of other investment companies, except in limited
situations.
FEDERATED STOCK PORTFOLIO ("FEDERATED STOCK PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
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 the prospectus. This investment
objective cannot be changed without the approval of shareholders.
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 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;
- - 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); and
- - when-issued securities.
See Exhibit A to the prospectus for a more detailed discussion of the above
investments.
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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;
- - issue senior securities;
- - trade in puts and calls; or
- - underwrite securities.
LARGE CAP PORTFOLIO ("LARGE CAP PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
Large Cap Portfolio seeks long-term growth of capital by investing primarily in
equity securities of companies with large market capitalizations
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% policy. The Large Cap 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.) The Subadviser, on behalf of the Portfolios, may
invest in, or write (as applicable), the following:
- - cash instruments;
- - equity securities;
- - debt securities;
- - foreign securities;
- - repurchase agreements;
- - reverse repurchased 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;
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- - loan participation and other direct indebtedness;
- - indexed securities;
- - short sales "against the box" (see Exhibit A to the prospectus for more
information about this investment technique);
- - swap agreements; and
- - restricted securities.
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 many companies and industries.
The Portfolio may not buy all of these instruments or use all of these
techniques to and those described in the prospectus 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.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental. The Portfolio will 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;
- - 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
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affiliate or successor with substantially the same investment objective,
policies, and limitations as the Portfolio.
The following investment limitations are nonfundamental:
- - 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.
- - 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 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 purposes of this limitation pass through
entities and other special purpose vehicles or pools of financial assets
such as issues of asset backed securities or investment companies are not
considered "business enterprises."
EQUITY INCOME PORTFOLIO ("EQUITY INCOME PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
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 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 beats that of 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.
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
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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 in the
prospectus including: (i) equity securities; (ii) debt securities; (iii) foreign
securities; (iv) repurchase agreements; (v) restricted securities; and (vi)
lending.
INVESTMENT RESTRICTIONS
The Equity Income Portfolio is subject to the same investment limitations as the
Large Cap Portfolio described above. Please refer to "Large Cap --Investment
Restrictions" above 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. For example, the
Portfolio may make purchases of lower-rated debt securities if such 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. The Portfolio currently intends to limit its investments in lower
than Baa-quality debt securities to 20% of its assets. (See Exhibit B to the
prospectus for a discussion of rating agency procedures.)
VALUATION OF SECURITIES
The current values for the portfolio securities of the Portfolios are
determined as follows. Securities that are traded on an established exchange are
valued on the basis of the last sales price on the exchange where primarily
traded prior to the time of valuation. Securities traded in the over-the-counter
market, for which complete quotations are readily available, are valued at the
mean of the bid and asked prices at the time of valuation. Short-term money
market instruments having maturities of sixty days or less are valued at
amortized cost (original purchase price as adjusted for amortization of premium
or accretion of discount) which, when combined with accrued interest,
approximates market. Short-term money market instruments having maturities of
more than sixty days, for which complete quotations are readily available, are
valued at current market value. The Board of Trustees of the Series Trust values
the following at prices it deems in good faith to be fair: (1) securities,
including restricted securities, for which complete quotations are not readily
available, (2) listed securities if in the Board's opinion the last sales price
does not reflect a current market value or if no sale occurred, and (3) other
assets.
The Series Trust believes that reliable market quotations generally are
not readily available for purposes of valuing fixed income securities. As a
result, depending on the particular securities owned by either Portfolio, it is
likely that most of the valuations for such securities will be based upon their
fair value determined under procedures which have been approved by the Board of
Trustees. The Board of Trustees has authorized the use of a
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pricing service to determine the fair value of the Portfolios' securities.
Securities for which market quotations are readily available are valued on a
consistent basis at that price quoted which, in the opinion of the Trustees or
the person designated by the Trustees to make the determination, most nearly
represents the market value of the particular security. Any securities for which
market quotations are not readily available or other assets are valued on a
consistent basis at fair value as determined in good faith using methods
prescribed by the Trustees or by a committee appointed by the Trustees. The
procedures set forth above need not be used to determine the value of the
securities owned by the Portfolios if, in the opinion of the Trustees or the
Committee, 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.
DISTRIBUTIONS AND TAXES
It is the Series Trust's intention to distribute dividends from net
investment income and all net realized capital gains from the Portfolios
annually in shares or, at the option of the shareholder, in cash. All of the
Portfolios have qualified, and intend to qualify in the future, as a regulated
investment company under Subchapter M of the Internal Revenue Code. Thus the
Portfolios are relieved of any federal income tax liability by distributing all
of their net investment income and net capital gains, if any, to its
shareholders.
When any Portfolio makes a distribution, it intends to distribute only its
net capital gains and such income as has been predetermined to the best of the
Portfolio's ability to be taxable as ordinary income. Therefore, net investment
income distributions will not be made on the basis of distributable income as
computed on the Portfolio's books, but will be made on a federal taxation basis.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name Present Position and Principal Occupation During Last Five Years
- ---- ----------------------------------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith Barney
Chairman and Member Inc. ("Smith Barney"); Chairman (1993-present),
388 Greenwich Street Smith Barney Strategy Advisors, Inc.; President
New York, New York (1994-present), Smith Barney Mutual Funds
Age 62 Management Inc.; Chairman and Director of
forty-one investment companies associated with Smith
Barney; Chairman, Board of Trustees, Drew
University; Trustee, The East New York Savings Bank;
Advisory Director, First Empire State Corporation;
Chairman, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance
Company+; Chairman, Board of Trustees, five Mutual
Funds sponsored by The Travelers Insurance
Company++; prior to July 1993, Senior Executive Vice
President of Shearson Lehman Brothers Inc.
Knight Edwards Of Counsel (1988-present), Partner (1956-1988),
Member Edwards & Angell, Attorneys; Member, Advisory
2700 Hospital Trust Tower Board (1973-1994), thirty-one mutual funds
Providence, Rhode Island sponsored by Keystone Group, Inc.; Member, Board
Age 72 of Managers, seven Variable Annuity Separate
Accounts of The Travelers Insurance Company+;
Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
Robert E. McGill, III Retired manufacturing executive. Director
Member (1983-1995), Executive Vice President (1989-1994)
295 Hancock Street and Senior Vice President, Finance and
Williamstown, Administration (1983-1989), The Dexter Corporation
Massachusetts (manufacturer of specialty chemicals and
Age 64 materials); Vice Chairman (1990-1992), Director
(1983-1995), Life Technologies, Inc. (life
science/biotechnology products); Director,
(1994-present), The Connecticut Surety Corporation
(insurance);
</TABLE>
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<PAGE> 72
Director (1995-present), Calbiochem Novachem
International (life science/biotechnology products);
Director (1995-present), Chemfab Corporation
(specialty materials manufacturer); Member, Board of
Managers, seven Variable Annuity Separate Accounts
of The Travelers Insurance Company+; Trustee, five
Mutual Funds sponsored by The Travelers Insurance
Company.++
Lewis Mandell Dean, College of Business Administration
Member (1995-present), Marquette University; Professor of
606 N. 13th Street Finance (1980-1995) and Associate Dean
Milwaukee, WI 53233 (1993-1995), School of Business Administration,
Age 53 and Director, Center for Research and Development
in Financial Services (1980-1995), University of
Connecticut; Director (1992-present), GZA
Geoenvironmental Tech, Inc. (engineering
services); Member, Board of Managers, seven
Variable Annuity Separate Accounts of The
Travelers Insurance Company+; Trustee, five
Mutual Funds sponsored by The Travelers Insurance
Company.++
Frances M. Hawk Portfolio Manager (1992-present), HLM Management
Member Company, Inc. (investment management); Assistant
222 Berkeley Street Treasurer, Pensions and Benefits. Management
Boston, Massachusetts (1989-1992), United Technologies Corporation
Age 48 (broad- based designer and manufacturer of high
technology products); Member, Board of Managers,
seven Variable Annuity Separate Accounts of The
Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance
Company.++
Ernest J. Wright Assistant Secretary (1994-present), Counsel
Secretary to the Board (1987-present), The Travelers Insurance Company;
One Tower Square Secretary, Board of Managers, seven Variable
Hartford, Connecticut Annuity Separate Accounts of The Travelers
Age 55 Insurance Company+; Secretary, Board of Trustees,
five Mutual Funds sponsored by The Travelers
Insurance Company.++
Kathleen A. McGah Assistant Secretary and Counsel (1995-present),
Assistant Secretary to The Travelers Insurance Company; Assistant
the Board Secretary, Board of Managers, seven Variable
One Tower Square Annuity Separate Accounts of The Travelers
Hartford, Connecticut Insurance Company+; Assistant Secretary, Board of
Age 45 Trustees, five Mutual Funds sponsored by The
Travelers Insurance Company.++ Prior to January
1995, Counsel, ITT Hartford Life Insurance Company.
Ian R. Stuart Vice President and Financial Officer, Financial
Treasurer Services Department (1994-present), Second Vice
One Tower Square President and Financial Officer, Financial
Hartford, Connecticut Services Department (1991-1994), The Travelers
39 Insurance Company; Senior Manager (1986-1991),
Price Waterhouse; Treasurer, Board of Trustees,
five Mutual Funds sponsored by The Travelers
Insurance Company.++
+ These seven Variable Annuity Separate Accounts are: The Travelers Growth
and Income Stock Account for Variable Annuities, The Travelers Quality
Bond Account for Variable Annuities, The Travelers Money Market Account
for Variable Annuities, The Travelers Timed Growth and Income Stock
Account for Variable Annuities, The Travelers Timed Short-Term Bond
Account for Variable Annuities, The Travelers Timed Aggressive Stock
Account for Variable Annuities and The Travelers Timed Bond Account for
Variable Annuities.
22
<PAGE> 73
++ These five Mutual Funds are: Capital Appreciation Fund, Cash Income
Trust, High Yield Bond Trust, Managed Assets Trust and The Travelers
Series Trust.
* Mr. McLendon is an "interested person" within the meaning of the 1940
Act by virtue of his position as Managing Director of Smith Barney Inc., an
indirect wholly owned subsidiary of Travelers Group Inc. and also owns shares
and options to purchase shares of Travelers Group Inc., the indirect parent of
The Travelers Insurance Company.
Members of the Board of Trustees who are also officers or employees of
Travelers Group Inc. or its subsidiaries are not entitled to any fee. Members of
the Board of Trustees who are not affiliated as employees of Travelers Group
Inc. or its subsidiaries receive an aggregate retainer of $17,000 for service on
the Boards of the five Mutual Funds sponsored by The Travelers Insurance Company
and the seven Variable Annuity Separate Accounts established by The Travelers
Insurance Company. They also receive an aggregate fee of $2,000 for each meeting
of such Boards attended.
DECLARATION OF TRUST
The Series Trust is organized as a Massachusetts business trust. Pursuant
to certain decisions of the Supreme Judicial Court of Massachusetts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for the obligations of the trust. However, even if
the Series Trust were held to be a partnership, the possibility of its
shareholders incurring financial loss for that reason appears remote because the
Series Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Series Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Series Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of Series Trust property
for any shareholder held personally liable for the obligations of the Series
Trust.
The Declaration of Trust provides that a Trustee shall be liable only for
his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, a Trustee shall
not be liable for the neglect or wrongdoing of any such person; provided,
however, that nothing in the Declaration of Trust shall protect a Trustee
against any liability for his willful misfeasance, bad faith, gross negligence
or the reckless disregard of his duties.
The Trustees were elected by Shareholders at a meeting held on October 30,
1992. After such meeting, no further meetings of shareholders for the purpose of
electing Trustees will be held, unless required by law, and unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, or if at the time of filling a vacancy less than
two-thirds of the Trustees holding office after filling the vacancy were elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law, and may appoint successor
Trustees. Any Trustee may voluntarily resign from office, or Trustees may be
removed from office (1) at any time by two-thirds vote of the Trustees; (2) by a
majority vote of Trustees where any Trustee becomes mentally or physically
incapacitated; and (3) either by declaration in writing or at a meeting called
for such purpose by the holders of not less than two-thirds of the outstanding
shares or other voting interests of the Trust. The Trustees are required to call
a meeting for the purpose of considering the removal of a person serving as
trustee, if requested in writing to do so by the holders of not less than 10% of
the outstanding shares or other voting interests of the Trust. The Series Trust
is required to assist in Shareholders' communications. In accordance with
current laws, insurance companies will request voting instructions from contract
owners participating in variable annuity and/or variable life insurance
contracts held by their respective separate accounts. Insurance companies will
vote shares of the Portfolios in the same proportion as the voting instructions
received.
23
<PAGE> 74
Voting rights are not cumulative, that is, the holders of more than 50% of
the shares voting on the election of Trustees can, if they choose to do so,
elect all of the Trustees of the Series Trust, in which event the holders of the
remaining shares will be unable to elect any person as a Trustee.
No amendment may be made to the Declaration of Trust without a "vote of a
majority of the outstanding voting securities" of the Series Trust (as defined
in the 1940 Act).
INVESTMENT ADVISORY SERVICES
As described above, the Board of Trustees monitors the activities of those
entities which provide investment management and Subadvisory services to the
Portfolios. Travelers Asset Management International Corporation ("TAMIC," also
referred to throughout this prospectus as the "Investment Adviser") provides
investment supervision to the Portfolios described herein 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. TAMIC also provides investment
advice to individual and pooled pension and profit-sharing accounts and
non-affiliated insurance companies.
INVESTMENT SUBADVISERS
GENERAL
Under the terms of the Investment 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.
ADVISER: TAMIC - - ZERO COUPON BOND PORTFOLIOS, QUALITY BOND AND U.S.
GOVERNMENT SECURITIES PORTFOLIOS
24
<PAGE> 75
TAMIC also provides investment management and advisory services to the
U.S. Government Securities Portfolio, the Zero Coupon Bond Fund Portfolios and
the Quality Bond Portfolio in accordance with separate Investment Advisory
Agreements which were approved by shareholders at meetings held for that
purpose.
For furnishing investment management and advisory services to the U.S.
Government Securities Portfolio, TAMIC is paid an amount equivalent on an annual
basis to 0.3233% of the average daily net assets of the Portfolio. The fee is
computed daily and paid weekly. The total advisory fees paid to TAMIC by the
U.S. Government Securities Portfolio for the years ended December 31, 1993, 1994
and 1995 were $56,276, $82,937 and $85,175, respectively. Since the Travelers
Quality Bond is new, to date no advisory or subadvisory fees have been paid to
TAMIC to date.
LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD FRERES ASSET MANAGEMENT
Lazard Freres 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 Freres Asset Management is a division of Lazard Freres, 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 Freres provides its clients with a wide variety of investment
banking, brokerage and related services.
Lazard Freres performs such brokerage services in conformity with Rule 17e-1
under the 1940 Act and procedures adopted by the Board of Trustees.
TAMIC pays the Subadviser an investment Subadvisory fee at the annual
rate of 0.475% of the average daily net asset value 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 of Lazard Freres,
and has been with the Subadviser since 1982 He has also acted as the Managing
Director of the Lazard International Equity Fund, a publicly traded mutual fund
offered by Lazard Freres since that fund's inception in 1992.
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 the MFS organization were
approximately $43.9 billion on behalf of approximately 1.9 million investor
accounts as of February 29, 1996. As of such date, the MFS organization managed
approximately $20 billion of assets invested in equity securities and
approximately $20 billion of assets invested in fixed income securities.
Approximately $3.8 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
25
<PAGE> 76
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").
TAMIC pays MFS an investment subadvisory fee at an annual rate of 0.375% of the
average daily net asset value 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 the Portfolio
manager for the MFS Portfolio. Mr. Ballen also serves in a similar capacity
as a portfolio manager to certain retail mutual funds offered by MFS. He has
acted in such a capacity for MFS since 1986.
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 $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December 31, 1995,
Federated Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,800 employees, Federated continues to be led by
the management who founded the company in 1955. Federated funds are presently at
work in and through 4,000 financial institutions nationwide.
Pursuant to an investment subadvisory 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 0.40% 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 Vice President of
an affiliate of the Portfolio's subadviser since 1988. Mr. Durbiano is a
Chartered Financial Analyst and received his MBA in Finance from the
University of Pittsburgh.
FEDERATED STOCK PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING
Federated also serves as the Subadviser to the Federated Stock Portfolio.
(See "Federated High Yield Portfolio--Subadviser: Federated Investment
Counseling, Inc." above for a discussion of Federated.)
Federated also 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.
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<PAGE> 77
Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to 0.375% 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. Mr.
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 MBA 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.
At present, the principal operating activities of FMR Corp. are those conducted
by three of its divisions as follows: FSC, which is the transfer and shareholder
servicing agent for certain of the funds advised by FMR; Fidelity Investments
Institutional Operations Company, which performs shareholder servicing functions
for institutional customers and funds sold through intermediaries; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
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 3d, 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 0.45% 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 106%, respectively, of the costs of
providing these 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 M. 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,
each publically traded retail mutual funds. He joined Fidelity in 1989. He is a
graduate of both Cornell University and Wharton School of Business.
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<PAGE> 78
EQUITY INCOME PORTFOLIO
SUBADVISER: FIDELITY RESOURCE MANAGEMENT
FMR, pursuant to a Subadvisory Agreement with TAMIC, also serves as the
Subadviser to the Equity Income Portfolio. See "Large Cap Portfolio--Fidelity
Resource Management--Background" above for a discussion of FMR.
Under its Subadvisory Agreement with TAMIC, FMR is paid an amount equivalent on
an annual basis to 0.45% of the average daily net assets of the Portfolio. The
fee is accrued daily and paid monthly.
MANAGEMENT OF EQUITY INCOME PORTFOLIO
Stephen Peterson is manager of Equity Income Portfolio. Since 1983, he has
also managed Fidelity Equity Income Fund a publicly traded retail mutual
fund. Mr. Peterson is also Senior Vice President of Fidelity Management Trust
Co. Previously, he was Vice President and manager of several trust accounts.
Mr. Peterson joined Fidelity in October 1980.
SBMFM
Smith Barney Mutual Funds Management Inc. (SBMFM) an indirect wholly owned
subsidiary of Travelers Group Inc., furnishes investment management and advisory
services to the Social Awareness Stock Portfolio through Greenwich Street
Advisors, a division of SBMFM, in accordance with the terms of an Investment
Advisory Agreement dated May 1, 1995 which was approved by shareholders at a
meeting held on April 28, 1995. Prior to May 1, 1995, The Travelers Investment
Management Company (TIMCO) provided investment management and advisory services.
For furnishing investment management and advisory services to the Fund, SBMFM is
paid any 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>
AGGREGATE NET ASSET VALUE
ANNUAL MANAGEMENT FEE OF THE PORTFOLIO
--------------------- -------------------------
<S> <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>
The total advisory fees paid to TIMCO by the Social Awareness Stock
Portfolio for the period ended December 31, 1993, and for the year ended
December 1994 and for the period January through April 1995 were $15,961,
$23,474 and $ 9,877, respectively. The total advisory fee paid to SBMFM for the
period May 1, 1995 through December 31, 1995 was $28,613.
Greenwich Street Advisors, a division of SBMFM, also manages the
day-to-day investment operations of the Utilities Portfolio pursuant to an
Investment Advisory Agreement approved by the Board of Trustees. Under the
Advisory Agreement, SBMFM is responsible for furnishing or causing to be
furnished to the Utilities Portfolio advice and assistance with respect to the
acquisition, holding or disposal of securities and recommendations with respect
to other aspects and affairs of the Portfolio. The Utilities Portfolio pays
SBMFM an advisory fee equal to 0.65% on an annual basis for its services as
investment adviser. The fee is computed daily and paid monthly.
The total advisory fees paid to SBMFM by the Utilities Portfolio for the
period ended December 1994 and for the year ended December 1995 were $21,804 and
$67,791, respectively.
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<PAGE> 79
SECURITIES TRANSACTIONS
The Subadviser for the Large Cap and Equity Income Portfolios is
authorized to use research services provided by and to place portfolio
transactions with brokerage firms that have provided assistance in the
distribution of shares of the Portfolios or shares of other funds advised by the
Subadviser to the extent permitted by law. The Subadviser may use research
services provided by and place transactions through Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Serviced (FBS), subsidiaries of FMR Corp., if
the commissions are fair and reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services.
The Subadviser for the Large Cap and Equity Income Portfolios may allocate
brokerage transactions to broker-dealers who have entered into arrangements with
the Subadviser under which the broker-dealer allocates a portion of the
commissions paid by the portfolio toward payment of the portfolio's expenses,
such as transfer agent fees or custodian fees. The transaction quality must,
however, be comparable to those of Section 11(a) of the Securities Act of 1934,
as amended, which prohibit members of national securities exchanges from
executing exchange transactions for account which they or their affiliates
managed, unless certain requirements are satisfied. Pursuance to such
requirements, the Subadviser's Board of Trustees has authorized FBSI to execute
portfolio transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
THE ADVISORY AGREEMENTS
Under the terms of their respective Advisory and Subadvisory Agreements,
the Parties to such agreements shall:
(1) obtain and evaluate pertinent economic, statistical and financial data
and other information relevant to the investment policy of the
Portfolios, affecting the economy generally and individual companies
or industries, the securities of which are included in the Portfolios
or are under consideration for inclusion therein;
(2) be authorized to purchase supplemental research and other services
from brokers at an additional cost to the Portfolios;
(3) regularly furnish recommendations to the Board of Trustees with
respect to an investment program for approval, modification or
rejection by the Board of Trustees;
(4) take such steps as are necessary to implement the investment programs
approved by the Board of Trustees; and
(5) regularly report to the Board of Trustees with respect to
implementation of the approved investment programs and any other
activities in connection with the administration of the assets of the
Portfolios.
As required by the 1940 Act, each Advisory Agreement will continue in
effect for a period more than two years from the date of its execution
only so long as its continuance is specifically approved at least annually (i)
by a vote of a majority of the Board of Trustees, or (ii) by a vote of a
majority of the outstanding voting securities of the Portfolios. In addition,
and in either event, the terms of the Advisory Agreements must be approved
annually by a vote of a majority of the Board of Trustees who are not parties
to, or interested persons of any party to, the Advisory Agreements, cast in
person at a meeting called for the purpose of voting on such approval and at
which the Board of Trustees is furnished such information as may be reasonably
necessary to evaluate the terms of the Advisory Agreements. The Advisory
Agreements further provide that they will terminate automatically upon
assignment; may be amended only with prior approval of a majority of the
outstanding voting securities of the Portfolios; may be terminated without the
payment of any penalty at any
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<PAGE> 80
time upon sixty days' notice by the Board of Trustees or by a vote of a majority
of the outstanding voting securities of the Portfolios; and may not be
terminated by TAMIC without prior approval of a new investment advisory
agreement by a vote of a majority of the outstanding voting securities of the
Portfolios.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for
all redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property.
However, the Fund has obligated itself under the 1940 Act to redeem for
cash all shares presented for redemption by any one shareholder up to $250,000,
or 1% of the Fund's net assets if that is less, in any 90-day period. Securities
delivered in payment of redemptions would be valued at the same value assigned
to them in computing the net asset value per share. Shareholders receiving such
securities would incur brokerage costs when these securities are sold.
BROKERAGE
Subject to approval of the Board of Trustees, it is the policy of TAMIC,
TIMCO, Lazard, MFS, Federated, FMR and SBMFM (collectively, the " advisers"), in
executing transactions in portfolio securities of the Portfolios, to seek best
execution of orders at the most favorable prices. The determination of what may
constitute best execution and price in the execution of a securities transaction
by a broker involves a number of considerations, including, without limitation,
the overall direct net economic result to the Portfolios, involving both price
paid or received and any commissions and other cost paid, the efficiency with
which the transaction is effected, the ability to effect the transaction at all
where a large block is involved, the availability of the broker to stand ready
to execute potentially difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are judgmental and are
weighed by management in determining the overall reasonableness of brokerage
commissions paid. Subject to the foregoing, a factor in the selection of brokers
is the receipt of research services, analyses and reports concerning issuers,
industries, securities, economic factors and trends, and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers to the Portfolios and the advisers is considered
to be in addition to and not in lieu of services required to be performed by the
advisers under their respective Investment Advisory Agreements. The cost, value
and specific application of such information are indeterminable and hence are
not practicably allocable among the Portfolios and other clients of either
TAMIC, TIMCO, Lazard, MFS, Federated, FMR or SBMFM who may indirectly benefit
from the availability of such information. Similarly, the Portfolios may
indirectly benefit from information made available as a result of transactions
for such clients.
Purchases and sales of bonds and money market instruments will usually be
principal transactions and will normally be purchased directly from the issuer
or from the underwriter or market maker for the securities. There usually will
be no brokerage commissions paid for such purchases. Purchases from the
underwriters will include the underwriting commission or concession and
purchases from dealers serving as market makers will include the spread between
the bid and asked prices. Where transactions are made in the over-the-counter
market, the Portfolios will deal with primary market makers unless more
favorable prices are otherwise obtainable. Brokerage fees will be incurred in
connection with futures transactions, and the Portfolios will be required to
deposit and maintain funds with brokers as margin to guarantee performance of
future obligations.
Each of the advisers may follow a policy of considering the sale of shares
of the Series Trust a factor in the selection of broker-dealers to execute
portfolio transactions, subject to the requirements of best execution described
above.
The investment advisers' policies with respect to brokerage are and will
be reviewed by the Board of Trustees periodically. Because of the possibility of
further regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
30
<PAGE> 81
The total brokerage commissions paid by the U.S. Government Securities
Portfolio to TAMIC for the years ended December 31, 1993, 1994 and 1995 were
$35,756, $13,363 and $119,817, respectively. For the year ended December 31,
1995, no portfolio transactions were directed to certain brokers because of
research services. No formula is used in placing portfolio transactions with
brokers which provide research services and no specific amount of transactions
is allocated for research services. No brokerage business was placed with any
brokers affiliated with TAMIC during 1995.
The total brokerage commissions paid by the Social Awareness Stock
Portfolio to TIMCO and SBMFM for the years ended December 31, 1993, 1994 and
1995 were $2,121, $6,302 and $14,657, respectively. (SBMFM became the investment
adviser on May 1, 1995.) For the year ended December 31, 1995, portfolio
transactions in the amount of $8,984,565 were placed with certain brokers
because of research services, of which $13,803 was paid in commissions with
respect to such services. No formula was used in placing such transactions, and
no specific amount of transactions was allocated for research services. No
brokerage business was placed with any brokers affiliated with TIMCO during
1995.
The total brokerage commission paid by the Utilities Portfolio to SBMFM
for the period ended December 31, 1994 and the year ended December 31, 1995 were
$8,611 and $20,686. For the year ended December 31, 1995, no portfolio
transactions in the amount of $9,792,394 were placed with certain brokers
because of research services, of which $20,686 was paid in commissions with
respect to such services. No formula was used in placing such transactions, and
no specific amount of transactions was allocated for research services. No
brokerage business was placed with any brokers affiliated with SBMFM during
1995.
The total brokerage commission paid by the Zero Coupon Bond Portfolios,
Series 1998, 2000 and 2005 for the period ended December 31, 1995 was $2,064,
$2,808 and $3,309, respectively. For the year ended December 31, 1995, no
portfolio transactions were directed to certain brokers because of research
services. No formula is used in placing portfolio transactions with brokers
which provide research services and no specific amount of transactions is
allocated for research services. No brokerage business was placed with any
brokers affiliated with TAMIC during 1995.
Because the other Portfolios are new, as of the date of this SAI, no
brokerage commissions were incurred or paid by them.
ADDITIONAL INFORMATION
The Travelers Insurance Company acts as transfer agent and dividend
disbursing agent for the Portfolios. 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 a wholly owned subsidiary of The
Travelers Insurance Group Inc., which is indirectly owned, through a wholly
owned subsidiary, by Travelers Group Inc., a financial services holding company.
The Company's Home Office is located at One Tower Square, Hartford, Connecticut
06183, telephone number 860-422-3985. On April 1, 1996, the Company owned 100%
of the Series Trust's outstanding shares.
Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York
11245, serves as the custodian of all securities and cash of the U.S. Government
Bond, Social Awareness, Utilities and the three Zero Coupon Bond Fund
Portfolios. For the Large Cap and Equity Income Portfolios, Brown Brothers
Harriman will serve as the custodian. For Federated Stock, Federated High Yield,
MFS Emerging Growth and Travelers Quality Bond Portfolios, the custodian is PNC
Bank NA, 200 Stevens Drive, Lester, PA 19113. For those portfolios, Barclay's
Bank, PLC may also act as a sub-custodian. For Lazard International Stock
Portfolio, the custodian is the Bank of New York, 90 Washington Street, New
York, NY 10286.
Coopers & Lybrand L.L.P., independent accountants, 100 Pearl Street,
Hartford, Connecticut 06103, are the independent auditors for the Series Trust
and its Portfolios, with the exception of Large Cap, Equity Income, Federated
Stock, Federated High Yield, MFS Emerging Growth, Travelers Quality Bond and
Lazard International Stock Portfolios. The services provided by Coopers &
Lybrand L.L.P., include primarily the audit of the applicable Series
31
<PAGE> 82
Trust's financial statements and financial highlights. The financial statements
and financial highlights included in the Registration Statement have been
audited by Coopers & Lybrand L.L.P., as indicated in their reports thereon, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
KPMG Peat Marwick LLP, independent certified public accountants, 345 Park
Avenue, New York, NY 10154 are the auditors for the Federated Stock, Federated
High Yield, MFS Emerging Growth, Travelers Quality Bond and Lazard International
Stock Portfolios.
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, are
the auditors for Large Cap and Equity Income Portfolios.
Except as otherwise stated in its prospectus or as required by law, the
Series Trust reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in the Series Trust's prospectus,
this SAI or any supplemental sales literature issued by the Series Trust, and no
person is entitled to rely on any information or representation not contained
therein.
The Series Trust's prospectus and this SAI omit certain information
contained in the Series Trust's registration statement filed with the Securities
and Exchange Commission which may be obtained from the Commission's principal
office in Washington, D.C. upon payment of the fee prescribed by the Rules and
Regulations promulgated by the Commission.
32
<PAGE> 83
APPENDIX
COMMERCIAL PAPER RATINGS
The Portfolio'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 Standard & Poor's 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.
33
<PAGE> 84
FINANCIAL STATEMENTS
34
<PAGE> 85
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $29,445,550) . . . . . . . . $ 30,242,611
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,159
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,433
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,657,031
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,342,234
---------------
LIABILITIES:
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 6,147,812
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 1,242
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892
---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,149,946
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,192,288
===============
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,976,806
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 1,520,848
Accumulated net realized gains (losses) on investment security transactions . . . . . 897,573
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . 797,061
---------------
Total net assets (applicable to 2,267,056 shares outstanding at $12.43 per share) $ 28,192,288
===============
</TABLE>
See Notes to Financial Statements
-50-
<PAGE> 86
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,667,448
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . . $ 85,175
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . . 45,266
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Printing and postage . . . . . . . . . . . . . . . . . . . . . . . 12,124
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 123
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,055
--------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 146,600
---------------
Net investment income . . . . . . . . . . . . . . . . . . . 1,520,848
===============
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 56,107,352
Cost of investment securities sold . . . . . . . . . . . . . . . 54,996,560
--------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 1,110,792
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994 . . . . . . . . . . . . . . (2,374,647)
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 797,061
--------------
Net change in unrealized gain (loss) for the year . . . . . 3,171,708
---------------
Net realized gain and change in unrealized gain (loss) . 4,282,500
---------------
Net increase in net assets resulting from operations . . . . . . . $ 5,803,348
===============
</TABLE>
See Notes to Financial Statements
-51-
<PAGE> 87
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,520,848 $ 1,418,225
Net realized gain (loss) from investment security transactions . . . 1,110,792 (211,271)
Net change in unrealized gain (loss) on investment securities . . . . 3,171,708 (2,752,337)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations . 5,803,348 (1,545,383)
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions . . . . . . . . . . . . . . . . . (1,404,917) (883,624)
Net long-term realized gains from investment security transactions - (63,504)
--------------- ---------------
Total distributions to shareholders . . . . . . . . . . . . . . . (1,404,917) (947,128)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . 5,439,282 7,137,525
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . . . . 1,404,917 947,128
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . (7,572,507) (6,590,182)
--------------- ---------------
Net increase (decrease) in net assets resulting from
capital share transactions . . . . . . . . . . . . . . . . . . (728,308) 1,494,471
-------------- ---------------
Net increase (decrease) in net assets . . . . . . . . . . . 3,670,123 (998,040)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . 24,522,165 25,520,205
--------------- ---------------
End of year (including undistributed net investment income as follows:
December, 1995 $1,520,848 and December, 1994 $1,418,225) . . . . . $ 28,192,288 $ 24,522,165
=============== ===============
</TABLE>
See Notes to Financial Statements
-52-
<PAGE> 88
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------ ------------
<S> <C> <C>
BONDS (14.0%)
COLLATERALIZED MORTGAGE
OBLIGATIONS (14.0%)
Federal Farm Credit Banks,
5.93% Notes, 2003 $ 1,000,000 $ 1,009,065
FNMA Remic Trust 1993-05,
7.50% Pass Through, 2008 1,000,000 1,050,009
FNMA Remic Trust 1993-13,
6.50% Pass Through, 2000 1,201,619 1,195,645
Guaranteed Export Certificate 1994-A,
7.12% Sinking Fund, 2006 916,189 969,144
------------
TOTAL BONDS (COST $ 3,971,385) 4,223,863
------------
U.S. GOVERNMENT AGENCY
SECURITIES (31.1%)
Federal Home Loan Mortgage Corp,
7.00% Pass Through, 2010 4,000,000 4,076,252
FNMA,
7.55% Notes, 2004 1,000,000 1,044,571
GNMA 30-Year Single Family,
9.00% Pass Through, 2016 32,417 34,372
GNMA 30-Year Single Family,
9.00% Pass Through, 2019 71,940 76,279
GNMA 30-Year Single Family,
8.50% Pass Through, 2018 371,732 390,551
GNMA 30-Year Single Family,
8.50% Pass Through, 2018 437,973 460,146
GNMA 30-Year Single Family,
8.50% Pass Through, 2018 434,297 456,283
GNMA 30-Year Single Family,
8.50% Pass Through, 2018 394,478 414,449
GNMA 30-Year Single Family,
8.50% Pass Through, 2018 330,407 347,134
GNMA 30-Year Notification,
8.50% Pass Through, 2025 2,000,000 2,100,000
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(COST $9,345,280) 9,400,037
------------
U.S. GOVERNMENT
SECURITIES (42.1%)
United States of America Treasury,
0.00% Notes, 2015 4,000,000 1,242,396
United States of America Treasury,
7.875% Bonds, 2021 5,000,000 6,156,250
United States of America Treasury,
8.75% Bonds, 2017 1,000,000 1,323,125
United States of America Treasury,
11.25% Bonds, 2015 2,500,000 4,009,375
------------
TOTAL U.S. GOVERNMENT
SECURITIES (COST $12,241,249) 12,731,146
------------
SHORT-TERM INVESTMENTS (12.8%)
U.S. GOVERNMENT AGENCY
SECURITIES (12.8%)
Federal Farm Credit Banks,
5.45% due January 11, 1996 $ 2,000,000 $ 1,993,626
Federal Home Loan Banks,
5.46% due January 11, 1996 1,900,000 1,893,939
------------
TOTAL SHORT-TERM
INVESTMENTS (COST $3,887,636) 3,887,565
------------
TOTAL INVESTMENTS (100%)
(COST $ 29,445,550) (A) (B) $ 30,242,611
============
</TABLE>
NOTES
(A) At December 31, 1995, net unrealized appreciation for all securities
was $797,061. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over cost of $803,354 and aggregate gross unrealized
depreciation for all securities in which there was an excess of cost
over market value of $6,293.
(B) The cost of investments for federal income tax purposes amounted to
$29,475,915. Gross unrealized appreciation and depreciation of
investments, based on identified tax cost at December 31, 1995, were
as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 772,989
Gross unrealized depreciation (6,293)
-------------
Net unrealized appreciation $ 766,696
=============
</TABLE>
See Notes to Financial Statements
-53-
<PAGE> 89
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $5,699,643) . . . . . . . . . $ 6,989,256
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,458
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,928
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . 29,069
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,092,780
---------------
LIABILITIES:
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . 625
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,069
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,275
---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,969
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,054,811
===============
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,463,666
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 55,079
Accumulated net realized gains (losses) on investment security transactions . . . . . 246,453
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . 1,289,613
---------------
Total net assets (applicable to 492,622 shares outstanding at $14.32 per share) . $ 7,054,811
===============
</TABLE>
See Notes to Financial Statements
-56-
<PAGE> 90
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 102,832
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,038
----------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,870
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . . 38,490
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . . 43,095
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 2,157
Printing and postage . . . . . . . . . . . . . . . . . . . . . . . 15,556
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 118
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,056
----------------
Total expenses before reimbursement from The Travelers . . . . . 102,860
Less: Reimbursement from The Travelers . . . . . . . . . . . . . . (29,069)
----------------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 73,791
---------------
Net investment income . . . . . . . . . . . . . . . . . . . 55,079
---------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 3,980,329
Cost of investment securities sold . . . . . . . . . . . . . . . 3,715,090
----------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 265,239
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994 . . . . . . . . . . . . . . (26,432)
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 1,289,613
----------------
Net change in unrealized gain (loss) for the year . . . . . 1,316,045
---------------
Net realized gain and change in unrealized gain (loss) . 1,581,284
---------------
Net increase in net assets resulting from operations . . . . . . . $ 1,636,363
===============
</TABLE>
See Notes to Financial Statements
-57-
<PAGE> 91
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,079 $ 51,650
Net realized gain from investment security transactions . . . . . . . . . 265,239 50,675
Net change in unrealized gain (loss) on investment securities . . . . . . 1,316,045 (195,236)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations . . . 1,636,363 (92,911)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and net short-term realized gains from
investment security transactions . . . . . . . . . . . . . . . . . . . (51,494) (70,411)
Net long-term realized gains from investment security transactions . . . (68,327) (17,258)
---------------- ----------------
Total distributions to shareholders . . . . . . . . . . . . . . . . . (119,821) (87,669)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 2,552,645 1,378,970
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . 119,821 87,669
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . (1,013,468) (768,126)
---------------- ----------------
Net increase in net assets resulting from capital share transactions . 1,658,998 698,513
---------------- ----------------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . 3,175,540 517,933
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,879,271 3,361,338
---------------- ----------------
End of year (including undistributed net investment income as follows:
December, 1995 $55,079 and December, 1994 $51,650) . . . . . . . . . . $ 7,054,811 $ 3,879,271
================ ================
</TABLE>
See Notes to Financial Statements
-58-
<PAGE> 92
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCKS (97.7%)
AMUSEMENTS (1.0%)
Walt Disney Co. 1,200 $ 70,800
-----------
BANKING (10.6%)
Banc One Corp. 1,200 45,300
Bank of Boston Corp. 500 23,125
Barnett Banks, Inc. 1,000 59,000
Chase Manhattan Corp. 300 18,187
Citicorp 1,500 100,875
First Chicago NBD 500 19,750
First Union Corp. 600 33,375
H.F. Ahmanson & Co. 1,400 37,100
Mellon Bank Corp. 2,000 107,500
MBNA Corp. 650 23,969
NationsBank Corp. 1,300 90,513
Norwest Corp. 900 29,700
State Street Boston Corp. 3,400 153,000
-----------
741,394
-----------
CHEMICALS, PHARMACEUTICALS, AND
ALLIED PRODUCTS (13.5%)
Air Products & Chemicals, Inc. 1,700 89,675
Amgen (A) 1,200 71,176
Bristol Myers Squibb Co. 1,100 94,463
Johnson & Johnson 1,500 128,437
Merck & Co., Inc. 2,300 151,225
Pfizer, Inc. 1,200 75,600
Praxair, Inc. 5,000 168,125
Procter & Gamble Co. 1,200 99,600
Schering-Plough Corp. 1,200 65,700
-----------
944,001
-----------
COMMUNICATION (5.6%)
Ameritech Corp. 1,400 82,600
Bell Atlantic Corp. 800 53,500
Bellsouth Corp. 1,800 78,300
Capital Cities ABC, Inc. 400 49,350
MCI Communications Corp. 1,000 26,188
NYNEX Corp. 700 37,800
Sprint Corp. 800 31,900
Tele-Communications, Inc. (A) 1,700 33,894
-----------
393,532
-----------
CONSTRUCTION (0.6%)
Kaufman & Broad Home CP 2,800 41,650
-----------
ELECTRICAL AND
ELECTRONIC MACHINERY (2.4%)
AMP, Inc. 500 19,187
DSC Communications, Inc. (A) 200 7,400
Intel Corp. 2,000 113,625
Time Warner, Inc. 700 26,513
-----------
166,725
-----------
FINANCE (4.7%)
American Express Co. 2,700 111,712
Dean Witter Discover & Co. 600 28,200
Federal Home Loan Corp. 1,000 83,500
Federal National Mortgage Assoc. 500 62,062
Green Tree Financial Corp. 600 15,825
Merrill Lynch & Co., Inc. 500 25,500
-----------
326,799
-----------
FOOD (3.9%)
Coca-Cola Co. 1,000 $ 74,250
Kellogg Co. 500 38,625
PepsiCo, Inc. 2,400 134,100
Unilever NV 200 28,150
-----------
275,125
-----------
INSURANCE (4.5%)
Aetna Life & Casualty Co. 200 13,850
American International Group 1,050 97,125
Transamerica Corp. 1,500 109,313
United Healthcare Corp. 1,400 91,700
-----------
311,988
-----------
MACHINERY (7.8%)
Cabletron System, Inc. (A) 300 24,300
Compaq Computer Corp. (A) 1,200 57,600
Deere & Co. 600 21,150
Digital Equipment Corp. (A) 700 44,887
EMC Corp. (A) 7,000 107,625
International Business Machines Corp. 1,100 100,925
Pitney Bowes, Inc. 700 32,900
Sun Microsystems (A) 600 27,413
York International, Inc. 2,800 131,600
-----------
548,400
-----------
METAL PRODUCTS (4.1%)
Belden, Inc. 4,500 115,875
Gillette Co. 800 41,700
Newell Company 5,000 129,375
-----------
286,950
-----------
MISCELLANEOUS MANUFACTURING (9.9%)
Beckman Instruments, Inc. 500 17,687
Dentsply International, Inc. 3,300 131,794
Emerson Electric Co. 1,000 81,750
Medtronic, Inc. 600 33,525
Perkin-Elmer Corp. 2,500 94,375
Stryker Corp. 3,100 162,557
Xerox Corp. 1,200 164,400
-----------
686,088
-----------
OIL & GAS (1.2%)
Anadarko Petroleum 1,500 81,187
-----------
PAPER AND ALLIED PRODUCTS (1.0%)
Tambrands, Inc. 1,500 71,625
-----------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (1.0%)
Tribune Co. 1,200 73,350
-----------
RETAIL (9.5%)
Home Depot, Inc. 2,900 138,837
Kroger Co. (A) 2,700 101,250
May Department Stores 1,500 63,375
McDonalds Corp. 2,000 90,250
Pep Boys-Manny, Moe, Jack 4,000 102,500
The GAP, Inc. 300 12,600
Toys R Us (A) 2,000 43,500
Wal-Mart Stores, Inc. 3,500 78,312
Wendy's International, Inc. 1,700 36,125
-----------
666,749
-----------
RUBBER AND PLASTIC PRODUCTS (0.4%)
Nike, Inc. 400 27,850
-----------
</TABLE>
-59-
<PAGE> 93
STATEMENT OF INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
SERVICES (6.5%)
Columbia/HCA Healthcare Corp. 2,500 $ 126,875
Computer Associates International 1,000 56,875
Microsoft (A) 1,100 96,594
Olsten Corp. 3,600 142,200
Oracle Systems Corp. (A) 700 29,663
-------------
452,207
-------------
TEXTILE MILL PRODUCTS (1.3%)
VF Corp. 1,700 89,675
-------------
TRANSPORTATION (1.3%)
Norfolk Southern Corp. 900 71,437
Southwest Airlines 800 18,600
-------------
90,037
-------------
TRANSPORTATION MANUFACTURING (3.6%)
Fleetwood Enterprises, Inc. 5,800 149,350
Varity Corp. (A) 2,800 103,950
-------------
253,300
-------------
WHOLESALE TRADE (3.3%)
Enron Corp. 3,300 125,813
Marshall Industries (A) 3,300 106,011
-------------
231,824
-------------
TOTAL COMMON STOCKS
(COST $ 5,541,643) 6,831,256
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.3%)
REPURCHASE AGREEMENTS (2.3%)
Barclays Bank PLC,
5.25% Repurchase Agreement
dated December 29, 1995 due
January 2, 1996 collateralized
by: United States of America
Treasury, $156,000,
5.875% due July 31, 1997 $ 158,000 $ 158,000
-------------
TOTAL SHORT-TERM
INVESTMENTS (COST $158,000) 158,000
-------------
TOTAL INVESTMENTS (100%)
(COST $5,699,643) (B) (C) $ 6,989,256
=============
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1995, net unrealized appreciation for all securities
was $1,289,613. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over cost of
$1,379,690 and aggregate gross unrealized depreciation for all securities in
which there was an excess of cost over market value of $90,077.
(C) The cost of investments for federal income tax purposes amounted to
$5,711,602. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost at December 31, 1995 were as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 1,360,418
Gross unrealized depreciation (82,763)
-------------
Net unrealized appreciation $ 1,277,655
=============
</TABLE>
See Notes to Financial Statements
-60-
<PAGE> 94
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $11,263,719) . . . . . . . . $ 13,356,856
Repurchase agreement, at market value (identified cost $2,144,000) . . . . . . . . . 2,144,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,210
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,122
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,846
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . 1,870
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,700,904
----------------
LIABILITIES:
Payables:
Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 353,662
Investment management and advisory fees . . . . . . . . . . . . . . . . . . . . . 1,350
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,870
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,347
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,229
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,339,675
================
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,660,428
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 441,157
Accumulated net realized gains (losses) on investment security transactions . . . . . 144,953
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . 2,093,137
----------------
Total net assets (applicable to 1,193,707 shares outstanding at $12.85 per share) $ 15,339,675
================
</TABLE>
See Notes to Financial Statements
-63-
<PAGE> 95
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 391,560
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,952
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 571,512
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . . 67,791
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . . 48,925
Printing and postage . . . . . . . . . . . . . . . . . . . . . . . 11,947
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,391
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 115
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,056
---------------
Total expenses before reimbursement from The Travelers . . . . . 132,225
Less: Reimbursement from The Travelers . . . . . . . . . . . . . . 1,870
---------------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 130,355
---------------
Net investment income . . . . . . . . . . . . . . . . . . . 441,157
---------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 2,272,015
Cost of investment securities sold . . . . . . . . . . . . . . . 2,127,062
---------------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 144,953
Change in unrealized gain (loss) on investment securities:
Unrealized loss at December 31, 1994 . . . . . . . . . . . . . . (77,549)
Unrealized gain at December 31, 1995 . . . . . . . . . . . . . . 2,093,137
---------------
Net change in unrealized gain (loss) for the year . . . . . 2,170,686
---------------
Net realized gain and change in unrealized gain (loss) . 2,315,639
---------------
Net increase in net assets resulting from operations . . . . . . . $ 2,756,796
===============
</TABLE>
See Notes to Financial Statements
-64-
<PAGE> 96
\ THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE PERIOD FEBRUARY 4, 1994 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 441,157 $ 139,138
Net realized gain from investment security transactions . . . . . . . 144,953 11,353
Net change in unrealized gain (loss) on investment securities . . . . 2,170,686 (77,549)
----------- ----------
Net increase in net assets resulting from operations . . . . . . . 2,756,796 72,942
----------- ----------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME AND
NET SHORT-TERM REALIZED GAINS FROM INVESTMENT SECURITY TRANSACTIONS . . (150,491) -
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . 9,178,587 7,595,972
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . . . . 150,491 -
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . (2,352,367) (1,912,255)
----------- ----------
Net increase in net assets resulting from capital share transactions 6,976,711 5,683,717
----------- ----------
Net increase in net assets . . . . . . . . . . . . . . . . . . 9,583,016 5,756,659
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 5,756,659 -
----------- ----------
End of period (including undistributed net investment income as follows:
December, 1995 $441,157 and December, 1994 $139,138) . . . . . . . $15,339,675 $5,756,659
=========== ==========
</TABLE>
See Notes to Financial Statements
-65-
<PAGE> 97
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCKS (76.7%)
COMMUNICATION (12.0%)
Ameritech Corp. 3,500 $ 206,500
AT&T Corp. 5,000 323,750
Bellsouth Corp. 10,000 435,000
GTE Corp. 7,500 330,000
NYNEX Corp. 3,500 189,000
Sprint Corp. 2,500 99,688
U.S. West, Inc. 5,000 178,750
US West Media (A) 5,000 95,000
-----------
1,857,688
-----------
UTILITIES (64.7%)
Allegheny Power System, Inc. 10,000 286,250
American Electric Power Co. 7,500 303,750
Baltimore Gas & Electric Co. 7,500 213,750
Carolina Power & Light Co. 7,500 258,750
Cinergy Corp. 10,000 306,250
Coastal Corp. 10,000 372,500
CIPSCO, Inc. 5,000 195,000
Dominion Resources, Inc. 7,000 288,750
Duquesne Light Co. 12,750 392,063
DPL, Inc. 10,000 247,500
El Paso Natural Gas Co. 5,000 141,875
Florida Power & Light Co. 12,500 579,687
Florida Progress Corp. 10,000 353,750
General Public Utilities 10,000 340,000
Houston Industries 16,000 388,000
Kansas City Power & Light Co. 10,000 261,250
New York State Electric & Gas Co. 7,500 194,063
NIPSCO Industries, Inc. 10,000 382,500
Ohio Edison Co. 10,000 235,000
Pacific Enterprises 10,000 282,500
Pacificorp 15,000 318,750
Peco Energy Co. 11,000 331,375
Portland General Electric Co. 13,100 381,537
Public Service of New Mexico (A) 15,000 264,375
Public Service Co. of Colorado 7,500 265,313
Public Service Enterprises Group 5,500 168,437
Southern Co. 7,500 184,688
SCE Corp. 6,000 106,500
Tenneco, Inc. 7,000 347,375
Texas Utilities Co. 12,000 493,500
Unicom Corporation 10,500 343,875
Wa Energy Co. 15,000 279,375
Westcoast Energy, Inc. 5,000 73,125
Williams Companies 5,000 219,375
Wisconsin Energy 7,500 229,687
-----------
10,030,475
-----------
TOTAL COMMON STOCKS
(COST $9,888,785)
11,888,163
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
BONDS (2.7%)
UTILITIES (2.7%)
Arizona Public Service Co.,
7.25% Bonds, 2023 $ 200,000 198,262
PECO Energy Co.,
8.75% Bonds, 2022 200,000 217,307
-----------
TOTAL BONDS (COST $376,457) 415,569
-----------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
U.S. GOVERNMENT
SECURITIES (6.8%)
United States of America Treasury,
7.50% Notes, 1996 $ 500,000 $ 511,250
United States of America Treasury,
7.75% Notes, 1999 500,000 541,874
-----------
TOTAL U.S. GOVERNMENT
SECURITIES (COST $998,477) 1,053,124
-----------
SHORT-TERM INVESTMENTS (13.8%)
REPURCHASE AGREEMENTS (13.8%)
Barclays Bank PLC,
5.25% Repurchase Agreement
dated December 29, 1995 due
January 2, 1996 collateralized
by: United States of America
Treasury, $2,114,000,
5.875% due July 31, 1997 2,144,000 2,144,000
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST $2,144,000) 2,144,000
-----------
TOTAL INVESTMENTS (100%)
(COST $13,407,719) (B)(C) $15,500,856
===========
</TABLE>
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1995, net unrealized appreciation for all securities
was $2,093,137. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over cost of $2,123,451 and aggregate gross unrealized
depreciation for all securities in which there was an excess of cost
over market value of $30,314.
(C) The cost of investments for federal income tax purposes is identical.
See Notes to Financial Statements
-66-
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Series Trust (the "Series Trust") is a Massachusetts
business trust registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
The Declaration of Trust authorizes the shares of the Series Trust to
be divided into two or more series. As of December 31, 1995, the
Series Trust consisted of six series: U.S. Government Securities
Portfolio, Social Awareness Stock Portfolio, Utilities Portfolio (the
"Portfolios"), Zero Coupon Bond Fund Portfolio Series 1998, Zero
Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund
Portfolio Series 2005. Shares in each Portfolio are currently
offered, without a sales charge, to separate accounts of The Travelers
Insurance Company ("The Travelers") and The Travelers Life and Annuity
Company, indirect wholly owned subsidiaries of Travelers Group Inc.,
in connection with the issuance of certain variable annuity and
variable life insurance contracts. The accompanying notes do not
specifically pertain to the Zero Coupon Bond Fund Portfolios, as the
financial statements and accompanying notes for these portfolios are
published in their own annual report.
The following is a summary of significant accounting policies
consistently followed by each Portfolio in the preparation of its
financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of
the close of business of the New York Stock Exchange on the last
business day of the year; securities traded on the over-the-counter
market and listed securities with no reported sales are valued at the
mean between the last-reported bid and asked prices or on the basis
of quotations received from a reputable broker or other recognized
source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally
stated at fair value on the basis of valuations furnished by a pricing
service. These valuations are determined for normal
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Securities, including restricted securities,
for which pricing services are not readily available are valued by
management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity.
FUTURES CONTRACTS. Each Portfolio may use stock index futures
contracts, and may also use interest rate futures contracts, as a
substitute for the purchase or sale of individual securities. When a
Portfolio enters into a futures contract, it agrees to buy or sell a
specified index of stocks, or debt securities, at a future time for a
fixed price, unless the contract is closed prior to expiration. Each
Portfolio is obligated to deposit with a broker an "initial margin"
equivalent to a percentage of the face, or notional value of the
contract.
It is each Portfolio's practice to hold cash and cash equivalents
(including short-term investments) in an amount at least equal to the
notional value of outstanding purchased futures contracts, less the
initial margin. Cash and cash equivalents include cash on hand,
securities segregated under federal and brokerage regulations, and
short-term highly liquid investments with maturities generally three
months or less when purchased. Generally, futures contracts are
closed prior to expiration.
Futures contracts purchased by each Portfolio are priced and settled
daily; accordingly, changes in daily prices are recorded as realized
gains or losses and no asset is recorded in the Statements of
Investments. However, when each Portfolio holds open futures
contracts, it assumes a market risk generally equivalent to the
underlying market risk of changes in the value of the specified
indexes or debt securities associated with the futures contract.
OPTIONS. Each Portfolio may purchase index or individual equity put
or call options, thereby obtaining the right to sell or buy a fixed
number of shares of the underlying asset at the stated price on or
before the stated expiration date. Each Portfolio may sell the
options before expiration. Options held in each Portfolio are listed
on either national securities exchanges or on over-the-counter
markets, and are short-term contracts with a duration of less than
nine months. The market value of the options will be the latest sale
price at the close of the New York Stock Exchange, or in the absence
of such sale, the latest bid quotation.
-67-
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS - CONTINUED
REPURCHASE AGREEMENTS. When each Portfolio enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to
repurchase the securities at a mutually agreed-upon date and price),
the repurchase price of the securities will generally equal the amount
paid by each Portfolio plus a negotiated interest amount. The seller
under the repurchase agreement will be required to provide to each
Portfolio securities (collateral) whose market value, including
accrued interest, will be at least equal to 102% of the repurchase
price. Each Portfolio monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with
national banks and reporting broker dealers believed to present
minimal credit risks. Each Portfolio's custodian will take actual or
constructive receipt of all securities underlying repurchase
agreements until such agreements expire.
TAXES. Each Portfolio has qualified, or intends to qualify each year,
as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company,
each Portfolio is relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable
capital gains, if any, to its shareholders. Each Portfolio further
intends to avoid excise tax liability by distributing substantially
all of its investment income. Therefore, no federal income tax
provision has been made by each Portfolio in its financial statements.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Security transactions are accounted for on the trade date. Interest
income is recorded on the accrual basis and dividend income is
recorded on the ex-dividend date. Distributions to shareholders are
recorded at the close of business on the record date.
2. INVESTMENTS
Purchases and sales of common stocks and bonds excluding short-term
investments aggregated $7,228,738 and $7,019,978, respectively, for
U.S. Government Securities Portfolio; $5,748,355 and $3,959,211,
respectively, for Social Awareness Stock Portfolio; and $7,493,306 and
$2,272,015, respectively, for Utilities Portfolio; for the year ended
December 31, 1995. Purchases and sales of direct and indirect U.S.
government obligations were $45,759,332 and $44,807,698, respectively,
for U.S. Government Securities Portfolio; and $498,789 for purchases
of Utilities Portfolio. Realized gains and losses from security
transactions are reported on an identified cost-basis.
Net realized gains (losses) from options transactions in the Social
Awareness Stock Portfolio were $21,118 and ($3,020) for the years
ended December 31, 1995 and 1994, respectively. These gains (losses)
are included in the net realized gain from investment security
transactions on both the Statement of Operations and the Statement of
Changes in Net Assets.
-68-
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. PORTFOLIO CHARGES
Investment management and advisory fees for U.S. Government Securities
Portfolio are calculated daily at an annual rate of 0.3233% of the
Portfolio's average net assets. These fees are paid to Travelers
Asset Management International Corporation, an indirect wholly owned
subsidiary of Travelers Group Inc.
Investment management and advisory fees for Social Awareness Stock
Portfolio are calculated daily at annual rates which start at 0.65%
and decrease, as net assets increase, to 0.40% of the Portfolio's
average net assets. Prior to May 1, 1995, these fees were paid to The
Travelers Investment Management Company, an indirectly wholly owned
subsidiary of Travelers Group Inc. Effective May 1, 1995, these fees
are paid to Greenwich Street Advisors, a division of Smith Barney
Funds Management Inc. ("SBMFM"), an indirect wholly owned subsidiary
of Travelers Group Inc.
Investment management and advisory fees for Utilities Portfolio are
calculated daily at an annual rate of 0.65% of the Portfolio's average
net assets. These fees are paid to Greenwich Street Advisors, a
division of SBMFM, an indirect wholly owned subsidiary of Travelers
Group Inc.
The Travelers has agreed to reimburse U.S. Government Securities
Portfolio, Social Awareness Portfolio and Utilities Portfolio for the
amount by which each Portfolio's aggregate annualized operating
expenses, excluding brokerage commissions and any interest charges and
taxes, exceed 1.25% of each Portfolio's average net assets.
Trustees and officers of the Series Trust, who are also officers and
employees of Travelers Group Inc., or its subsidiaries, receive no
compensation directly from the Series Trust.
-69-
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest without par value.
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES
PORTFOLIO
------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 484,178 655,046
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (672,686) (616,041)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized gains 138,279 77,901
from net long-term realized gains . . . . . . . . . . . . - 5,990
------------- -------------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,229) 122,896
============= =============
</TABLE>
<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK
PORTFOLIO
------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 205,312 122,407
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (74,604) (67,708)
Shares issued in reinvestment of distributions:
from net investment income and net short-term realized gains 4,774 6,067
from net long-term realized gains . . . . . . . . . . . . 6,139 1,517
------------- -------------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,621 62,283
============= =============
</TABLE>
<TABLE>
<CAPTION>
UTILITIES PORTFOLIO
-------------------------------------
FOR THE YEAR FEBRUARY 4,*
ENDED TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------- --------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 822,640 754,802
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (209,288) (189,041)
Shares issued in reinvestment of distributions from
net investment income and net short-term realized gains . 14,594 -
------------- --------------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627,946 565,761
============= ==============
</TABLE>
* Date operations commenced.
As of December 31, 1995, all outstanding shares of beneficial interest
of each Portfolio were owned by The Travelers Fund U for Variable
Annuities, and/or The Travelers Fund UL for Variable Life Insurance,
both of which are separate accounts of The Travelers.
5. SUBSEQUENT EVENT
On January 23, 1996, in accordance with the Board of Trustees, a
dividend was declared with a distribution of net investment income and
net short-term realized gains of $1.06 per share from the
U.S.Government Securities Portfolio; a distribution of net investment
income of $0.28 and a distribution from net long-term realized gains
of $0.34 per share from Social Awareness Stock Portfolio; and a
distribution of net investment income and net short-term realized
gains of $0.47 per share from the Utilites Portfolio, payable on
January 23, 1996, to shareholders of record as of January 22, 1996.
These distributions are not reflected in the accompanying financial
statements.
-70-
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding throughout each period.)
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
JANUARY 24,**
TO
FOR THE YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------------------------- -------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period . . . . . . . . . . . . . . $ 10.58 $ 11.63 $ 10.79 $ 10.00
Income from operations
----------------------
Net investment income . . . . . . . . . . . . . . . . . . . . 0.65 0.60 0.57 0.53
Net gains or losses on securities (realized and unrealized).. 1.80 (1.23) 0.44 0.26
------- ------- ------- -------
Total from investment operations . . . . . . . . . . . . . 2.45 (0.63) 1.01 0.79
Less distributions
------------------
Distributions from net investment income and
net short-term realized gains . . . . . . . . . . . . . . (0.60) (0.39) (0.17) -
Distributions from net long-term realized gains . . . . . . . - (0.03) - -
------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . . . (0.60) (0.42) (0.17) -
Net asset value, end of period . . . . . . . . . . . . . . . . . $ 12.43 $ 10.58 $ 11.63 $ 10.79
------- ------- ------- -------
TOTAL RETURN*** 24.42 % (5.64)% 9.48 % 7.90%
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (thousands) . . . . . . . . . . . . $ 28,192 $ 24,522 $ 25,520 $ 9,017
Ratio of expenses to average net assets ## . . . . . . . . . 0.56 % 0.71 % 0.58 % 0.38%#
Ratio of net investment income to average net assets 5.80 % 5.56 % 5.04 % 4.72%#
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . 214 % 16 % 51 % 25%
</TABLE>
* This information set forth in Note 6 replaces the data presented in
prior periods as supplemental information.
** Date operations commenced.
*** 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. As described in Note 1, 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. The total return does not reflect the deduction
of any contract charges or fees assessed by The Travelers separate
accounts. For periods of less than one year, total returns are not
annualized.
# Annualized.
## The ratio of expenses to average net assets for 1992-1993 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
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, 1995 and 1994, there
were no expense reimbursements by The Travelers in connection with the
voluntary expense limitations described in Note 3.
-71-
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding throughout each period.)
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
MAY 1,** TO
FOR THE YEARS ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992
------ ------- ------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period . . . . . . . . . $ 11.05 $ 11.64 $ 10.95 $ 10.00
Income from operations
----------------------
Net investment income . . . . . . . . . . . . . . . 0.12 0.16 0.17 0.16
Net gains or losses on securities (realized and
unrealized) . . . . . . . . . . . . . . . . . . . . 3.47 (0.45) 0.65 0.79
------- ------- ------- -------
Total from investment operations . . . . . . . . 3.59 (0.29) 0.82 0.95
Less distributions
------------------
Distributions from net investment income and
net short-term realized gains . . . . . . . . . (0.14) (0.24) (0.13) -
Distributions from net long-term realized gains . . (0.18) (0.06) - -
------- ------- ------- -------
Total distribution . . . . . . . . . . . . . . . (0.32) (0.30) (0.13) -
Net asset value, end of period . . . . . . . . . . . . $ 14.32 $ 11.05 $ 11.64 $ 10.95
======= ======= ======= =======
TOTAL RETURN*** 33.37% (2.69)% 7.55% 9.50%
- ------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (thousands) . . . . . . . $ 7,055 $ 3,879 $ 3,361 $ 1,394
Ratio of expenses to average net assets ## . . . . 1.25% 1.25% 1.05% 0.71%#
Ratio of net investment income to average net assets 0.99% 1.43% 1.50% 2.22%#
Portfolio turnover rate . . . . . . . . . . . . . . 73% 137% 60% 56%
</TABLE>
* This information set forth in Note 7 replaces the data presented in
prior periods as supplementary information.
** Date operations commenced.
*** 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. As described in Note 1, shares in the Social Awareness
Stock Portfolio are only sold to The Travelers separate accounts in
connection with the issuance of variable annuity contracts. The total
return does not reflect the deduction of any contract charges or fees
assessed by The Travelers separate accounts. For periods of less
than one year, total returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1992-1995 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
expenses to average net assets would have been 1.75%, 3.34%, 3.73% and
2.19% for the years ended December 31, 1995, 1994, 1993 and the period
ended December 31, 1992, respectively.
-72-
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout each period.)
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR FEBRUARY 4,*
ENDED TO
DECEMBER 31, DECEMBER 31,
1995 1994
---- ----
<S> <C> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period . . . . . . . . . $ 10.17 $ 10.00
Income from operations
----------------------
Net investment income . . . . . . . . . . . . . . . 0.48 0.35
Net gains or losses on securities (realized and unrealized) 2.44 (0.18)
--------- ---------
Total from investment operations . . . . . . . . 2.92 0.17
Less distributions
------------------
Distributions from net investment income and
net short-term realized gains . . . . . . . . . (0.24) -
--------- ---------
Total distributions . . . . . . . . . . . . . (0.24) -
Net asset value, end of period . . . . . . . . . . . . $ 12.85 $ 10.17
========= =========
TOTAL RETURN** 29.29 % 1.70 %
- ------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (thousands) . . . . . . . $ 15,340 $ 5,757
Ratio of expenses to average net assets ## . . . . 1.25 % 1.25 %#
Ratio of net investment income to average net assets 4.29 % 3.86 %#
Portfolio turnover rate . . . . . . . . . . . . . . 25 % 32 %
</TABLE>
* Date operations commenced.
** 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. As described in Note 1, 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 the deduction
of any contract charges or fees assessed by The Travelers separate
accounts. For periods of less than one year, total returns are not
annualized.
# Annualized.
## The ratio of expenses to average net assets for 1994-1995 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratios of
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.
-73-
<PAGE> 105
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Travelers Series Trust:
We have audited the accompanying statements of assets and liabilities of the
U.S. Government Securities Portfolio, Social Awareness Stock Portfolio and the
Utilities Portfolio of The Travelers Series Trust, including the statements of
investments as of December 31, 1995, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of
the applicable periods ended December 31, 1995 and 1994, and the financial
highlights for each of the applicable periods ended December 31, 1995, 1994,
1993 and 1992. These financial statements and financial highlights are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and also
with brokers for the U.S. Government Securities Portfolio and the Utilities
Portfolio. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Government Securities Portfolio, Social Awareness Stock Portfolio, and
Utilities Portfolio of The Travelers Series Trust as of December 31, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the applicable periods ended December 31, 1995 and 1994, and
the financial highlights for each of the applicable periods ended December 31,
1995, 1994, 1993 and 1992, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1996
-74-
<PAGE> 106
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND PORTFOLIO FUND SERIES 1998
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (amortized cost $999,583) . . . . . . . . . . $1,012,572
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,352
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,257
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038,181
----------
LIABILITIES:
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . 14
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,257
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,383
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,023,798
==========
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 998,739
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 12,428
Accumulated net realized gains (losses) on investment security transactions . . . . . (358)
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . 12,989
----------
Total net assets (applicable to 99,875 shares outstanding at $10.25 per share) $1,023,798
==========
</TABLE>
See Notes to Financial Statements
-4-
<PAGE> 107
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,764
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . . $ 224
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . . 5,322
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,215
Printing and postage . . . . . . . . . . . . . . . . . . . . . . . 6,425
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,407
--------
Total expenses before reimbursement from The Travelers . . . . . 14,593
Less: Reimbursement from The Travelers . . . . . . . . . . . . . . (14,257)
--------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 336
-------
Net investment income . . . . . . . . . . . . . . . . . . . 12,428
-------
REALIZED LOSS AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 196,886
Amortized cost of investment securities sold . . . . . . . . . . 197,244
--------
Net realized loss . . . . . . . . . . . . . . . . . . . . . (358)
Unrealized gain on investment securities:
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 12,989
-------
Net realized loss and change in unrealized gain . . . . . 12,631
-------
Net increase in net assets resulting from operations . . . . . . . $25,059
=======
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 108
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
----
<S> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 12,428
Net realized loss from investment security transactions . . . . . . . (358)
Net change in unrealized gain on investment securities . . . . . . . 12,989
----------
Net increase in net assets resulting from operations . . . . . . . 25,059
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . 1,000,000
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . (1,261)
----------
Net increase in net assets resulting from capital share transactions 998,739
----------
Net increase in net assets . . . . . . . . . . . . . . . . . . 1,023,798
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . -
----------
End of period (including undistributed net investment income of $12,428) $1,023,798
==========
</TABLE>
See Notes to Financial Statements
-6-
<PAGE> 109
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
BONDS (19.9%)
BANKING (4.9%)
Chemical New York Corp.,
0.00% Bonds, 1999 $ 60,000 $ 49,838
----------
FINANCE (5.0%)
Avco Financial Services, Inc.,
0.00% Notes, 1998 60,000 50,753
----------
FOOD (5.1%)
PepsiCo, Inc.,
0.00% Notes, 1999 62,000 51,150
----------
INSURANCE (4.9%)
New England Life,
0.00% Bonds, 1999 60,000 49,575
----------
TOTAL BONDS
(AMORTIZED COST $199,247) 201,316
----------
U.S. GOVERNMENT
SECURITIES (80.1%)
United States of America Treasury,
0.00% Notes, 1998 941,000 811,256
----------
TOTAL U.S. GOVERNMENT
SECURITIES
(AMORTIZED COST $800,336) 811,256
----------
TOTAL INVESTMENTS (100%)
AMORTIZED COST $999,583) (A) (B) $1,012,572
==========
</TABLE>
NOTES
(A) At December 31, 1995, net unrealized appreciation for all securities was
$12,989. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over amortized cost
of $12,989.
(B) The cost of investments for federal income tax purposes is identical.
See Notes to Financial Statements
-7-
<PAGE> 110
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (amortized cost $1,004,949) . . . . . . . . . $1,024,291
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,302
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,257
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,043,850
----------
LIABILITIES:
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . 14
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,257
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,383
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,029,467
==========
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 998,743
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 12,592
Accumulated net realized gains (losses) on investment security transactions . . . . . (1,210)
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . 19,342
----------
Total net assets (applicable to 99,876 shares outstanding at $10.31 per share) $1,029,467
==========
</TABLE>
See Notes to Financial Statements
-8-
<PAGE> 111
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,928
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . $ 224
Accounting and audit fees . . . . . . . . . . . . . . . . . . 5,322
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 1,215
Printing and postage . . . . . . . . . . . . . . . . . . . . . 6,425
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . 1,407
--------
Total expenses before reimbursement from The Travelers. . 14,593
Less: Reimbursement from The Travelers . . . . . . . . . . . . (14,257)
--------
Net expenses . . . . . . . . . . . . . . . . . . . . . 336
------
Net investment income . . . . . . . . . . . . . . . 12,592
------
REALIZED LOSS AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . 343,073
Amortized cost of investment securities sold . . . . . . . 344,283
--------
Net realized loss . . . . . . . . . . . . . . . . . (1,210)
Unrealized gain on investment securities:
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 19,342
-------
Net realized loss and change in unrealized gain . . 18,132
-------
Net increase in net assets resulting from operations . . . . . $30,724
=======
</TABLE>
See Notes to Financial Statements
-9-
<PAGE> 112
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
----
<S> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,592
Net realized loss from investment security transactions . . . . . . . . . . . (1,210)
Net change in unrealized gain on investment securities . . . . . . . . . . . 19,342
----------
Net increase in net assets resulting from operations . . . . . . . . . . . 30,724
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
Payment for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (1,257)
----------
Net increase in net assets resulting from capital share transactions . . . 998,743
----------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . 1,029,467
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
----------
End of period (including undistributed net investment income of $12,592) . . $1,029,467
==========
</TABLE>
See Notes to Financial Statements
-10-
<PAGE> 113
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
BONDS (24.5%)
BANKING (4.9%)
Chemical New York Corp.,
0.00% Bonds, 1999 $ 60,000 $ 49,837
----------
FINANCE (4.8%)
American Express, Co.,
0.00% Bonds, 2000 65,000 48,669
----------
FOOD (5.0%)
PepsiCo, Inc.,
0.00% Notes, 1999 62,000 51,150
----------
INSURANCE (4.8%)
New England Life,
0.00% Bonds, 1999 60,000 49,575
----------
SERVICES (5.0%)
Hospital Corp. of America,
0.00% Notes, 2000 65,000 51,348
----------
TOTAL BONDS
(AMORTIZED COST $246,210) 250,579
----------
U.S. GOVERNMENT
SECURITIES (75.5%)
United States of America
Treasury,
0.00% Notes, 2000 1,000,000 773,712
----------
TOTAL U.S. GOVERNMENT
SECURITIES
(AMORTIZED COST $758,739) 773,712
----------
TOTAL INVESTMENTS (100%)
(AMORTIZED COST $1,004,949)(A)(B) $1,024,291
==========
</TABLE>
NOTES
(A) At December 31, 1995, net unrealized appreciation for all securities was
$19,342. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over amortized cost
of $19,342.
(B) The cost of investments for federal income tax purposes amounted to
$1,005,372. Gross unrealized appreciation of investments, based on
identified tax cost at December 31, 1995 was $18,919.
See Notes to Financial Statements
-11-
<PAGE> 114
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (amortized cost $1,006,402) . . . . . . . . . . . $1,043,215
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,833
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,256
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,064,304
----------
LIABILITIES:
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . . 14
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,256
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,383
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,049,921
==========
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,001,717
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . 13,259
Accumulated net realized gains (losses) on investment security transactions . . . . . . (1,868)
Net unrealized appreciation on investment securities . . . . . . . . . . . . . . . . . . 36,813
----------
Total net assets (applicable to 100,164 shares outstanding at $10.48 per share) . . . $1,049,921
==========
</TABLE>
See Notes to Financial Statements
-12-
<PAGE> 115
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,597
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . $ 225
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . 5,322
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 1,215
Printing and postage . . . . . . . . . . . . . . . . . . . . . . 6,425
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 1,407
--------
Total expenses before reimbursement from The Travelers . . . . 14,594
Less: Reimbursement from The Travelers . . . . . . . . . . . . . (14,256)
--------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . 338
-------
Net investment income . . . . . . . . . . . . . . . . . . . 13,259
-------
REALIZED LOSS AND CHANGE IN UNREALIZED GAIN ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . 231,571
Amortized cost of investment securities sold . . . . . . . . . 233,439
--------
Net realized loss . . . . . . . . . . . . . . . . . . . . . . (1,868)
Unrealized gain on investment securities:
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 36,813
-------
Net realized loss and change in unrealized gain . . . . . . 34,945
-------
Net increase in net assets resulting from operations . . . . . . $48,204
=======
</TABLE>
See Notes to Financial Statements
-13-
<PAGE> 116
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 11, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
----
<S> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,259
Net realized loss from investment security transactions . . . . . . . . . . . . . . (1,868)
Net change in unrealized gain on investment securities . . . . . . . . . . . . . . 36,813
----------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 48,204
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002,907
Payment for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,190)
----------
Net increase in net assets resulting from capital share transactions . . . . . . 1,001,717
----------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,049,921
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
----------
End of period (including undistributed net investment income of $13,259) . . . . . $1,049,921
==========
</TABLE>
See Notes to Financial Statements
-14-
<PAGE> 117
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
BONDS (23.2%)
BANKING (4.9%)
Chemical New York Corp.,
0.00% Bonds, 2002 $ 75,000 $ 51,094
----------
FINANCE (9.3%)
Exxon Capital,
0.00% Notes, 2004 80,000 47,200
Grand Met Investment Corp.,
0.00% Notes, 2004 80,000 49,404
----------
96,604
----------
FOOD (4.4%)
General Mills, Inc.,
0.00% Bonds, 2004 80,000 46,250
----------
INSURANCE (4.6%)
American International Group,
0.00% Bonds, 2004 80,000 47,950
----------
TOTAL BONDS
(AMORTIZED COST $234,613) 241,898
----------
U.S. GOVERNMENT
SECURITIES (76.8%)
United States of America Treasury,
0.00% Bonds, 2005 1,398,000 801,317
----------
TOTAL U.S. GOVERNMENT
SECURITIES
(AMORTIZED COST $771,789) 801,317
----------
TOTAL INVESTMENTS (100%)
(AMORTIZED COST $1,006,402) (A) (B) $1,043,215
==========
</TABLE>
NOTES
(A) At December 31, 1995, net unrealized appreciation for all securities was
$36,813. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over amortized cost
of $36,813.
(B) The cost of investments for federal income tax purposes is identical.
See Notes to Financial Statements
-15-
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Series Trust (the "Series Trust") is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Declaration of
Trust authorizes the shares of the Series Trust to be divided into two or
more series. As of December 31, 1995, the Series Trust consisted of six
series: Zero Coupon Bond Fund Portfolio Series 1998, Zero Coupon Bond Fund
Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005 (the
"Portfolios"), U.S. Government Securities Portfolio, Social Awareness Stock
Portfolio, and Utilities Portfolio. Shares in each Portfolio are currently
offered, without a sales charge, to separate accounts of The Travelers
Insurance Company ("The Travelers") and The Travelers Life and Annuity
Company, indirect wholly owned subsidiaries of Travelers Group Inc., in
connection with the issuance of certain variable life insurance contracts.
The following is a summary of significant accounting policies consistently
followed by each Portfolio in the preparation of its financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of the
close of business of the New York Stock Exchange on the last business day
of the period; securities traded on the over-the-counter market and listed
securities with no reported sales are valued at the mean between the last
reported bid and asked prices or on the basis of quotations received from a
reputable broker or other recognized source.
When market quotations are not considered to be readily available for
long-term corporate bonds and notes, such investments are generally stated
at fair value on the basis of valuations furnished by a pricing service.
These valuations are determined for normal institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between securities which
are generally recognized by institutional traders. Securities, including
restricted securities, for which pricing services are not readily available
are valued by management at prices which it deems in good faith to be fair.
Short-term investments for which a quoted market price is available are
valued at market. Short-term investments for which there is no reliable
quoted market price are valued by computing a market value based upon
quotations from dealers or issuers for securities of a similar type,
quality and maturity.
STRIPPED SECURITIES. Each Zero Coupon Bond Fund Portfolio will invest
primarily in "Stripped Securities", a term used collectively for Stripped
Treasury Securities, Stripped Government Securities, Stripped Corporate
Securities and Stripped Eurodollar Obligations; as well as other stripped
securities. Stripped Securities can be securities consisting of debt
obligations that have been stripped of unmatured interest coupons,
securities consisting of unmatured interest coupons that have been stripped
from debt obligations, or debt obligations that are issued without interest
coupons and are sold at substantial discounts from their face amounts.
Stripped Securities do not make periodic payments of interest prior to
maturity. The market value of stripped securities will fluctuate in
response to changes in economic conditions, interest rates and the market's
perception of the securities. Fluctuations in response to interest rates
may be greater than those for debt obligations of comparable maturities
that pay interest currently. The amount of fluctuation increases with a
longer period of maturity.
-16-
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FUTURES CONTRACTS. Each Portfolio may use stock index futures contracts, and
may also use interest rate futures contracts, as a substitute for the purchase
or sale of individual securities. When each Portfolio enters into a futures
contract, it agrees to buy or sell a specified index of stocks, or debt
securities, at a future time for a fixed price, unless the contract is closed
prior to expiration. Each Portfolio is obligated to deposit with a broker an
"initial margin" equivalent to a percentage of the face, or notional value of
the contract.
It is each Portfolio's practice to hold cash and cash equivalents (including
short-term investments) in an amount at least equal to the notional value of
outstanding purchased futures contracts, less the initial margin. Generally,
futures contracts are closed prior to expiration.
Futures contracts purchased by each Portfolio are priced and settled daily;
accordingly, changes in daily prices are recorded as realized gains or losses
and no asset is recorded in the Statements of Investments. However, when each
Portfolio holds open futures contracts, it assumes a market risk generally
equivalent to the underlying market risk of changes in the value of the
specified indexes or debt securities associated with the futures contract.
OPTIONS. Each Portfolio may purchase index or individual equity put or call
options, thereby obtaining the right to sell or buy a fixed number of shares of
the underlying asset at the stated price on or before the stated expiration
date. Each Portfolio may sell the options before expiration. Options held in
each Portfolio are listed on either national securities exchanges or on
over-the-counter markets, and are short-term contracts with a duration of less
than nine months. The market value of the options will be the latest sale
price at the close of the New York Stock Exchange, or in the absence of such
sale, the latest bid quotation.
REPURCHASE AGREEMENTS. When each Portfolio enters into a repurchase agreement
(a purchase of securities whereby the seller agrees to repurchase the
securities at a mutually agreed-upon date and price), the repurchase price of
the securities will generally equal the amount paid by each Portfolio plus a
negotiated interest amount. The seller under the repurchase agreement will be
required to provide to each Portfolio securities (collateral) whose market
value, including accrued interest, will be at least equal to 102% of the
repurchase price. Each Portfolio monitors the value of collateral on a daily
basis. Repurchase agreements will be limited to transactions with national
banks and reporting broker dealers believed to present minimal credit risks.
Each Portfolio's custodian will take actual or constructive receipt of all
securities underlying repurchase agreements until such agreements expire.
TAXES. Each Portfolio has qualified, or intends to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. As a regulated investment company, each Portfolio is
relieved of any federal income tax liability by distributing all of its net
taxable investment income and net taxable capital gains, if any, to its
shareholders. Each Portfolio further intends to avoid excise tax liability by
distributing substantially all of its investment income. Therefore, no federal
income tax provision has been made by each Portfolio in its financial
statements. As of December 31, 1995, the Zero Coupon Bond Fund Portfolio
Series 1998, Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond
Fund Portfolio Series 2005 had capital loss carryovers of $358, $787, and
$1,868, respectively, which may be available to offset any future realized
taxable capital gains, to the extent provided by regulations. These amounts
expire during the year 2003.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Interest income is
recorded on the accrual basis and dividend income is recorded on the
ex-dividend date. For the Zero Coupon Bond Fund Portfolios all original issue
discounts are amortized to investment income for both financial reporting and
federal income tax purposes. The constant yield method of amortization is
utilized in these portfolios. Distributions to shareholders are recorded at
the close of business on the record date.
-17-
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
Purchases of bonds excluding short-term investments aggregated $197,321 for
Zero Coupon Bond Fund Portfolio Series 1998; $293,301 for Zero Coupon Bond
Fund Portfolio Series 2000; $232,206 for Zero Coupon Bond Fund Portfolio
Series 2005 for the period ended December 31, 1995. Sales of bonds
excluding short-term investments aggregated $49,406 for Zero Coupon Bond
Fund Portfolio Series 2000 for the same period. Purchases and sales of
direct and indirect U.S. government obligations were $987,858 and $196,886,
respectively for Zero Coupon Bond Fund Portfolio Series 1998; $1,044,119
and $293,667, respectively for Zero Coupon Bond Fund Portfolio Series 2000;
$995,154 and $231,571, respectively for Zero Coupon Bond Fund Portfolio
Series 2005 for the period ended December 31, 1995. Realized gains and
losses from security transactions are reported on an identified cost basis.
3. PORTFOLIO CHARGES
Investment management and advisory fees for the Zero Coupon Bond Fund
Portfolios are calculated daily at an annual rate of 0.10% of each Zero
Coupon Bond Fund Portfolios' average net assets. These fees are paid to
Travelers Asset Management International Corporation, an indirect wholly
owned subsidiary of Travelers Group Inc.
The Travelers has agreed to reimburse the Zero Coupon Bond Fund Portfolios
for the amount by which each of the Zero Coupon Bond Fund Portfolio's
aggregate annualized operating expenses, excluding brokerage commissions
and any interest charges and taxes, exceed 0.15% of each Zero Coupon Bond
Fund Portfolio's average net assets. Trustees and officers of the Series
Trust, who are also officers and employees of Travelers Group Inc., or its
subsidiaries, receive no compensation directly from the Series Trust.
-18-
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of
each Portfolio were as follows:
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND
PORTFOLIO SERIES 1998
---------------------
OCTOBER 11,*
TO
DECEMBER 31, 1995
---------------------
<S> <C>
Shares sold ..................................................... 100,000
Shares redeemed ................................................. (125)
-------
Net ............................................................. 99,875
=======
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND
PORTFOLIO SERIES 2000
---------------------
OCTOBER 11,*
TO
DECEMBER 31, 1995
---------------------
<S> <C>
Shares sold ..................................................... 100,000
Shares redeemed ................................................. (124)
-------
Net ............................................................. 99,876
=======
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND
PORTFOLIO SERIES 2005
---------------------
OCTOBER 11,*
TO
DECEMBER 31, 1995
---------------------
<S> <C>
Shares sold ..................................................... 100,281
Shares redeemed ................................................. (117)
-------
Net ............................................................. 100,164
=======
</TABLE>
* Date operations commenced.
As of December 31, 1995, all outstanding shares of beneficial interest of
each Portfolio were owned by The Travelers Fund UL for Variable Life
Insurance, a separate account of The Travelers.
5. SUBSEQUENT EVENT
On January 23, 1996, in accordance with the Board of Trustees, a dividend
was declared with a distribution of net investment income of $0.12 per
share from the Zero Coupon Bond Fund Portfolio Series 1998; a distribution
of net investment income of $0.12 per share from the Zero Coupon Bond Fund
Portfolio Series 2000; a distribution of net investment income of $0.13 per
share from the Zero Coupon Bond Fund Portfolio Series 2005, payable on
January 23, 1996, to shareholders of record as of January 22, 1996. These
distributions are not reflected in the accompanying financial statements.
-19-
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the period.)
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
<TABLE>
<CAPTION>
OCTOBER 11,*
TO
DECEMBER 31,
------------
1995
------------
<S> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period .......................... $ 10.00
Income from operations
----------------------
Net investment income ....................................... 0.12
Net gains or losses on securities (realized and unrealized).. 0.13
------------
Total from investment operations .......................... 0.25
Net asset value, end of period ................................ $ 10.25
============
TOTAL RETURN** 2.50%
- ------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (thousands) ....................... $ 1,024
Ratio of expenses to average net assets ## .................. 0.15%#
Ratio of net investment income to average net assets ........ 5.55%#
Portfolio turnover rate ..................................... 20%
</TABLE>
* Date operations commenced.
** 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. As described in Note 1, shares of the Zero Coupon Bond
Fund Portfolio Series 1998 are only sold to The Travelers separate
accounts in connection with the issuance of variable life insurance
contracts. The total return does not reflect the deduction of any
contract charges or fees assessed by The Travelers separate accounts.
For periods of less than one year, total returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1995 reflects an
expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratio of
expenses to average net assets would have been 6.51% annualized for
the period ended December 31, 1995.
-20-
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the period.)
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
<TABLE>
<CAPTION>
OCTOBER 11,*
TO
DECEMBER 31,
------------
1995
------------
<S> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period ......................... $ 10.00
Income from operations
----------------------
Net investment income ........................................ 0.13
Net gains or losses on securities (realized and unrealized)... 0.18
------------
Total from investment operations ........................... 0.31
Net asset value, end of period ............................... $ 10.31
============
TOTAL RETURN** 3.10%
- ------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (thousands)....................... $ 1,029
Ratio of expenses to average net assets ## ................. 0.15%#
Ratio of net investment income to average net assets ....... 5.61%#
Portfolio turnover rate .................................... 34%
</TABLE>
* Date operations commenced.
** 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. As
described in Note 1, shares of the Zero Coupon Bond Fund Portfolio Series
2000 are only sold to The Travelers separate accounts in connection with the
issuance of variable life insurance contracts. The total return does not
reflect the deduction of any contract charges or fees assessed by The
Travelers separate accounts. For periods of less than one year, total
returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1995 reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the ratio of expenses to
average net assets would have been 6.51% annualized for the period ended
December 31, 1995.
-21-
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the period.)
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
<TABLE>
<CAPTION>
OCTOBER 11,*
TO
DECEMBER 31,
------------
1995
------------
<S> <C>
PER SHARE DATA:
- ---------------
Net asset value, beginning of period ........................... $ 10.00
Income from operations
----------------------
Net investment income ....................................... 0.13
Net gains or losses on securities (realized and unrealized)... 0.35
------------
Total from investment operations ........................... 0.48
Net asset value, end of period ................................. $ 10.48
============
TOTAL RETURN** 4.80%
- ------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (thousands) . . . . . . . . . . . . $ 1,050
Ratio of expenses to average net assets ## . . . . . . . . . . 0.15%#
Ratio of net investment income to average net assets . . . . . 5.89%#
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . 23%
</TABLE>
* Date operations commenced.
** 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. As
described in Note 1, shares in the Zero Coupon Bond Fund Portfolio Series
2005 are only sold to The Travelers separate accounts in connection with the
issuance of variable life insurance contracts. The total return does not
reflect the deduction of any contract charges or fees assessed by The
Travelers separate accounts. For periods of less than one year, total
returns are not annualized.
# Annualized.
## The ratio of expenses to average net assets for 1995 reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the ratio of expenses to
average net assets would have been 6.48% annualized for the period ended
December 31, 1995.
-22-
<PAGE> 125
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Travelers Series Trust:
We have audited the accompanying statements of assets and liabilities of the
Zero Coupon Bond Fund Portfolio Series 1998, Zero Coupon Bond Fund Portfolio
Series 2000 and the Zero Coupon Bond Fund Portfolio Series 2005 of The
Travelers Series Trust, including the statements of investments as of December
31, 1995, and the related statements of operations for the period October 11,
1995 (date operations commenced) to December 31, 1995, the statements of
changes in net assets for the period October 11, 1995 (date operations
commenced) to December 31, 1995, and the financial highlights for the period
October 11, 1995 (date operations commenced) to December 31, 1995. These
financial statements and financial highlights are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Zero Coupon Bond Fund Portfolio Series 1998, Zero Coupon Bond Fund Portfolio
Series 2000 and the Zero Coupon Bond Fund Portfolio Series 2005 of The
Travelers Series Trust as of December 31, 1995, the results of their operations
for the period October 11, 1995 (date operations commenced) to December 31,
1995, the changes in their net assets for the period October 11, 1995 (date
operations commenced) to December 31, 1995, and the financial highlights for
the period October 11, 1995 (date operations commenced) to December 31, 1995,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1996
-23-
<PAGE> 126
STATEMENT OF ADDITIONAL INFORMATION
FOR
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000,2005)
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
35
<PAGE> 127
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
The financial statements of the Registrant and the Report of Independent
Accountants are contained in the Statement of Additional Information. The
Registrant's financial statements for the period ended December 31, 1995
include:
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS - SERIES 1998, 2000 AND 2005
Statements of Assets and Liabilities as of December 31, 1995
Statements of Operations for the applicable period ended December 31,
1995
Statements of Changes in Net Assets for the applicable periods ended
December 31, 1995 and 1994
Statements of Investments as of December 31, 1995
Notes to Financial Statements
The following Portfolios have no assets as of the effective date of the
Registration Statement and accordingly no Financial Statements relating to
the following portfolios are included:
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
TRAVELERS QUALITY BOND PORTFOLIO
LARGE CAP PORTFOLIO
EQUITY INCOME PORTFOLIO
(b) Exhibits
1. Agreement and Declaration of Trust. (Incorporated herein by
reference to Exhibit 1 to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed on April 3, 1996.)
2. By-Laws. (Incorporated herein by reference to Exhibit 2 to
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A, filed April 3, 1996.)
5(a). Investment Advisory Agreement between the U.S. Government Securities
Portfolio and Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(a) to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A, filed
April 3, 1996.)
5(b). Investment Advisory Agreement between the Social Awareness Stock
Portfolio and Smith Barney Mutual Fund Management Inc. (Incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A filed on April 25,
1995.)
<PAGE> 128
5(c). Investment Advisory Agreement between the Utilities Portfolio and
Smith Barney Mutual Fund Management Inc. (Incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A filed on April 25, 1995.)
5(d). Form of Investment Advisory Agreement between the Zero Coupon Bond
Fund Portfolios of The Trust and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(d) to Post-Effective Amendment No. 12 to the Registration
Statement on N-1A filed on June 2, 1995.)
5(e). Form of Investment Advisory Agreement between MFS Emerging Growth
Portfolio of the Registrant and Travelers Asset Management
International Corporation.
5(f). Form of Investment Advisory Agreement between Federated High Yield
Portfolio of the Registrant and Travelers Asset Management
International Corporation.
5(g). Form of Investment Advisory Agreement between Federated Stock
Portfolio of the Registrant and Travelers Asset Management
International Corporation.
5(h). Form of Investment Advisory Agreement between Lazard International
Stock Portfolio of the Registrant and Travelers Asset Management
International Corporation.
5(i). Form of Investment Advisory Agreement between Large Cap Portfolio of
the Registrant and Travelers Asset Management International
Corporation.
5(j). Form of Investment Advisory Agreement between Equity Income Portfolio
of the Registrant and Travelers Asset Management International
Corporation.
5(k). Form of Investment Advisory Agreement between Travelers Quality Bond
Portfolio of the Registrant and Travelers Asset Management
International Corporation.
5(l). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Massachusetts Financial Services
Company as Subadviser to MFS Emerging Growth Portfolio.
5(m). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Federated Investment Counseling as
Subadviser to Federated High Yield Portfolio.
5(n). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Federated Investment Counseling as
Subadviser to Federated Stock Portfolio.
5(o). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Lazard Freres Asset Management as
Subadviser to Lazard International Stock Portfolio.
5(p). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Fidelity Management & Research Company
as Subadviser to Equity Income Portfolio and Large Cap Portfolio.
5(q). Form of Sub-Subadvisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc.
5(r). Form of Sub-Subadvisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc.
<PAGE> 129
8(a). Custody Agreement dated February 1, 1995 between the Registrant and
Chase Manhattan Bank, N.A., Brooklyn, New York. (Incorporated herein
by reference to Exhibit 8 to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A filed on April 25, 1995.)
8(b). Form of Custody Agreement between the Registrant and PNC Bank.
8(c). Form of Custody Agreement between the Registrant and Bank of
New York.
8(d). Form of Custody Agreement between the Registrant and Barclays Bank
PLC. (To be filed by amendment.)
8(e). Form of Custody Agreement between the Registrant and Brown Brothers
Harriman & Co.
9(a). Transfer and Recordkeeping Agreement between the Registrant and The
Travelers Insurance Company. (Incorporated herein by reference to
Exhibit 9 to Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed April 3, 1996.)
9(b). Form of Amendment to Transfer and Recordkeeping Agreement between the
Registrant and The Travelers Insurance Company.
9(c). Form of Transfer Agent Agreement between Fidelity Investments
Institutional Operations Company and the Equity Income Portfolio and
Large Cap Portfolio of The Registrant.
9(d). Form of Administrative Services Agreement between the Registrant and
The Travelers Insurance Company.
9(e). Form of Service Agent Agreement between Fidelity Service Company and
the Equity Income Portfolio and Large Cap Portfolio of The
Registrant.
10. Opinion and Consent of Counsel.
11(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants.
11(b). Powers of Attorney authorizing Ernest J. Wright, Secretary or
Kathleen A. McGah, Assistant Secretary as signatory for Heath B.
McLendon, Knight Edwards, Robert E. McGill III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart. (Incorporated herein by reference
to Exhibit 11(b) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed April 3, 1996.)
27. Financial Data Schedule. (Incorporated herein by reference to
Exhibit 27 to Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed on
April 3, 1996.)
<PAGE> 130
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of February 16, 1996
- -------------- -----------------------
<S> <C>
Shares of beneficial interest, Three (3)
without par value
</TABLE>
Item 27. Indemnification
Provisions for the indemnification of the Series Trust's Trustees and officers
are contained in and are incorporated by reference to the Series Trust's
Declaration of Trust, which was filed with Post-Effective Amendment No. 13 to
this Registration Statement as Exhibit 1.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 131
Item 28. Business and Other Connections of Investment Advisers
U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIOS
LARGE CAP PORTFOLIO
EQUITY INCOME PORTFOLIO
TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO
Officers and Directors of Travelers Asset Management International Corporation
(TAMIC), the Investment Adviser for the above Portfolios of The Travelers Series
Trust, are set forth in the following table:
<TABLE>
<CAPTION>
Name Position with TAMIC Other Business
- ---- ------------------- --------------
<S> <C> <C>
Marc P. Weill Director and Chairman Senior Vice President **
Chief Investment Officer
David A. Tyson Director, President and Senior Vice President *
Chief Investment Officer
Joseph E. Rueli, Jr. Director, Vice President Vice President*
and Chief Financial
Officer
F. Denney Voss Director and Senior Vice Senior Vice President*
President
John R. Britt Director and Secretary Assistant Secretary *
Joseph Mullally Senior Vice President Vice President*
Sandip A. Bhagat Senior Vice President Director and President,
The Travelers Investment
Management Company
Kent A. Kelley Senior Vice President Director and Chief Executive
Office, The Travelers Invest-
ment Management Company
David Amaral Vice President Assistant Director*
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Vice President*
Phillip A. Duncan Vice President Second Vice President*
Edward Hinchliffe III Vice President and Cashier Cashier*
Kathryn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
</TABLE>
<PAGE> 132
<TABLE>
<S> <C> <C>
Emil J. Molinaro Vice President Vice President*
Jordan M. Stitzer Vice President Vice President*
William H. White Treasurer Vice President and Treasurer*
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George C. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
Marla A. Berman Assistant Secretary Assistant Secretary**
Patricia A. Uzzel Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
</TABLE>
* Positions are held with The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc. , 388 Greenwich Street, New
York, N.Y. 10013.
<PAGE> 133
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
Officers and Directors of Smith Barney Mutual Funds Management Inc. (SBMFM), the
Investment Adviser for the Social Awareness Stock Portfolio and Utilities
Portfolio of the Series Trust, are set forth in the following table:
<TABLE>
<CAPTION>
Name Position with SBMFM* Other Business
- ---- -------------------- --------------
<S> <C> <C>
Jessica Bibliowicz Chairman and Chief Executive Vice President of
Executive Officer Smith Barney Inc. ("Smith
Barney"); Director and/or
President of certain investment
companies sponsored by Smith
Barney.
Heath B. McLendon Director and President Managing Director of Smith
Barney; Director of certain
investment companies sponsored
by Smith Barney
Lewis E. Daidone Director and Senior Managing Director of Smith
Vice President Barney, Senior Vice President
and Treasurer of certain
investment companies sponsored
by Smith Barney
A. George Saks Director Managing Director and General
Counsel of Smith Barney
Bruce D. Sargent Director and Vice Managing Director of Smith
President Barney; Vice President and
Director of certain investment
companies sponsored by Smith
Barney
Michael J. Day Treasurer Managing Director of Smith
Barney
Christina T. Sydor General Counsel and Managing Director of Smith
Secretary Barney and Secretary of certain
investment companies sponsored
by Smith Barney
</TABLE>
* Address: 388 Greenwich Street, New York, N.Y. 10013
<PAGE> 134
Executive Officers and Directors of Massachusetts Financial Services Company,
the Sub-Adviser to MFS Emerging Growth Portfolio of the Registrant, are set
forth in the following table:
<TABLE>
<CAPTION>
Position with MFS
Name Financial Services Co. Other Business
- ---- ---------------------- --------------
<S> <C> <C>
Keith Brodkin Director and Chairman -
Jeffrey L. Shames Director and President -
Arnold D. Scott Director, Senior Executive -
Vice President and Secretary
John R. Gardner Director President
Sun Life Assurance
Company
John D. McNeil Director Chairman
Sun Life Assurance
Company
Bruce C. Avery Executive Vice President -
William S. Harris Executive Vice President -
William W. Scott, Jr. Executive Vice President -
Patricia A. Zlotin Executive Vice President -
Stephen E. Cavan Senior Vice President, General -
Counsel and Assistant Secretary -
Joseph W. Dello Russo Senior Vice President, Chief -
Financial Officer and Treasurer -
Robert T. Burns Vice President, Associate General -
Counsel and Assistant Secretary -
Thomas B. Hastings Vice President and Assistant Treasurer -
</TABLE>
<PAGE> 135
Lazard Freres & Co. LLC serves as the investment subadviser for the Lazard
International Stock Portfolio. Lazard Freres is a limited liability company,
an organization for which management is provided by general members. Lazard
Freres Asset Management is a division of Lazard Freres & Co. LLC.
<TABLE>
<CAPTION>
Position with Lazard
Name Freres & Co. LLC Other Business
- ---- ----------------------- --------------
<S> <C> <C>
Michel A. David-Weill General Member -
William R. Araskog General Member -
Frederick H. Betrue General Member -
David G. Braunechvig General Member -
Patrick J. Callahan, Jr. General Member -
John V. Doyle General Member -
Charles R. Dreifus General Member -
Thomas F. Dunn General Member -
Noman Eig General Member -
Peter R. Ezersky General Member -
Jonathan F. Foster General Member -
Albert H. Garner General Member -
James S. Gold General Member -
Jeffrey A. Golman General Member -
Steven J. Golub General Member -
Herbert W. Gullquist General Member -
Thomas R. Haack General Member -
Jay R. Harris General Member -
Melvin L. Heineman General Member -
Kenneth M. Jacobs General Member -
Jonathan H. Kagan General Member -
James L. Kempner General Member -
Sandra A. Lamb General Member -
Edgar D. Lagaspi General Member -
Michael S. Lise General Member -
William R. Loomis, Jr. General Member -
Jesse R. Lovejoy General Member -
Matthew J. Lustig General Member -
Philippe L. Magistretti General Member -
Damon Mezzacappa General Member -
Christina A.Mohr General Member -
Robert P. Morgenthau General Member -
Steven J. Niemczyk General Member -
Hamish W. M. Norton General Member -
Jonathan O'Herron General Member -
James A. Paduano General Member -
Louis Perlmutter General Member -
Robert E. Pell, Jr. General Member -
Leter Pollack General Member -
Michael J. Price General Member -
Steven L. Rattner General Member -
John R. Reese General Member -
John R. Reinsberg General Member -
Louis G. Rice General Member -
Luis E. Rinaldini General Member -
Bruno M. Roger General Member -
Felix G. Rohatyn General Member -
Michael S. Rome General Member -
Gerald Rosenfeld General Member -
Peter L. Smith General Member -
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
Position with Lazard
Name Freres & Co. LLC Other Business
- ---- ----------------------- --------------
<S> <C> <C>
Arthur P. Soloman General Member -
Michael B. Solomon General Member -
Edouard M. Stern General Member -
Paul A. Street General Member -
John S. Tamagni General Member -
David L. Tashjian General Member -
Joseph M. Thomas General Member -
Donald A. Wagner General Member -
Ali E. Wambold General Member -
Michal A. Wildish General Member -
Kendrick R. Wilson, III General Member -
Alexander B. Zagoreos General Member -
</TABLE>
<PAGE> 137
Executive Officers and Directors of Federated Investment Counseling, the
Sub-Adviser to Federated Stock Portfolio and Federated High Yield Portfolio of
the Registrant, are set forth in the following table:
<TABLE>
<CAPTION>
Position with Federated
Name Investment Counseling Other Business
- ---- ----------------------- --------------
<S> <C> <C>
John F. Donahue Trustee -
J. Christopher Donahue Trustee -
Henry J. Gailliot Trustee and Chairman -
Mark L. Mallon Trustee and President -
John W. McGonigle Trustee -
Mark D. Olson Trustee -
J. Alan Minteer Senior Vice President -
Robert J. Ostrowski Senior Vice President -
G. Michael P. Cullen Vice President -
Michael P. Donnelly Vice President -
Edward C. Gonzales Vice President -
Stephen A. Keen Vice President and Secretary -
Robert K. Kinsey Vice President -
Charles A. Ritter Vice President -
Christopher J. Smith Vice President -
Edward J. Tiedge Vice President -
Donna M. Fabiano Assistant Vice President -
Thomas R. Donahue Treasurer and Assistant Secretary -
Joseph M. Huber Assistant Secretary -
David M. Taylor Assistant Secretary -
Richard B. Fisher Assistant Treasurer -
</TABLE>
<PAGE> 138
Executive Officers and Directors of Fidelity Management & Research Company, the
Sub-Adviser to Equity Income Portfolio and Large Cap Portfolio of the
Registrant, are set forth in the following table:
<TABLE>
<CAPTION>
Position with Fidelity
Name Management & Research Other Business
- ---- --------------------- --------------
<S> <C> <C>
J. Gary Burkhead Director, President -
Edward C. Johnson 3d Director, Chairman of the Board -
Peter S. Lynch Director, Vice Chairman of the Board -
Fred Henning, Jr. Senior Vice President -
Richard B. Fentin Senior Vice President -
Richard Haberman Senior Vice President -
William J. Hayes Senior Vice President -
Robert A. Lawrence Senior Vice President -
Arthur S. Loring Senior Vice President, Clerk and -
General Counsel -
Robert E. Stansky Senior Vice President -
Beth F. Terrana Senior Vice President -
George A. Vanderheiden Senior Vice President -
Stephen P. Jonas Vice President and Treasurer -
</TABLE>
<PAGE> 139
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
(2) Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes to provide to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, The Travelers Series Trust, certifies that
it meets all the requirements for effectiveness of this post-effective amendment
to this Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this amendment to this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Hartford, State of Connecticut, on July 30, 1996.
THE TRAVELERS SERIES TRUST
--------------------------
(Registrant)
By: *HEATH B. McLENDON
---------------------------
Heath B. McLendon
Chairman, Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on July 30, 1996.
*HEATH B. McLENDON Chairman of the Board
- -----------------------------
(Heath B. McLendon)
*KNIGHT EDWARDS Trustee
- -----------------------------
(Knight Edwards)
*ROBERT E. McGILL, III Trustee
- -----------------------------
(Robert E. McGill, III)
*LEWIS MANDELL Trustee
- -----------------------------
(Lewis Mandell)
*FRANCES M. HAWK Trustee
- -----------------------------
(Frances M. Hawk)
*IAN R. STUART Treasurer and Chief Accounting Officer
- -----------------------------
(Ian R. Stuart)
*By: /s/ KATHLEEN A. MCGAH
--------------------------------------
Kathleen A. McGah, Attorney-in-Fact
Assistant Secretary, Board of Trustees
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
1. Agreement and Declaration of Trust. (Incorporated
herein by reference to Exhibit 1 to Post-Effective
Amendment No. 13 to the Registration Statement on
Form N-1A, filed April 3, 1996.)
2. By-Laws. (Incorporated herein by reference to Exhibit 2
to Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed April 3, 1996.)
5(a). Investment Advisory Agreement between the U.S.
Government Securities Portfolio and Travelers Asset
Management International Corporation. (Incorporated
herein by reference to Exhibit 5(a) to Post-Effective
Amendment No. 13 to the Registration Statement on
Form N-1A, filed April 3, 1996.)
5(b). Investment Advisory Agreement between the
Social Awareness Stock Portfolio and Smith Barney
Mutual Fund Management Inc. (Incorporated herein
by reference to Exhibit 5(b) to Post-Effective
Amendment No. 11 to the Registration Statement on
Form N-1A filed on April 25, 1995.)
5(c). Investment Advisory Agreement between the
Utilities Portfolio and Smith Barney Mutual Fund
Management Inc. (Incorporated herein by reference
to Exhibit 5(c) to Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A filed on
April 25, 1995.)
5(d). Form of Investment Advisory Agreement between the
Zero Coupon Bond Fund Portfolios of The Trust and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(d) to Post-
Effective Amendment No. 12 to the Registration
Statement on Form N-1A filed on June 2, 1995.)
5(e). Form of Investment Advisory Agreement between Electronically
MFS Emerging Growth Portfolio of the Registrant and
Travelers Asset Management International Corporation.
5(f). Form of Investment Advisory Agreement between Electronically
Federated High Yield Portfolio of the Registrant and
Travelers Asset Management International Corporation.
5(g). Form of Investment Advisory Agreement between Electronically
Federated Stock Portfolio of the Registrant and Travelers
Asset Management International Corporation.
</TABLE>
<PAGE> 142
<TABLE>
<S> <C> <C>
5(h). Form of Investment Advisory Agreement between Electronically
Lazard International Stock Portfolio of the Registrant and
Travelers Asset Management International Corporation.
5(i). Form of Investment Advisory Agreement between Large Electronically
Cap Portfolio of the Registrant and Travelers Asset
Management International Corporation.
5(j). Form of Investment Advisory Agreement between Equity Electronically
Income Portfolio of the Registrant and Travelers Asset
Management International Corporation.
5(k). Form of Investment Advisory Agreement between Travelers Electronically
Quality Bond Portfolio of the Registrant and Travelers Asset
Management International Corporation.
5(l). Form of Sub-Advisory Agreement between Travelers Asset Electronically
Management International Corporation and Massachusetts
Financial Services Company as Subadviser to MFS Emerging
Growth Portfolio.
5(m). Form of Sub-Advisory Agreement between Travelers Asset Electronically
Management International Corporation and Federated
Investment Counseling as Subadviser to Federated High
Yield Portfolio.
5(n). Form of Sub-Advisory Agreement between Travelers Electronically
Asset Management International Corporation and
Federated Investment Counseling as Subadviser to
Federated Stock Portfolio.
5(o). Form of Sub-Advisory Agreement between Travelers Asset Electronically
Management International Corporation and Lazard Freres
Asset Management as Subadviser to Lazard International
Stock Portfolio.
5(p). Form of Sub-Advisory Agreement between Travelers Asset Electronically
Management International Corporation and Fidelity
Management & Research Company as Subadviser to
Equity Income Portfolio and Large Cap Portfolio.
5(q). Form of Sub-Subadvisory Agreement between Fidelity Electronically
Management & Research Company and Fidelity
Management & Research (U.K.) Inc.
5(r). Form of Sub-Subadvisory Agreement between Fidelity Electronically
Management & Research Company and Fidelity
Management & Research (Far East) Inc.
8(a). Custody Agreement dated February 1, 1995 between
the Registrant and Chase Manhattan Bank, N.A.,
Brooklyn, New York. (Incorporated herein by reference
to Exhibit 8 to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A filed on April 25,
1995.)
</TABLE>
<PAGE> 143
<TABLE>
<S> <C> <C>
8(b). Form of Custody Agreement between the Registrant and Electronically
PNC Bank.
8(c). Form of Custody Agreement between the Registrant and Electronically
Bank of New York.
8(d). Form of Custody Agreement between the Registrant and To be filed by
Barclays Bank PLC. amendment
8(e). Form of Custody Agreement between the Registrant and Electronically
Brown Brothers Harriman & Co.
9(a). Transfer and Recordkeeping Agreement between the
Registrant and The Travelers Insurance Company.
(Incorporated herein by reference to Exhibit 9 to
Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed April 3, 1996.)
9(b). Form of Amendment to Transfer and Recordkeeping Electronically
Agreement between the Registrant and The Travelers
Insurance Company.
9(c). Form of Transfer Agent Agreement between Fidelity Electronically
Investments Institutional Operations Company and the
Equity Income Portfolio and Large Cap Portfolio of
The Registrant.
9(d). Form of Administrative Services Agreement between the Electronically
Registrant and The Travelers Insurance Company.
9(e). Form of Service Agent Agreement between Fidelity Service Electronically
Company and the Equity Income Portfolio and Large
Cap Portfolio of The Registrant.
10. Opinion and Consent of Counsel. Electronically
11(a). Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants.
11(b). Powers of Attorney authorizing Ernest J. Wright,
Secretary, or Kathleen A. McGah, Assistant Secretary
to be the signatory for Heath B. McLendon,
Knight Edwards, Robert E. McGill III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart. (Incorporated herein
by reference to Exhibit 11(b) to Post-Effective
Amendment No. 13 to the Registration Statement on
Form N-1A, filed April 3, 1996.)
27. Financial Data Schedule. (Incorporated herein
by reference to Exhibit 27 to Post-Effective
Amendment No. 13 to the Registration Statement
on Form N-1A, filed April 3, 1996.)
</TABLE>
<PAGE> 1
Exhibit 5(e)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of MFS Emerging Growth Portfolio (the "Portfolio") and
Travelers Asset Management International Corporation, a New York corporation
("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and limitations authorized
by its Board of Trustees (the "Board") and as specified in the prospectus (the
"Prospectus") and the statement of additional information (the "SAI") filed with
the Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A as may be periodically amended. Copies of the Prospectus
and the SAI have been and will be (following amendments) forwarded to TAMIC. The
Trust desires to employ and accordingly appoints TAMIC to act as investment
adviser to the Portfolio. TAMIC accepts the appointment, and subject to the
supervision of the Board, agrees to furnish the services contemplated herein for
the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the
Board, TAMIC will manage the investment operations of the Portfolio and will
furnish or cause to be furnished to the Trust advice and assistance with respect
to the acquisition, holding or disposal of the Portfolio's investments, in
accordance with the investment objectives, policies and restrictions as
communicated to it by the Board and as are contained in the Prospectus and SAI.
It is expressly understood and the Trust, subject to the approval of the Board,
hereby agrees that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of
developments materially affecting the Portfolio. In this regard, TAMIC shall
provide such periodic reports concerning the obligations assumed under this
agreement as the Trust and the Board may from time to time reasonably request.
Additionally, TAMIC shall ensure that the Sub-Adviser, at least quarterly, will
provide the Board with a written certification that the Portfolio is in
compliance with the Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good
faith in rendering the services contemplated herein. TAMIC shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
TAMIC against any liability to the Trust or the shareholders of the Portfolio to
which TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by either the
Portfolio or the Trust) in connection with the performance of its services under
this Agreement and shall pay: (a) any sub-investment adviser fee to the
Portfolio under any and all Subadvisory Agreement(s), and (b) any other fees
required to be paid to any Sub-Adviser. The Trust will bear certain other
expenses incurred in connection with the Portfolio's respective operations,
including, but not limited to, investment advisory, sub-advisory, and
administrative fees, other than those payable to a Sub-Adviser or any additional
or substitute investment adviser; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory compliance; and
pro rata costs associated with maintaining the Trust's legal existence and
shareholder relations. The Trust will bear all other expenses that TAMIC has not
specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the Investment Company Act of 1940, as amended
(the "1940 Act"). This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board or by vote of holders of a majority (as defined in
the 1940 Act and the rules thereunder) of the outstanding voting securities of
the Trust, or upon 60 days' written notice, by TAMIC. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust
is on file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It
shall be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in
the event that either should become involved in any investigation, legal
proceeding, claim, suit, or other similar action arising from the performance of
the obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment
Company Act of 1940 or other applicable federal securities law, neither TAMIC
nor any of its officers, directors, employees or agents shall be subject to any
liability to the Trust or any shareholder of the Trust for any error or
judgment, mistake of law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:____________________________________________________
Its:___________________________________________________
The Travelers Series Trust
By:____________________________________________________
Its:___________________________________________________
5
<PAGE> 1
Exhibit 5(f)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Federated High Yield Portfolio (the "Portfolio") and
Travelers Asset Management International Corporation, a New York corporation
("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and limitations authorized
by its Board of Trustees (the "Board") and as specified in the prospectus (the
"Prospectus") and the statement of additional information (the "SAI") filed with
the Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A as may be periodically amended. Copies of the Prospectus
and the SAI have been and will be (following amendments) forwarded to TAMIC. The
Trust desires to employ and accordingly appoints TAMIC to act as investment
adviser to the Portfolio. TAMIC accepts the appointment, and subject to the
supervision of the Board, agrees to furnish the services contemplated herein for
the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the
Board, TAMIC will manage the investment operations of the Portfolio and will
furnish or cause to be furnished to the Trust advice and assistance with respect
to the acquisition, holding or disposal of the Portfolio's investments, in
accordance with the investment objectives, policies and restrictions as
communicated to it by the Board and as are contained in the Prospectus and SAI.
It is expressly understood and the Trust, subject to the approval of the Board,
hereby agrees that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of
developments materially affecting the Portfolio. In this regard, TAMIC shall
provide such periodic reports concerning the obligations assumed under this
agreement as the Trust and the Board may from time to time reasonably request.
Additionally, TAMIC shall ensure that the Sub-Adviser, at least quarterly, will
provide the Board with a written certification that the Portfolio is in
compliance with the Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good
faith in rendering the services contemplated herein. TAMIC shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
TAMIC against any liability to the Trust or the shareholders of the Portfolio to
which TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by either the
Portfolio or the Trust) in connection with the performance of its services under
this Agreement and shall pay: (a) any sub-investment adviser fee to the
Portfolio under any and all Subadvisory Agreement(s), and (b) any other fees
required to be paid to any Sub-Adviser. The Trust will bear certain other
expenses incurred in connection with the Portfolio's respective operations,
including, but not limited to, investment advisory, sub-advisory, and
administrative fees, other than those payable to a Sub-Adviser or any additional
or substitute investment adviser; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory compliance; and
pro rata costs associated with maintaining the Trust's legal existence and
shareholder relations. The Trust will bear all other expenses that TAMIC has not
specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the Investment Company Act of 1940, as amended
(the "1940 Act"). This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board or by vote of holders of a majority (as defined in
the 1940 Act and the rules thereunder) of the outstanding voting securities of
the Trust, or upon 60 days' written notice, by TAMIC. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust
is on file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It
shall be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in
the event that either should become involved in any investigation, legal
proceeding, claim, suit, or other similar action arising from the performance of
the obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment
Company Act of 1940 or other applicable federal securities law, neither TAMIC
nor any of its officers, directors, employees or agents shall be subject to any
liability to the Trust or any shareholder of the Trust for any error or
judgment, mistake of law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:____________________________________________________
Its:___________________________________________________
The Travelers Series Trust
By:____________________________________________________
Its:___________________________________________________
5
<PAGE> 1
Exhibit 5(g)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Federated Stock Portfolio (the "Portfolio") and
Travelers Asset Management International Corporation, a New York corporation
("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and limitations authorized
by its Board of Trustees (the "Board") and as specified in the prospectus (the
"Prospectus") and the statement of additional information (the "SAI") filed with
the Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A as may be periodically amended. Copies of the Prospectus
and the SAI have been and will be (following amendments) forwarded to TAMIC. The
Trust desires to employ and accordingly appoints TAMIC to act as investment
adviser to the Portfolio. TAMIC accepts the appointment, and subject to the
supervision of the Board, agrees to furnish the services contemplated herein for
the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the
Board, TAMIC will manage the investment operations of the Portfolio and will
furnish or cause to be furnished to the Trust advice and assistance with respect
to the acquisition, holding or disposal of the Portfolio's investments, in
accordance with the investment objectives, policies and restrictions as
communicated to it by the Board and as are contained in the Prospectus and SAI.
It is expressly understood and the Trust, subject to the approval of the Board,
hereby agrees that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of
developments materially affecting the Portfolio. In this regard, TAMIC shall
provide such periodic reports concerning the obligations assumed under this
agreement as the Trust and the Board may from time to time reasonably request.
Additionally, TAMIC shall ensure that the Sub-Adviser, at least quarterly, will
provide the Board with a written certification that the Portfolio is in
compliance with the Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good
faith in rendering the services contemplated herein. TAMIC shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
TAMIC against any liability to the Trust or the shareholders of the Portfolio to
which TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by either the
Portfolio or the Trust) in connection with the performance of its services under
this Agreement and shall pay: (a) any sub-investment adviser fee to the
Portfolio under any and all Subadvisory Agreement(s), and (b) any other fees
required to be paid to any Sub-Adviser. The Trust will bear certain other
expenses incurred in connection with the Portfolio's respective operations,
including, but not limited to, investment advisory, sub-advisory, and
administrative fees, other than those payable to a Sub-Adviser or any additional
or substitute investment adviser; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory compliance; and
pro rata costs associated with maintaining the Trust's legal existence and
shareholder relations. The Trust will bear all other expenses that TAMIC has not
specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the Investment Company Act of 1940, as amended
(the "1940 Act"). This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board or by vote of holders of a majority (as defined in
the 1940 Act and the rules thereunder) of the outstanding voting securities of
the Trust, or upon 60 days' written notice, by TAMIC. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust
is on file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It
shall be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in
the event that either should become involved in any investigation, legal
proceeding, claim, suit, or other similar action arising from the performance of
the obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment
Company Act of 1940 or other applicable federal securities law, neither TAMIC
nor any of its officers, directors, employees or agents shall be subject to any
liability to the Trust or any shareholder of the Trust for any error or
judgment, mistake of law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:____________________________________________________
Its:___________________________________________________
The Travelers Series Trust
By:____________________________________________________
Its:___________________________________________________
5
<PAGE> 1
Exhibit 5(h)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Lazard International Stock Portfolio (the "Portfolio")
and Travelers Asset Management International Corporation, a New York corporation
("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and limitations authorized
by its Board of Trustees (the "Board") and as specified in the prospectus (the
"Prospectus") and the statement of additional information (the "SAI") filed with
the Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A as may be periodically amended. Copies of the Prospectus
and the SAI have been and will be (following amendments) forwarded to TAMIC. The
Trust desires to employ and accordingly appoints TAMIC to act as investment
adviser to the Portfolio. TAMIC accepts the appointment, and subject to the
supervision of the Board, agrees to furnish the services contemplated herein for
the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the
Board, TAMIC will manage the investment operations of the Portfolio and will
furnish or cause to be furnished to the Trust advice and assistance with respect
to the acquisition, holding or disposal of the Portfolio's investments, in
accordance with the investment objectives, policies and restrictions as
communicated to it by the Board and as are contained in the Prospectus and SAI.
It is expressly understood and the Trust, subject to the approval of the Board,
hereby agrees that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of
developments materially affecting the Portfolio. In this regard, TAMIC shall
provide such periodic reports concerning the obligations assumed under this
agreement as the Trust and the Board may from time to time reasonably request.
Additionally, TAMIC shall ensure that the Sub-Adviser, at least quarterly, will
provide the Board with a written certification that the Portfolio is in
compliance with the Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good
faith in rendering the services contemplated herein. TAMIC shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
TAMIC against any liability to the Trust or the shareholders of the Portfolio to
which TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by either the
Portfolio or the Trust) in connection with the performance of its services under
this Agreement and shall pay: (a) any sub-investment adviser fee to the
Portfolio under any and all Subadvisory Agreement(s), and (b) any other fees
required to be paid to any Sub-Adviser. The Trust will bear certain other
expenses incurred in connection with the Portfolio's respective operations,
including, but not limited to, investment advisory, sub-advisory, and
administrative fees, other than those payable to a Sub-Adviser or any additional
or substitute investment adviser; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory compliance; and
pro rata costs associated with maintaining the Trust's legal existence and
shareholder relations. The Trust will bear all other expenses that TAMIC has not
specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the Investment Company Act of 1940, as amended
(the "1940 Act"). This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board or by vote of holders of a majority (as defined in
the 1940 Act and the rules thereunder) of the outstanding voting securities of
the Trust, or upon 60 days' written notice, by TAMIC. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust
is on file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It
shall be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in
the event that either should become involved in any investigation, legal
proceeding, claim, suit, or other similar action arising from the performance of
the obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment
Company Act of 1940 or other applicable federal securities law, neither TAMIC
nor any of its officers, directors, employees or agents shall be subject to any
liability to the Trust or any shareholder of the Trust for any error or
judgment, mistake of law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:____________________________________________________
Its:___________________________________________________
The Travelers Series Trust
By:____________________________________________________
Its:___________________________________________________
5
<PAGE> 1
Exhibit 5(i)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Large Cap Portfolio (the "Portfolio") and Travelers
Asset Management International Corporation, a New York corporation ("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the Portfolio by
investing and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations authorized by its Board of
Trustees (the "Board") and as specified in the prospectus (the "Prospectus") and
the statement of additional information (the "SAI") filed with the Securities
and Exchange Commission as part of the Trust's Registration Statement on Form
N-1A as may be periodically amended. Copies of the Prospectus and the SAI have
been and will be (following amendments) forwarded to TAMIC. The Trust desires to
employ and accordingly appoints TAMIC to act as investment adviser to the
Portfolio. TAMIC accepts the appointment, and subject to the supervision of the
Board, agrees to furnish the services contemplated herein for the compensation
set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the Board,
TAMIC will manage the investment operations of the Portfolio and will furnish or
cause to be furnished to the Trust advice and assistance with respect to the
acquisition, holding or disposal of the Portfolio's investments, in accordance
with the investment objectives, policies and restrictions as communicated to it
by the Board and as are contained in the Prospectus and SAI. It is expressly
understood and the Trust, subject to the approval of the Board, hereby agrees
that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of developments
materially affecting the Portfolio. In this regard, TAMIC shall provide such
periodic reports concerning the obligations assumed under this agreement as the
Trust and the Board may from time to time reasonably request. Additionally,
TAMIC shall ensure that the Sub-Adviser, at least quarterly, will provide the
Board with a written certification that the Portfolio is in compliance with the
Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good faith
in rendering the services contemplated herein. TAMIC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect TAMIC
against any liability to the Trust or the shareholders of the Portfolio to which
TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs, custodian
fees, auditors fees or other expenses to be borne by either the Portfolio or the
Trust) in connection with the performance of its services under this Agreement
and shall pay: (a) any sub-investment adviser fee to the Portfolio under any and
all Subadvisory Agreement(s), and (b) any other fees required to be paid to any
Sub-Adviser. The Trust will bear certain other expenses incurred in connection
with the Portfolio's respective operations, including, but not limited to,
investment advisory, sub-advisory, and administrative fees, other than those
payable to a Sub-Adviser or any additional or substitute investment adviser;
fees for necessary professional and brokerage services; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Trust's legal existence and shareholder relations. The Trust
will bear all other expenses that TAMIC has not specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to act and
may act in the future as investment manager or adviser to fiduciary and other
managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually as required by the Investment Company Act of 1940, as amended (the
"1940 Act"). This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board or by vote of holders of a majority (as defined in the 1940
Act and the rules thereunder) of the outstanding voting securities of the Trust,
or upon 60 days' written notice, by TAMIC. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act and the
rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust is on
file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It shall
be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in the
event that either should become involved in any investigation, legal proceeding,
claim, suit, or other similar action arising from the performance of the
obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment Company Act
of 1940 or other applicable federal securities law, neither TAMIC nor any of its
officers, directors, employees or agents shall be subject to any liability to
the Trust or any shareholder of the Trust for any error or judgment, mistake of
law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:
-----------------------------------------------------
Its:
-----------------------------------------------------
The Travelers Series Trust
By:
-----------------------------------------------------
Its:
-----------------------------------------------------
5
<PAGE> 1
Exhibit 5(j)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Equity Income Portfolio (the "Portfolio") and Travelers
Asset Management International Corporation, a New York corporation ("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the Portfolio by
investing and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations authorized by its Board of
Trustees (the "Board") and as specified in the prospectus (the "Prospectus") and
the statement of additional information (the "SAI") filed with the Securities
and Exchange Commission as part of the Trust's Registration Statement on Form
N-1A as may be periodically amended. Copies of the Prospectus and the SAI have
been and will be (following amendments) forwarded to TAMIC. The Trust desires to
employ and accordingly appoints TAMIC to act as investment adviser to the
Portfolio. TAMIC accepts the appointment, and subject to the supervision of the
Board, agrees to furnish the services contemplated herein for the compensation
set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the Board,
TAMIC will manage the investment operations of the Portfolio and will furnish or
cause to be furnished to the Trust advice and assistance with respect to the
acquisition, holding or disposal of the Portfolio's investments, in accordance
with the investment objectives, policies and restrictions as communicated to it
by the Board and as are contained in the Prospectus and SAI. It is expressly
understood and the Trust, subject to the approval of the Board, hereby agrees
that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of developments
materially affecting the Portfolio. In this regard, TAMIC shall provide such
periodic reports concerning the obligations assumed under this agreement as the
Trust and the Board may from time to time reasonably request. Additionally,
TAMIC shall ensure that the Sub-Adviser, at least quarterly, will provide the
Board with a written certification that the Portfolio is in compliance with the
Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good faith
in rendering the services contemplated herein. TAMIC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect TAMIC
against any liability to the Trust or the shareholders of the Portfolio to which
TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
2
<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs, custodian
fees, auditors fees or other expenses to be borne by either the Portfolio or the
Trust) in connection with the performance of its services under this Agreement
and shall pay: (a) any sub-investment adviser fee to the Portfolio under any and
all Subadvisory Agreement(s), and (b) any other fees required to be paid to any
Sub-Adviser. The Trust will bear certain other expenses incurred in connection
with the Portfolio's respective operations, including, but not limited to,
investment advisory, sub-advisory, and administrative fees, other than those
payable to a Sub-Adviser or any additional or substitute investment adviser;
fees for necessary professional and brokerage services; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Trust's legal existence and shareholder relations. The Trust
will bear all other expenses that TAMIC has not specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to act and
may act in the future as investment manager or adviser to fiduciary and other
managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually as required by the Investment Company Act of 1940, as amended (the
"1940 Act"). This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board or by vote of holders of a majority (as defined in the 1940
Act and the rules thereunder) of the outstanding voting securities of the Trust,
or upon 60 days' written notice, by TAMIC. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act and the
rules thereunder).
3
<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust is on
file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It shall
be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in the
event that either should become involved in any investigation, legal proceeding,
claim, suit, or other similar action arising from the performance of the
obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment Company Act
of 1940 or other applicable federal securities law, neither TAMIC nor any of its
officers, directors, employees or agents shall be subject to any liability to
the Trust or any shareholder of the Trust for any error or judgment, mistake of
law, or any loss arising out of any investment or other act
4
<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:
-----------------------------------------------------
Its:
-----------------------------------------------------
The Travelers Series Trust
By:
-----------------------------------------------------
Its:
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5
<PAGE> 1
Exhibit 5(k)
FORM OF
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as
of August 1, 1996 by and between The Travelers Series Trust (the "Trust") by
itself and on behalf of Travelers Quality Bond Portfolio (the "Portfolio") and
Travelers Asset Management International Corporation, a New York corporation
("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the Portfolio by
investing and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations authorized by its Board of
Trustees (the "Board") and as specified in the prospectus (the "Prospectus") and
the statement of additional information (the "SAI") filed with the Securities
and Exchange Commission as part of the Trust's Registration Statement on Form
N-1A as may be periodically amended. Copies of the Prospectus and the SAI have
been and will be (following amendments) forwarded to TAMIC. The Trust desires to
employ and accordingly appoints TAMIC to act as investment adviser to the
Portfolio. TAMIC accepts the appointment, and subject to the supervision of the
Board, agrees to furnish the services contemplated herein for the compensation
set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the Board,
TAMIC will manage the investment operations of the Portfolio and will furnish or
cause to be furnished to the Trust advice and assistance with respect to the
acquisition, holding or disposal of the Portfolio's investments, in accordance
with the investment objectives, policies and restrictions as communicated to it
by the Board and as are contained in the Prospectus and SAI. It is expressly
understood and the Trust, subject to the approval of the Board, hereby agrees
that TAMIC may
<PAGE> 2
enter into agreements, pursuant to which a duly organized investment adviser
(the "Sub-Adviser") may be appointed to provide investment advice or other
services to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of developments
materially affecting the Portfolio. In this regard, TAMIC shall provide such
periodic reports concerning the obligations assumed under this agreement as the
Trust and the Board may from time to time reasonably request. Additionally,
TAMIC shall ensure that the Sub-Adviser, at least quarterly, will provide the
Board with a written certification that the Portfolio is in compliance with the
Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good faith
in rendering the services contemplated herein. TAMIC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect TAMIC
against any liability to the Trust or the shareholders of the Portfolio to which
TAMIC would otherwise be subject by reason of its willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties or by
reason of TAMIC's disregard of its obligations and duties under this Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, the Trust will pay TAMIC an annual fee calculated at _____% of the
Portfolio's average daily net assets. The parties understand that the fee will
be calculated daily and paid monthly. The fee for the period from the Effective
Date (defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to TAMIC, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the SAI.
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<PAGE> 3
6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs, custodian
fees, auditors fees or other expenses to be borne by either the Portfolio or the
Trust) in connection with the performance of its services under this Agreement
and shall pay: (a) any sub-investment adviser fee to the Portfolio under any and
all Subadvisory Agreement(s), and (b) any other fees required to be paid to any
Sub-Adviser. The Trust will bear certain other expenses incurred in connection
with the Portfolio's respective operations, including, but not limited to,
investment advisory, sub-advisory, and administrative fees, other than those
payable to a Sub-Adviser or any additional or substitute investment adviser;
fees for necessary professional and brokerage services; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Trust's legal existence and shareholder relations. The Trust
will bear all other expenses that TAMIC has not specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC now acts, will continue to act and
may act in the future as investment manager or adviser to fiduciary and other
managed accounts, and as investment manager or adviser to other investment
companies, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually as required by the Investment Company Act of 1940, as amended (the
"1940 Act"). This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board or by vote of holders of a majority (as defined in the 1940
Act and the rules thereunder) of the outstanding voting securities of the Trust,
or upon 60 days' written notice, by TAMIC. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act and the
rules thereunder).
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<PAGE> 4
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust is on
file with the Secretary of the State of Massachusetts. The Trust further
represents that it shall maintain compliance with applicable regulatory mandates
including periodic reporting requirements, including but not limited to
compliance with any reporting or information requested by the California
Commissioner of Insurance. TAMIC also represents that it shall maintain
compliance with applicable regulatory mandates including periodic reporting
requirements, including but not limited to compliance with any reporting or
information requested by the California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It shall
be governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in the
event that either should become involved in any investigation, legal proceeding,
claim, suit, or other similar action arising from the performance of the
obligations descried in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulation, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. Additionally, TAMIC shall assume
responsibility for ensuring compliance with the applicable investment
diversification requirements set forth in both the 1940 Act and Section 817(h)
of the Internal Revenue Code of 1986, as amended. TAMIC shall also ensure that
its activities are conducted in a manner consistent with a Code of Ethics
maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good
faith efforts to ensure that any sub-adviser appointed shall adopt and follow a
similar Code of Ethics. TAMIC also agrees that it shall conduct its activities
in a manner consistent with any No-Action Letter, order or rule promulgated by
the SEC applicable to the Trust or the Portfolio.
13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment Company Act
of 1940 or other applicable federal securities law, neither TAMIC nor any of its
officers, directors, employees or agents shall be subject to any liability to
the Trust or any shareholder of the Trust for any error or judgment, mistake of
law, or any loss arising out of any investment or other act
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<PAGE> 5
or omission in the course of, connected with, or arising out of any services to
be rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement. To the
extent permitted under federal and state law, the Trust shall hold harmless and
indemnify TAMIC for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management. International Corporation.
By:
-----------------------------------------------------
Its:
-----------------------------------------------------
The Travelers Series Trust
By:
-----------------------------------------------------
Its:
-----------------------------------------------------
5
<PAGE> 1
Exhibit 5(l)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
This Investment Sub-Advisory Agreement (the "Agreement") is entered
into as of August 1, 1996, by and between Travelers Asset Management
International Corporation, a corporation duly organized and existing under the
laws of the State of New York ("TAMIC"), and Massachusetts Financial Services
Company, a corporation duly organized and existing under the laws of the State
of Delaware ("Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement dated
August 1, 1996, (the "Investment Advisory Agreement") with The Travelers Series
Trust (a Massachusetts business trust, hereinafter referred to as the "Trust").
A copy of such agreement is attached as Exhibit A hereto, pursuant to which
TAMIC provides investment management and advisory services to the Trust; and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may
engage a duly organized sub-adviser, to furnish investment information, services
and advice to assist TAMIC in carrying out its responsibilities under the
Investment Advisory Agreement; and
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Sub- Adviser desires to provide such investment advisory
services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. INVESTMENT DESCRIPTION APPOINTMENT
The Trust, which is divided into segments including the segment
known as the MFS Emerging Growth Portfolio (the "Portfolio") desires to employ
its capital relating to the Portfolio by investing and reinvesting in
investments of the kind and in accordance with the investment(s), policies and
limitations specified in the prospectus (the "Prospectus") and the statement of
additional information (the "SAI") filed with the Securities and Exchange
Commission (the "SEC") as part of the Trust's Registration Statement on Form
N-1A, as amended or supplemented from time to time, and in the manner and to the
extent as may from time to time be approved by the Board of Trustees of the
Trust (the "Board"). TAMIC will supply copies of the Prospectus and the SAI to
the Sub-Adviser promptly after the Trust's Registration Statement is declared
effective. TAMIC agrees promptly to provide copies of all amendments and
supplements to the current Prospectus and the SAI, and copies of any procedures
adopted by the Board applicable to the Sub-Adviser and any amendments thereto
(the "Board Procedures"), to
<PAGE> 2
the Sub-Adviser on an on-going basis. Until TAMIC delivers any such amendment or
supplement or Board Procedures, the Sub-Adviser shall be fully protected in
relying on the Prospectus and SAI and any Board Procedures, if any, as
previously furnished to the Sub-Adviser. In addition, TAMIC shall furnish the
Sub-Adviser with a certified copy of any financial statement or report prepared
for the Trust with respect to the Portfolio by certified or independent public
accountants, and with copies of any financial statements or reports made by the
Trust to shareholders or to any state or federal regulatory agency. TAMIC shall
also inform the Sub-Adviser of the results of any audits or examinations by
regulatory authorities pertaining to the Portfolio. TAMIC further agrees to
furnish the Sub-Adviser with any materials or information that the Sub-Adviser
may reasonably request to enable it to perform its functions under this
Agreement.
TAMIC and the Trust desire to employ and hereby appoint the Sub-Adviser
to act as the sub-investment adviser to the Portfolio. The Sub-Adviser accepts
the appointment and agrees to furnish the services for the compensation and for
the term set forth below. Except as specified herein, the Sub-Adviser agrees
that it shall not delegate any material obligation assumed pursuant to this
Agreement to any third party without first obtaining the written consent of both
the Trust and TAMIC.
2. SERVICES AS SUB-ADVISER
Subject to the supervision, direction and approval of the Board
and TAMIC, the Sub-Adviser shall conduct a continual program of investment,
evaluation and, if appropriate in its view, the sale and reinvestment of the
Portfolio's assets. The Sub-Adviser is authorized, in its sole discretion and
without prior consultation with TAMIC, to: (a) manage the Portfolio's assets in
accordance with the Portfolio's investment objective(s) and policies as stated
in the Prospectus and the SAI; (b) make investment decisions for the Portfolio;
(c) place purchase and sale orders for portfolio transactions on behalf of the
Portfolio and manage otherwise uninvested cash assets of the Portfolio; (d)
provide reasonable assistance in the pricing of internally priced securities
(securities for which market quotations are not readily available) to the Trust
(or its designated agent); (e) execute account documentation, agreements,
contracts and other documents as the Sub-Adviser shall be requested by brokers,
dealers, counterparties and other persons in connection with its management of
the assets of the Portfolio (in such respect, and only for this limited purpose,
the Sub-Adviser shall act as TAMIC's and the Trust's agent and
attorney-in-fact); and (f) employ professional portfolio managers and securities
analysts who provide research services to the Portfolio.
In addition, (i) the Sub-Adviser shall furnish TAMIC or its designee
(e.g., the custodian bank for the Portfolio) daily information concerning
portfolio transactions and periodic reports concerning transactions and
performance of the Portfolio in such form as may be mutually agreed upon from
time to time. In addition, the Sub-Adviser agrees to review the performance of
the services provided to the Portfolio pursuant to this Agreement and to discuss
the management of the Portfolio with TAMIC and the Board as either or both shall
reasonably request.
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<PAGE> 3
(ii) Unless TAMIC gives the Sub-Adviser written instructions to the
contrary, the Sub- Adviser shall use its good faith judgment in a manner which
it reasonably believes best serves the interests of the Portfolio's shareholders
to vote or abstain from voting all proxies solicited by or with respect to the
issuers of securities in which assets of the Portfolio may be invested.
(iii) With respect to the provision of services by the Sub-Adviser
hereunder, the Sub- Adviser shall maintain and preserve such records related to
the Portfolio's transactions as are required under any applicable state or
federal securities law or regulation including: the Investment Company Act of
1940, as amended (the "1940 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Investment Advisers Act of 1940, as amended
(the "Advisers Act) (collectively, the "Record Retention Rules"). TAMIC shall
maintain and preserve all books and other records not related to the Portfolio's
transactions as required under the Record Retention Rules. The Sub-Adviser shall
furnish to TAMIC all of the information relating to the Sub-Advisory services
contemplated hereunder that TAMIC shall reasonably request within a reasonable
period of time after TAMIC makes such request. The Sub-Adviser agrees that all
records which it maintains under the Record Retention Rules for the Portfolio
are the property of the Trust and the Sub-Adviser will surrender, within a
reasonable period of time after a request for such records from TAMIC or the
Trust, copies of any of such records.
(iv) The Sub-Adviser understands that (i) shares of the Portfolio will
be sold to one or more separate accounts or sub-accounts of The Travelers
Insurance Company and Travelers Life and Annuity Company as the funding medium
for variable annuity and life contracts; and (ii) the variable annuity and life
contracts will not be treated as annuity or life contracts for tax purposes if
the Portfolio does not (a) meet the diversification requirements specified in
Section 817(h) of the Internal Revenue Code of 1986, as amended, (the "Code")
and Treasury Regulations promulgated thereunder; and (b) qualify as a "regulated
investment company" under SubChapter M of the Code.
Therefore, the Sub-Adviser shall manage and invest the Portfolio's
assets in accordance with information provided to it by the Trust's
administrator, accountant, custodian or other agent designated by TAMIC as
responsible for testing compliance by the Portfolio with applicable investment
policies and restrictions and applicable law (the "Compliance Agent") in an
effort to ensure that the Fund will, as required, comply with the
diversification requirements set forth in Section 817(h) of the Code and
Treasury Regulation Section 1.817.5 thereunder, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity and
life contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations; and the Sub-Adviser shall manage and
invest the Portfolio's assets in accordance with information provided to it by
the Trust's Compliance Agent, in an effort to ensure that the Portfolio meets
and maintains, so long as required by the Code, the requirements for
qualification as a Regulated Investment Company under Sub-Chapter M of the Code.
In addition, the Sub-Adviser shall manage and invest the Portfolio's
assets in accordance with applicable investment policies, restrictions and
federal and state securities laws based upon information provided to it by TAMIC
or the Compliance Agent. In fulfilling its obligations under this Agreement, the
Sub-Adviser shall be entitled to rely on and act in accordance with
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<PAGE> 4
information and instructions, and TAMIC and the Trust agree to hold the
Sub-Adviser harmless for any act or omission taken in good faith in reliance on
information and instructions, which may standing instructions, provided to it by
TAMIC or the Compliance Agent. Such information and instructions shall be
conveyed to the Sub-Adviser in a timely manner so as to permit the Sub- Adviser
to take such action as may be required in an orderly fashion.
(v) The Sub-Adviser shall maintain a written code of ethics (the "Code
of Ethics") that it reasonably believes complies with the requirements of Rule
17(j) under the 1940 Act, a copy of which it will provide to TAMIC or Trust upon
any reasonable request. The Sub-Adviser shall follow such Code of Ethics in all
material respects in performing its services under this Agreement and will
supply the Board with a quarterly certification with respect to such compliance.
Further, the Sub-Adviser represents that it has policies and procedures
regarding the detection and prevention and the misuse of material, nonpublic
information by the Sub-Adviser and its employees as required by the Insider
Trading and Securities Fraud Enforcement Act of 1988.
(vi) Subject to the provision of clause (iv) above, the Sub-Adviser
shall manage the investments of the Portfolio in a manner consistent with
applicable investment restrictions contained in the 1940 Act and rule
promulgated thereunder, any SEC No-Action Letter or order or rule issued by the
SEC applicable to the Portfolio, and any applicable state securities law or
regulation.
3. BROKERAGE
In selecting brokers or dealers (including, if permitted by
applicable law and appropriate Board Procedures, any broker or dealer affiliated
with either TAMIC or the Sub- Adviser) to execute transactions on behalf of the
Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub- Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth and nature of the market in the security, the price of the security, the
size of the order, the timing of the transaction, the difficulty of the
transaction, the reputation, experience, financial condition and execution
capability of the broker or dealer, the quality of the service and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the 1934 Act) provided to the Portfolio and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Nothing in this paragraph shall be deemed to prohibit the
Sub-Adviser from paying an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that transaction, if the
Sub-Adviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker, or dealer, viewed in terms of either that
particular transaction or its overall responsibilities with
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<PAGE> 5
respect to the Portfolio and/or other accounts over which the Sub-Adviser or its
affiliate exercise investment discretion.
4. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, TAMIC will pay the Sub-Adviser an annual fee calculated at the rate
of 0.375% of the Portfolio's average daily net assets; the fee is calculated
daily and paid monthly. The Sub-Adviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. The fee
for the period from the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the SAI.
5. EXPENSES
The Sub-Adviser shall bear all expenses in connection with the
performance of its services under this Agreement. In no event will the
Sub-Adviser bear brokerage costs, custodian fees, auditors fees or other
expenses to be borne by the Portfolio or the Trust. The Portfolio will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory fees, sub-advisory fees (other than sub-advisory
fees paid pursuant to this Agreement) and administration fees; fees for
necessary professional and brokerage services; costs relating to local
administration of securities; fees for any pricing service; the costs of
regulatory compliance; and pro rata costs associated with maintaining the
Trust's legal existence and shareholder relations. The Portfolio shall assume
all other expenses not specifically assumed by the Sub-Adviser hereunder or by
TAMIC under the Investment Advisory Agreement entered into between TAMIC and the
Trust.
6. STANDARD OF CARE
The Sub-Adviser shall exercise reasonable care and act in a
manner consistent with applicable federal and state laws and regulations in
rendering the services it agrees to provide under this Agreement. Neither the
Sub-Adviser nor its officers, directors, employees, agents, legal
representatives or persons controlled by it (collectively, the "Related
Persons") shall be liable for or subject to any damages, expenses, or losses in
connection with any error of judgment or mistake of law or for any loss suffered
by the Trust, the Portfolio or TAMIC or any shareholder, director, trustee or
officer thereof, in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport
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<PAGE> 6
to protect the Sub-Adviser against any liability to TAMIC, the Trust or to the
shareholders of the Trust to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Agreement.
7. LIABILITY
Except as may otherwise be provided by the 1940 Act or federal
securities laws, neither Sub-Adviser nor any Related Persons shall be subject to
any liability or subject to any damages, expenses, or losses in connection with
any error of judgment, mistake of law, or any loss to TAMIC or the Trust arising
out of any investment or other act or omission in the course of, connected with,
or arising out of any services to be rendered under this Agreement, except by
reason of either willful misfeasance, bad faith, or gross negligence in the
performance of its duties hereunder, or by reason of reckless disregard of its
obligations and duties under this Agreement. TAMIC shall hold harmless and
indemnify Sub-Adviser and each Related Person against any loss, liability,
claim, cost, damage or expense (including reasonable investigation and defense
costs and reasonable attorneys fees and costs) arising by reason of any matter
to which this Agreement relates unless the Sub-Adviser found to have violated
its Standard of Care as specified in Section 6 of this Agreement. The
Sub-Adviser shall hold harmless the Trust and TAMIC for any loss, liability,
cost, damage, or expenses arising from any claim resulting from the
Sub-Adviser's violation of its Standard of Care as specified in Section 6 of
this Agreement.
Promptly after receipt by a party seeking to be indemnified under this
Section 7 (the "Indemnified Party") of notice of the commencement of any action,
the Indemnified Party shall, if a claim in respect thereof is to be made against
a party against whom indemnification is sought under this Section 7 (the
"Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof; but the omission to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability which it may have to any
Indemnified Party otherwise than under the provisions hereof, and shall relieve
it from liability hereunder only to the extent that such omission results in the
forfeiture by the Indemnifying Party of rights or defenses with respect to such
action.
In any action or proceeding, following provision of proper notice by
the Indemnified Party of the existence of such action, the Indemnifying Party
shall be entitled to participate in any such action and, to the extent that it
shall wish, participate jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel of its choice (unless any
conflict of interest requires the appointment of separate counsel), and after
notice from the Indemnifying Party to such Indemnified Party of its election to
assume the defense of the action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expense of the other counsel
subsequently incurred without the Indemnifying Party's consent by such
Indemnified Party in connection with the defense thereof. The Indemnifying Party
shall cooperate in the defense or settlement of claims so assumed. The
Indemnified Party shall not be liable hereunder for the settlement by the
Indemnified Party for any claim or demand unless it has previously approved the
settlement or it has been notified of such claim or demand
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<PAGE> 7
and has failed to provide a defense in accordance with the provisions hereof. In
the event that any proceeding against the Indemnified Party shall be commenced
by the Indemnifying Party in connection with this Agreement, or the transactions
contemplated hereunder, and such proceeding shall be finally determined by a
court of competent jurisdiction in favor of the Indemnifying Party, the
Indemnified Party shall be liable to the Indemnifying Party for any reasonable
attorney's fees and court costs relating to such proceedings.
The indemnifications provided in this Section 7 shall survive the
termination of this Agreement.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996, (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually as required by the 1940 Act. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board or by vote of holders of a
majority (as defined in the 1940 Act and the rules thereunder) of the
outstanding voting securities of the Trust, or upon 60 days' written notice, by
the Sub-Adviser. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Sub-Adviser acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, as an investment manager or adviser to other investment
companies, including any offshore entities, or accounts. TAMIC has no objection
to the Sub-Adviser's so acting, provided that whenever the Portfolio and one or
more other investment companies or accounts managed or advised by the
Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each company and account. TAMIC recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, TAMIC understands that the persons employed by the
Sub-Adviser to assist in the performance of the Sub-Adviser's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the
Sub-Adviser or any affiliate of the Sub-Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
This Agreement shall not in any way limit or restrict Sub-Adviser or any of its
directors, officers, employees, or agents from buying, selling or trading any
securities or other investment instruments for its or their own account or for
the account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance by
Sub-Adviser of its duties and obligations under this Agreement.
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10. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this Agreement each agree to cooperate in a
reasonable manner with each other (unless their interests are in conflict) in
the event that any of them should become involved in a legal, administrative,
judicial or regulatory action, claim, or suit as a result of performing its
obligations under this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF TAMIC
TAMIC represents and warrants to the Sub-Adviser as follows:
a. TAMIC is registered as an investment adviser under the
Advisers Act;
b. TAMIC is a corporation duly organized and validly existing
under the laws of the State of New York with the power to
own and possess its assets and carry on its business as it
is now being conducted;
c. The execution, delivery and performance by TAMIC of this
Agreement are within TAMIC's powers and have been duly
authorized by all necessary action on the part of its
directors, and no action by or in respect of, or filing
with, any governmental body, agency or official is required
on the part of TAMIC for the execution, delivery and
performance of this Agreement by the parties hereto, and
the execution, delivery and performance of this Agreement
by the parties hereto does not contravene or constitute a
default under: (i) any provision of applicable law, rule or
regulation; (ii) TAMIC's Articles of Incorporation or By-
Laws; or (iii) any agreement, judgment, injunction, order,
decree or other instruments binding upon TAMIC;
d. This Agreement is a valid and binding Agreement of TAMIC;
e. TAMIC has provided the Sub-Adviser with a copy of its Form
ADV as most recently filed with the SEC and TAMIC further
represents that it will, within a reasonable time after
filing any amendment to its Form ADV with the SEC, furnish
a copy of such amendments to the Sub-Adviser. The
information contained in TAMIC's Form ADV is accurate and
complete in all material respects and does not omit to
state any material fact necessary in order to make the
statements made, in light of the circumstances under this
they were made, not misleading;
f. TAMIC acknowledges that it received a copy of the
Sub-Adviser's current Form ADV. At least 48 hours prior to
the execution of this Agreement and has delivered a copy of
the same to the Trust.
12. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER
a. The Sub-Adviser is registered as an investment adviser
under the Advisers Act;
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b. The Sub-Adviser is a corporation duly organized and validly
existing under the laws of the State of Delaware with the
power to own and possess its assets and carry on its
business as it is now being conducted;
c. The execution, delivery and performance by the Sub-Adviser
of this Agreement are within the Sub-Adviser's powers and
have been duly authorized by all necessary action on the
part of its directors, and no action by or in respect of,
or filing with, any governmental body, agency or official
is required on the part of the Sub-Adviser for the
execution, delivery and performance of this Agreement by
the parties hereto, and the execution, delivery and
performance of this Agreement by the parties hereto does
not contravene or constitute a default under: (i) any
provision of applicable law, rule or regulation; (ii) the
Sub-Adviser's Articles of Incorporation or By-Laws; or
(iii) any agreement, judgment, injunction, order, decree or
other instruments binding upon the Sub-Adviser;
d. This Agreement is a valid and binding Agreement of the
Sub-Adviser;
e. The Sub-Adviser has provided TAMIC with a copy of its Form
ADV as most recently filed with the SEC and will, promptly
after filing any amendment to its Form ADV and the SEC,
furnish a copy of such amendments to TAMIC. The information
contained in the Sub-Adviser's form ADV is accurate and
complete in all material respects and does not omit to
state any material fact necessary in order to make the
statements made, in light of the circumstances under which
they were made, not misleading;
f. The Sub-Adviser acknowledges that it received a copy of
TAMIC's current Form ADV.
13. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct its obligations under this Agreement in
a manner consistent with applicable laws and regulations, including but not
limited to Sections 2a-7, 5(b), 12, 17, 18, and 36 of the 1940 Act. TAMIC shall
conduct its investment advisory activities in a manner consistent with a Code of
Ethics maintained pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use
good faith efforts to ensure that any other sub-adviser of the Trust appointed
shall adopt and follow a similar Code of Ethics. TAMIC also agrees that it shall
conduct its activities in a manner consistent with any No-Action Letter, order
or rule promulgated by the SEC applicable to the Trust or any of the Portfolios.
14. MISCELLANEOUS
This Agreement may be signed in one or more counterpart.
The Trust represents that a copy of the Declaration of Trust is
on file with the Secretary of the Commonwealth of Massachusetts.
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This Agreement shall be governed by the laws of the State of
Connecticut.
Each party agrees to comply with all applicable reporting
requirements pursuant to state and federal laws and regulations.
All representations and warranties made by the sub-Adviser and
TAMIC herein shall survive for the duration of this Agreement and the parties
hereto shall immediately notify, but in no event later than five (5) days, each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
15. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and
affiliates may use the names "Massachusetts Financial Services Company" or "MFS"
or any derivative thereof or logo associated therewith in offering materials of
the Portfolio only with the prior approval of the Sub-Adviser and only for so
long as this Agreement or any extension, renewal, or amendment hereof remains in
effect. At such time as this Agreement shall no longer be in effect, the Trust
and TAMIC together with its subsidiaries and affiliates each agree that they
shall cease to use such names or any other name indicating that it is advised by
or otherwise connected with the Sub-Adviser and shall promptly change its name
accordingly. The Trust acknowledges that it has adopted the name "Massachusetts
Financial Services Company" or "MFS" or any derivative thereof or logo
associated therewith in offering materials of the Portfolio only with the prior
approval of the Sub-Adviser and through permission of the Sub-Adviser, and
agrees that the Sub-Adviser reserves to itself and any successor to its
business the right to grant the non-exclusive right to use the aforementioned
names or any similar names to any other corporation or entity, including but not
limited to any investment company of which the Sub-Adviser or any subsidiary or
affiliate thereof or any successor to the business of any thereof shall be the
investment advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials thereunto duly
authorized as of the day and year first above written.
Travelers Asset Management International Corporation
By:____________________________________________________
Its:___________________________________________________
Massachusetts Financial Services Company
By:____________________________________________________
Its:___________________________________________________
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Exhibit 5(m)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, INC.
AND
FEDERATED INVESTMENT COUNSELING
This Investment Sub-Advisory Agreement (the "Agreement") is entered
into as of August 1, 1996, by and between Travelers Asset Management
International Corporation, a corporation duly organized and existing under the
laws of the state of New York ("TAMIC"), and Federated Investment Counseling, a
business trust duly organized and existing under the laws of the state of
Delaware (the "Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement dated
August 1, 1996, (the "Investment Advisory Agreement") with The Travelers Series
Trust (a Massachusetts business trust, hereinafter referred to as the "Trust").
A copy of such agreement is attached as Exhibit A hereto, pursuant to which
TAMIC provides investment management and advisory services to the Trust; and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may
engage a duly organized sub-adviser, to furnish investment information, services
and advice to assist TAMIC in carrying out its responsibilities under the
Investment Advisory Agreement; and
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Sub- Adviser desires to provide such investment advisory
services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. INVESTMENT DESCRIPTION APPOINTMENT
The Trust, which is divided into segments including the segment
known as the Federated High Yield Portfolio ( the "Portfolio") desires to employ
its capital relating to the Portfolio by investing and reinvesting in
investments of the kind and in accordance with the investment(s), policies and
limitations specified in the prospectus (the "Prospectus") and the statement of
additional information (the "SAI") filed with the Securities and Exchange
Commission (the "SEC") as part of the Trust's Registration Statement on Form
N-1A, as amended or supplemented from time to time, and in the manner and to the
extent as may from time to time be approved by the Board of Trustees of the
Trust (the "Board"). TAMIC will supply copies of the Prospectus and the SAI to
the Sub-Adviser promptly after the Trust's Registration Statement is declared
effective. TAMIC agrees promptly to provide copies of all amendments and
supplements to the current Prospectus and the SAI, and copies of any
<PAGE> 2
procedures adopted by the Board applicable to the Sub-Adviser and any amendments
thereto (the "Board Procedures"), to the Sub-Adviser on an on-going basis. Until
TAMIC delivers any such amendment or supplement or Board Procedures, the
Sub-Adviser shall be fully protected in relying on the Prospectus and SAI and
any Board Procedures, if any, as previously furnished to the Sub-Adviser. In
addition, TAMIC shall furnish the Sub-Adviser with a certified copy of any
financial statement or report prepared for the Trust with respect to the
Portfolio by certified or independent public accountants, and with copies of any
financial statements or reports made by the Trust to shareholders or to any
state or federal regulatory agency. TAMIC shall also inform the Sub-Adviser of
the results of any audits or examinations by regulatory authorities pertaining
to the Portfolio. TAMIC further agrees to furnish the Sub-Adviser with any
materials or information that the Sub-Adviser may reasonably request to enable
it to perform its functions under this Agreement.
TAMIC and the Trust desire to employ and hereby appoint the Sub-Adviser
to act as the sub-investment adviser to the Portfolio. Subject to the terms and
conditions of this Agreement, Sub-Adviser accepts the appointment and agrees to
furnish the services for the compensation and for the term set forth below.
Except as specified herein, the Sub-Adviser agrees that it shall not delegate
any material obligation assumed pursuant to this Agreement to any third party
without first obtaining the written consent of both the Trust and TAMIC.
2. SERVICES AS SUB-ADVISER--STANDARDS
TAMIC authorizes the Sub-Adviser, in its discretion and without
prior consultation with TAMIC, to engage in such investment activities on behalf
of the Portfolio as have been approved by the Trust and are as set forth in the
then current Prospectus and SAI. (The permissible investment vehicles in which
the Portfolio may invest and trade are referred to herein as the "Securities.")
Subject to the supervision of TAMIC and the Board, the Sub-Adviser will manage
the investment operations of the Portfolio and the composition of the Portfolio,
including the purchase, retention and disposition of, and exercise of all rights
pertaining to, the Securities. The Sub-Adviser may invest the Portfolio in such
proportions of stocks, bonds, instruments, financial contracts, cash and other
investment assets as the Sub-Adviser shall determine, and may dispose of
Securities without regard to the length of time the securities have been held,
the resulting rate of portfolio turnover or any tax considerations, provided
that all investments shall conform with:
(a) The Portfolio's investment objectives, policies, limitations,
procedures and guidelines set forth in the documents listed on
Schedule 1 to the Agreement as such Schedule may be amended from
time to time;
(b) any additional objectives, policies or guidelines established by
TAMIC or by the Board that have been furnished in writing to
Sub-Adviser;
(c) the provisions of Section 851 of the Internal Revenue Code of
1986, as amended, ("IRC") applicable to "regulated investment
companies";
(d) the diversification requirements specified in Section 817(h) of
the IRC, and the regulations thereunder; and
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<PAGE> 3
(e) the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act") and the rules and regulations thereunder
applicable to the Portfolio.
3. SERVICES AS SUB-ADVISER--AUTHORITY
In conducting its activities as described herein, the Sub-Adviser
shall be authorized to perform the following functions on behalf of the Trust:
(a) following the execution of appropriate documentation authorizing the
Sub-Adviser to execute Portfolio account documents, execute such account
documentation, agreements, contracts and other documents as the Sub-Adviser
shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the assets of the Portfolio (in such respect,
and only for this limited purpose, the Sub-Adviser shall act as TAMIC's and the
Trust's agent and attorney-in-fact); and (b) employ professional portfolio
managers and securities analysts who provide research services to the Portfolio.
In addition:
(i) the Sub-Adviser shall furnish TAMIC or its designee (e.g., the
custodian bank for the Trust's Portfolio) daily information concerning Portfolio
transactions and quarterly and annual reports concerning transactions and
performance of the Portfolio in such form as may be mutually agreed upon and the
Sub-Adviser agrees to review the Portfolio and discuss the management of it with
TAMIC and Board as either or both shall from time to time reasonably request.
(ii) Unless TAMIC gives the Sub-Adviser written instructions to the
contrary, the Sub- Adviser shall use its good faith judgment in a manner which
it reasonably believes best serves the interests of the Portfolio's shareholders
to vote or abstain from voting all proxies solicited by or with respect to the
issuers of Securities in which assets of the Portfolio may be invested.
(iii) With respect to the provision of services by the Sub-Adviser
hereunder, the Sub- Adviser shall maintain and preserve such records related to
the Portfolio's transactions as are required under any applicable state or
federal securities law or regulation including: the 1940 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the Investment Advisers
Act of 1940, as amended (the "Advisers Act") (collectively, the "Record
Retention Rules"). TAMIC shall maintain and preserve all books and other records
not related to the Portfolio's transactions as required under the Record
Retention Rules. The Sub-Adviser shall, within a reasonable period to time after
the request, furnish to TAMIC all information relating to the Sub-Adviser's
services hereunder reasonably requested by TAMIC to keep and preserve the books
and records of the Trust required to be maintained under the Record Retention
Rules. The Sub-Adviser agrees that all records which it maintains under the
Record Retention Rules for the Portfolio are the property of the Trust and the
Sub-Adviser will surrender, within a reasonable period of time after the
request, to the Trust copies of any of such records.
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(iv) The Sub-Adviser shall maintain and follow a written code of ethics
(the "Code of Ethics") that it reasonably believes complies with the
requirements of Rule 17-j under the 1940 Act, a copy of which it will provide to
TAMIC or the Trust upon any reasonable request. The Sub-Adviser further
represents that it has policies and procedures regarding the detection and
prevention and the misuse of material, nonpublic information by the Sub-Adviser
and its employees as required by the Insider Trading and Securities Fraud
Enforcement Act of 1988.
(v) The Sub-Adviser shall manage the investment and reinvestment of the
assets of the Portfolio in a manner consistent with the diversification
requirements of Section 817 of the IRC. The Sub-Adviser will also manage the
investments of the Portfolio in a manner consistent with any and all investment
restrictions (including diversification requirements) contained in the 1940 Act,
any SEC no-action letter or order applicable to TAMIC that TAMIC provides to the
Sub-Adviser, and any applicable state securities law or regulation.
(vi) The Sub-Adviser will maintain compliance procedures for the
Portfolio that it reasonably believes are adequate to ensure the Portfolio's
compliance with the 1940 Act and the Advisers Act and the rules and regulations
thereunder, and the Portfolio's investment objectives and policies as stated in
the Prospectus and SAI.
4. BROKERAGE
In selecting brokers or dealers (including, if permitted by
applicable law and appropriate Board Procedures, any broker or dealer affiliated
with either TAMIC or the Sub-Adviser) to execute transactions on behalf of the
Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth and nature of the market in the security, the price of the security, the
size of the order, the timing of the transaction, the difficulty of the
transaction, the reputation, experience, financial condition and execution
capability of the broker or dealer, the quality of the service and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the 1934 Act) provided to the Portfolio and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Nothing in this paragraph shall be deemed to prohibit the
Sub-Adviser from paying an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that transaction, if the
Sub-Adviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker, or dealer, viewed in terms of either that
particular transaction or its overall responsibilities with respect to the
Portfolio and/or other accounts over which the Sub-Adviser or its affiliate
exercise investment discretion.
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To the extent consistent with the applicable law, Sub-Adviser may
aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of Sub-Adviser or its affiliated
persons. In such event, allocation of Securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by Sub-Adviser in the
manner Sub-Adviser considers to be the most equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. TAMIC hereby acknowledges that such aggregations of orders may not
result in a more favorable price or lower brokerage commissions in all
instances.
5. INFORMATION AND REPORTS
(a) TAMIC will provide Sub-Adviser with a list, to the best of
TAMIC's knowledge, of all affiliated persons of TAMIC (and
any affiliated person of such an affiliated person) and will
promptly update the list whenever TAMIC becomes aware of any
additional affiliated persons.
(b) The Sub-Adviser will maintain books and records relating to
its management of the Portfolio under its customary
procedures and in compliance with applicable regulations
under the 1940 Act and the Advisers Act. Sub-Adviser will
permit TAMIC to inspect such books and records at all
reasonable times during normal business hours, upon
reasonable notice. Sub-Adviser agrees that all records which
it maintains for the Portfolio are the property of the Trust
and Sub-Adviser will surrender promptly to the Trust copies
of any such records upon request by the Trust or TAMIC.
Prior to each Board meeting, Sub-Adviser will provide TAMIC and the
Board with reports regarding its management of the Portfolio during the interim
period, in such form as may be mutually agreed upon by Sub-Adviser and TAMIC.
Sub-Adviser will also provide TAMIC with any information regarding its
management of the Portfolio required for any shareholder report, amended
registration statement or prospectus supplement filed by the Portfolio with the
SEC. Sub-Adviser will submit on a quarterly basis to the Board and TAMIC a
written certification detailing any variation from applicable investment
policies or procedure, or from its Code of Ethics.
6. CONDITIONS TO AGREEMENT
Sub-Adviser's and TAMIC's obligations under this Agreement are
subject to the satisfaction of the following conditions precedent:
(a) Receipt of a certification of an officer of the Trust
stating that: (i) this Agreement and the Investment Advisory
Agreement have been approved by the vote of a majority of
the Board who are not interested persons of Sub-Adviser or
TAMIC, cast in person at a meeting of the Board, called for
the purpose of
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<PAGE> 6
voting on such approval and (ii) the Shareholders of the
Portfolio have approved this Agreement and the Investment
Advisory Agreement in a manner consistent with the provision
of the 1940 Act;
(b) Receipt of certified copies of instructions from the
Portfolio to its custodian designating the persons specified
by Sub-Adviser as "authorized persons" under the Portfolio's
custody agreement;
(c) The Portfolio's execution and delivery of a limited power of
attorney in favor of Sub-Adviser, in a form mutually
agreeable to Sub-Adviser, TAMIC and the Board;
(d) Receipt of Board resolutions, certified by an officer of the
Portfolio, adopting all procedures and guidelines applicable
to the Portfolio as listed on Schedule 2 attached to this
Agreement, and as such Schedule may be amended from time to
time; and
(e) Receipt of any other documents, certifications or other
instruments that Sub- Adviser or TAMIC may reasonably
request from the Portfolio;
7. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, TAMIC will pay the Sub-Adviser an annual fee calculated at the rate
of 0.40 % of the Portfolio's average daily net assets. These fees are calculated
daily and paid monthly. The Sub-Adviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. The fee
for the period from the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the SAI.
8. EXPENSES
The Sub-Adviser shall bear all expenses in connection with the
performance of its services under this Agreement. In no event will the
Sub-Adviser bear brokerage costs, custodian fees, auditors fees or other
expenses to be borne by the Portfolio or the Trust. The Portfolio will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory fees, sub-advisory fees (other than sub-advisory
fees paid pursuant to this
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<PAGE> 7
Agreement) and administration fees; fees for necessary professional and
brokerage services; costs relating to local administration of securities; fees
for any pricing service; the costs of regulatory compliance; and pro rata costs
associated with maintaining the Trust's legal existence and shareholder
relations. The Portfolio shall assume all other expenses not specifically
assumed by the Sub-Adviser or by TAMIC under the Investment Advisory Agreement
entered into between TAMIC and the Trust.
9. STANDARD OF CARE
The Sub-Adviser shall exercise reasonable care and in a manner
consistent with applicable federal and state laws and regulations in rendering
the services it agrees to provide under this Agreement. Neither the Sub-Adviser
nor its officers, directors, employees, agents, affiliated person, legal
representatives or persons controlled by it (collectively, the "Related
Persons") shall be liable for or subject to any damages, expenses, or losses in
connection with any error of judgment or mistake of law or for any loss suffered
by the Trust, the Portfolio or TAMIC or any shareholder, director, trustee or
officer thereof, in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Sub-Adviser against any liability to TAMIC, the Trust or to the
shareholders of the Trust to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's disregard of its
obligations and duties under this Agreement.
10. LIABILITY
Except as may otherwise be provided by the 1940 Act or federal
securities laws, neither Sub-Adviser nor any Related Persons, any shareholder,
director, trustee or officer thereof, shall be subject to any liability or
subject to any damages, expenses, or losses in connection with any error of
judgment, mistake of law, or any loss to TAMIC or the Trust arising out of any
investment or other act or omission in the course of, connected with, or arising
out of any services to be rendered under this Agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in the performance if its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement. TAMIC shall hold harmless and indemnify Sub-Adviser and each
Related Person against any loss, liability, claim, cost, damage or expense
(including reasonable investigation and defense costs and reasonable attorneys
fees and costs) arising by reason of any matter to which this Agreement relates
unless the Sub-Adviser is negligent in the performance of its duties or it has
reckless disregard of its obligations and duties under this Agreement. The Sub-
Adviser shall hold harmless the Trust and TAMIC for any loss, liability, cost,
damage, or expenses arising from any claim resulting from the Sub-Adviser's
negligence in connection with the performance of its duties or the reckless
disregard of its obligations and duties under this Agreement.
Promptly after receipt by a party seeking to be indemnified under this
Section 10 (the "Indemnified Party") of notice of the commencement of any
action, the Indemnified Party shall,
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if a claim in respect thereof is to be made against a party against whom
indemnification is sought under this Section 10 (the "Indemnifying Party"),
notify the Indemnifying Party in writing of the commencement thereof; but the
omission to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to any Indemnified Party otherwise
than under the provisions hereof, and shall relieve it from liability hereunder
only to the extent that such omission results in the forfeiture by the
Indemnifying Party of rights or defenses with respect to such action.
In any action or proceeding, following provision of proper notice by
the Indemnified Party of the existence of such action, the Indemnifying Party
shall be entitled to participate in any such action and, to the extent that it
shall wish, participate jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel of its choice (unless any
conflict of interest requires the appointment of separate counsel), and after
notice from the Indemnifying Party to such Indemnified Party of its election to
assume the defense of the action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expense of the other counsel
subsequently incurred without the Indemnifying Party's consent by such
Indemnified Party in connection with the defense thereof. The Indemnified Party
shall cooperate in the defense or settlement of claims so assumed. The
Indemnifying Party shall not be liable hereunder for the settlement by the
Indemnified Party for any claim or demand unless it has previously approved the
settlement or it has been notified of such claim or demand and has failed to
provide a defense in accordance with the provisions hereof. In the event that
any proceeding against the Indemnified Party shall be commenced by the
Indemnified Party in connection with this Agreement, or the transactions
contemplated hereunder, and such proceeding shall be finally determined by a
court of competent jurisdiction in favor of the Indemnifying Party, the
Indemnified Party shall be liable to the Indemnifying Party for any reasonable
attorney's fees and court costs relating to such proceedings.
The indemnifications provided in this Section 10 shall survive the
termination of this Agreement.
11. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996, (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the 1940 Act. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Board or by vote of holders
of a majority (as defined in the 1940 Act and the rules thereunder) of the
outstanding voting securities of the Trust, or upon 60 days' written notice, by
the Sub-Adviser. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
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12. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Sub-Adviser and its affiliates act,
will continue to act and may act in the future as investment manager or adviser
to fiduciary and other managed accounts, as an investment manager or adviser to
other investment companies, including any offshore entities, or accounts. TAMIC
has no objection to the Sub-Adviser and its affiliates so acting, provided that
whenever the Portfolio and one or more other investment companies or accounts
managed or advised by the Sub-Adviser and its affiliates have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a formula believed to be equitable to each company and
account. TAMIC recognizes that in some cases this procedure may adversely affect
the size of the position obtainable for the Portfolio. In addition, TAMIC
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate of the
Sub-Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature. This Agreement shall not in any way
limit or restrict Sub-Adviser or any of its directors, officers, employees, or
agents from buying, selling or trading any securities or other investment
instruments for its or their own account or for the account of others for whom
it or they may be acting, provided that such activities will not adversely
affect or otherwise impair the performance by Sub-Adviser of its duties and
obligations under this Agreement.
13. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this Agreement each agree to cooperate in a
reasonable manner with each other in the event that any of them should become
involved in a legal, administrative, judicial or regulatory action, claim, or
suit as a result of performing its obligations under this Agreement.
14. REPRESENTATIONS AND WARRANTIES OF TAMIC
TAMIC represents and warrants to the Sub-Adviser as follows:
a. TAMIC is registered with the SEC as an investment adviser
under the Advisers Act;
b. TAMIC is registered and licensed as an investment adviser
under the laws of all jurisdictions in which its activities
require it to be so licensed, except in such jurisdictions
where the failure to be so licensed would not have a
material effect on its business;
c. TAMIC is a corporation duly organized and validly existing
under the laws of the State of New York with the power to
own and possess its assets and carry on its business as it
is now being conducted;
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d. The execution, delivery and performance by TAMIC of this
Agreement are within TAMIC's powers and have been duly
authorized by all necessary action on the part of its
directors, and no action by or in respect of, or filing
with, any governmental body, agency or official is required
on the part of TAMIC for the execution, delivery and
performance of this Agreement by the parties hereto, and the
execution, delivery and performance of this Agreement by the
parties hereto does not contravene or constitute a default
under (i) any provision of applicable law, rule or
regulation, (ii) TAMIC's Articles of Incorporation or
By-Laws, or (iii) any agreement, judgment, injunction,
order, decree or other instruments binding upon TAMIC;
e. This Agreement is a valid and binding Agreement of TAMIC;
f. TAMIC has provided the Sub-Adviser with a copy of its Form
ADV as most recently filed with the SEC and will, within a
reasonable time after filing any amendment to its Form ADV
with the SEC, furnish a copy of such amendments to the
Sub-Adviser. The information contained in TAMIC's Form ADV
is accurate and complete in all material respects and does
not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances
under this they were made, not misleading;
g. TAMIC acknowledges that it received a copy of the
Sub-Adviser's Form ADV at least 48 hours prior to the
execution of this Agreement and has delivered a copy of the
same to the Trust; and
h. TAMIC has furnished Sub-Adviser true and complete copies of
all documents listed on Schedule 1 and Schedule 2 to this
Agreement, and TAMIC will promptly notify and provide
Sub-Adviser with updated documents as such documents are
revised;
i. The Trust and TAMIC have complied with all shareholder
approval requirements concerning the Investment Advisory
Agreement and the Sub-Advisory Agreement for the Portfolio.
15. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER
The Sub-Adviser hereby represents and warrants to TAMIC that:
a. The Sub-Adviser is registered with the SEC as an investment
adviser under the Advisers Act;
b. The Sub-Adviser is registered or licensed as an investment
adviser under the laws of jurisdictions in which its
activities require it to be so registered or licensed,
except where the failure to be so licensed would not have a
material adverse effect on its business;
c. The Sub-Adviser is a business trust duly organized and
validly existing under the laws of the State of Delaware
with the power to own and possess its assets and carry on
its business as it is now being conducted;
d. The execution, delivery and performance by the Sub-Adviser
of this Agreement are within the Sub-Adviser's powers and
have been duly authorized by all
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necessary action on the part of its directors, and no action
by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the
Sub-Adviser for the execution, delivery and performance of
this Agreement by the parties hereto, and the execution,
delivery and performance of this Agreement by the parties
hereto does not contravene or constitute a default under (i)
any provision of applicable law, rule or regulation, (ii)
the Sub-Adviser's Articles of Incorporation or By-Laws, or
(iii) any agreement, judgment, injunction, order, decree or
other instruments binding upon the Sub-Adviser;
e. This Agreement is a valid and binding Agreement of the
Sub-Adviser;
f. The Sub-Adviser has provided TAMIC with a copy of its Form
ADV as most recently filed with the SEC and will, promptly
after filing any amendment to its Form ADV and the SEC,
furnish a copy of such amendments to the Sub-Adviser. The
information contained in the Sub-Adviser's form ADV is
accurate and complete in all material respects and does not
omit to state any material fact necessary in order to make
the statements made, in light of the circumstances under
which they were made, not misleading;
g. The Sub-Adviser acknowledges that it received a copy of
TAMIC's Form ADV at least 48 hours prior to the execution of
this Agreement.
16. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulations, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. TAMIC shall ensure that its activities
are conducted in a manner consistent with a Code of Ethics maintained pursuant
to Section 17(j) of the 1940 Act. TAMIC agrees to use good faith efforts to
ensure that any Sub-Adviser appointed shall adopt and follow a similar Code of
Ethics. TAMIC also agrees that it shall conduct its activities in a manner
consistent with any No-Action Letter, order or rule promulgated by the SEC
applicable to the Trust or any of the Portfolio.
17. MISCELLANEOUS
This Agreement may be signed in one or more counterpart.
Each party to this Agreement represents and warrants that it is
validly existing and taken all necessary action to obtain the requisite
authority to enter into this Agreement and to perform the duties contemplated
herein.
The Trust represents that a copy of the Declaration of Trust is
on file with the Secretary of the Commonwealth of Massachusetts.
This Agreement shall be governed by the laws of the State of
Connecticut.
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Each party agrees to comply with all applicable reporting
requirements pursuant to state and federal laws and regulations.
All representations and warranties made by the Sub-Adviser and
TAMIC herein shall survive for the duration of this Agreement and the parties
hereto shall immediately notify, but in no event later than five (5) days, each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
18. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and
affiliates may use the names "Federated Investment Counseling." or "Federated"
or any derivative thereof or logo associated therewith in offering materials of
the Portfolio only with the prior approval of the Sub-Adviser and only for so
long as this Agreement or any extension, renewal, or amendment hereof remains in
effect. At such time as this Agreement shall no longer be in effect, the Trust
and TAMIC together with its subsidiaries and affiliates each agree that they
shall cease to use such names or any other name indicating that it is advised by
or otherwise connected with the Sub-Adviser and shall promptly change its name
accordingly. The Trust acknowledges that it has adopted the name "Federated
Investment Counseling." or "Federated" or any derivative thereof or logo
associated therewith in offering materials of the Portfolio only with the prior
approval of the Sub-Adviser and through permission of the Sub-Adviser, and
agrees that the Sub-Adviser reserves to itself and any successor to its business
the right to grant the non-exclusive right to use the aforementioned names or
any similar names to any other corporation or entity, including but not limited
to any investment company of which the Sub-Adviser or any subsidiary or
affiliate thereof or any successor to the business of any thereof shall be the
investment advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials thereunto duly
authorized as of the day and year first above written.
Travelers Asset Management International Corporation
By:____________________________________________________
Its:___________________________________________________
Federated Investment Counseling
By:____________________________________________________
Its:___________________________________________________
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Exhibit 5(n)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, INC.
AND
FEDERATED INVESTMENT COUNSELING
This Investment Sub-Advisory Agreement (the "Agreement") is entered
into as of August 1, 1996, by and between Travelers Asset Management
International Corporation, a corporation duly organized and existing under the
laws of the state of New York ("TAMIC"), and Federated Investment Counseling, a
business trust duly organized and existing under the laws of the state of
Delaware (the "Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement dated
August 1, 1996, (the "Investment Advisory Agreement") with The Travelers Series
Trust (a Massachusetts business trust, hereinafter referred to as the "Trust").
A copy of such agreement is attached as Exhibit A hereto, pursuant to which
TAMIC provides investment management and advisory services to the Trust; and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may
engage a duly organized sub-adviser, to furnish investment information, services
and advice to assist TAMIC in carrying out its responsibilities under the
Investment Advisory Agreement; and
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Sub-Adviser desires to provide such investment advisory
services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. INVESTMENT DESCRIPTION APPOINTMENT
The Trust, which is divided into segments including the segment
known as the Federated Stock Portfolio ( the "Portfolio") desires to employ its
capital relating to the Portfolio by investing and reinvesting in investments of
the kind and in accordance with the investment(s), policies and limitations
specified in the prospectus (the "Prospectus") and the statement of additional
information (the "SAI") filed with the Securities and Exchange Commission (the
"SEC") as part of the Trust's Registration Statement on Form N-1A, as amended or
supplemented from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Trustees of the Trust (the "Board").
TAMIC will supply copies of the Prospectus and the SAI to the Sub-Adviser
promptly after the Trust's Registration Statement is declared effective. TAMIC
agrees promptly to provide copies of all amendments and supplements to the
current Prospectus and the SAI, and copies of any procedures adopted by the
<PAGE> 2
Board applicable to the Sub-Adviser and any amendments thereto (the "Board
Procedures"), to the Sub-Adviser on an on-going basis. Until TAMIC delivers any
such amendment or supplement or Board Procedures, the Sub-Adviser shall be fully
protected in relying on the Prospectus and SAI and any Board Procedures, if any,
as previously furnished to the Sub-Adviser. In addition, TAMIC shall furnish the
Sub-Adviser with a certified copy of any financial statement or report prepared
for the Trust with respect to the Portfolio by certified or independent public
accountants, and with copies of any financial statements or reports made by the
Trust to shareholders or to any state or federal regulatory agency. TAMIC shall
also inform the Sub-Adviser of the results of any audits or examinations by
regulatory authorities pertaining to the Portfolio. TAMIC further agrees to
furnish the Sub-Adviser with any materials or information that the Sub-Adviser
may reasonably request to enable it to perform its functions under this
Agreement.
TAMIC and the Trust desire to employ and hereby appoint the Sub-Adviser
to act as the sub-investment adviser to the Portfolio. Subject to the terms and
conditions of this Agreement, Sub-Adviser accepts the appointment and agrees to
furnish the services for the compensation and for the term set forth below.
Except as specified herein, the Sub-Adviser agrees that it shall not delegate
any material obligation assumed pursuant to this Agreement to any third party
without first obtaining the written consent of both the Trust and TAMIC.
2. SERVICES AS SUB-ADVISER--STANDARDS
TAMIC authorizes the Sub-Adviser, in its discretion and without
prior consultation with TAMIC, to engage in such investment activities on behalf
of the Portfolio as have been approved by the Trust and are as set forth in the
then current Prospectus and SAI. (The permissible investment vehicles in which
the Portfolio may invest and trade are referred to herein as the "Securities.")
Subject to the supervision of TAMIC and the Board, the Sub-Adviser will manage
the investment operations of the Portfolio and the composition of the Portfolio,
including the purchase, retention and disposition of, and exercise of all rights
pertaining to, the Securities. The Sub-Adviser may invest the Portfolio in such
proportions of stocks, bonds, instruments, financial contracts, cash and other
investment assets as the Sub-Adviser shall determine, and may dispose of
Securities without regard to the length of time the securities have been held,
the resulting rate of portfolio turnover or any tax considerations, provided
that all investments shall conform with:
(a) The Portfolio's investment objectives, policies, limitations,
procedures and guidelines set forth in the documents listed on
Schedule 1 to the Agreement as such Schedule may be amended from
time to time;
(b) any additional objectives, policies or guidelines established by
TAMIC or by the Board that have been furnished in writing to
Sub-Adviser;
(c) the provisions of Section 851 of the Internal Revenue Code of
1986, as amended, ("IRC") applicable to "regulated investment
companies";
(d) the diversification requirements specified in Section 817(h) of
the IRC, and the regulations thereunder; and
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<PAGE> 3
(e) the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act") and the rules and regulations thereunder
applicable to the Portfolio.
3. SERVICES AS SUB-ADVISER--AUTHORITY
In conducting its activities as described herein, the Sub-Adviser
shall be authorized to perform the following functions on behalf of the Trust:
(a) following the execution of appropriate documentation authorizing the
Sub-Adviser to execute Portfolio account documents, execute such account
documentation, agreements, contracts and other documents as the Sub-Adviser
shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the assets of the Portfolio (in such respect,
and only for this limited purpose, the Sub-Adviser shall act as TAMIC's and the
Trust's agent and attorney-in-fact); and (b) employ professional portfolio
managers and securities analysts who provide research services to the Portfolio.
In addition:
(i) the Sub-Adviser shall furnish TAMIC or its designee (e.g., the
custodian bank for the Trust's Portfolio) daily information concerning Portfolio
transactions and quarterly and annual reports concerning transactions and
performance of the Portfolio in such form as may be mutually agreed upon and the
Sub-Adviser agrees to review the Portfolio and discuss the management of it with
TAMIC and Board as either or both shall from time to time reasonably request.
(ii) Unless TAMIC gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Portfolio's shareholders to
vote or abstain from voting all proxies solicited by or with respect to the
issuers of Securities in which assets of the Portfolio may be invested.
(iii) With respect to the provision of services by the Sub-Adviser
hereunder, the Sub-Adviser shall maintain and preserve such records related to
the Portfolio's transactions as are required under any applicable state or
federal securities law or regulation including: the 1940 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the Investment Advisers
Act of 1940, as amended (the "Advisers Act") (collectively, the "Record
Retention Rules"). TAMIC shall maintain and preserve all books and other records
not related to the Portfolio's transactions as required under the Record
Retention Rules. The Sub-Adviser shall, within a reasonable period to time after
the request, furnish to TAMIC all information relating to the Sub-Adviser's
services hereunder reasonably requested by TAMIC to keep and preserve the books
and records of the Trust required to be maintained under the Record Retention
Rules. The Sub-Adviser agrees that all records which it maintains under the
Record Retention Rules for the Portfolio are the property of the Trust and the
Sub-Adviser will surrender, within a reasonable period of time after the
request, to the Trust copies of any of such records.
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(iv) The Sub-Adviser shall maintain and follow a written code of ethics
(the "Code of Ethics") that it reasonably believes complies with the
requirements of Rule 17-j under the 1940 Act, a copy of which it will provide to
TAMIC or the Trust upon any reasonable request. The Sub-Adviser further
represents that it has policies and procedures regarding the detection and
prevention and the misuse of material, nonpublic information by the Sub-Adviser
and its employees as required by the Insider Trading and Securities Fraud
Enforcement Act of 1988.
(v) The Sub-Adviser shall manage the investment and reinvestment of the
assets of the Portfolio in a manner consistent with the diversification
requirements of Section 817 of the IRC. The Sub-Adviser will also manage the
investments of the Portfolio in a manner consistent with any and all investment
restrictions (including diversification requirements) contained in the 1940 Act,
any SEC no-action letter or order applicable to TAMIC that TAMIC provides to the
Sub-Adviser, and any applicable state securities law or regulation.
(vi) The Sub-Adviser will maintain compliance procedures for the
Portfolio that it reasonably believes are adequate to ensure the Portfolio's
compliance with the 1940 Act and the Advisers Act and the rules and regulations
thereunder, and the Portfolio's investment objectives and policies as stated in
the Prospectus and SAI.
4. BROKERAGE
In selecting brokers or dealers (including, if permitted by
applicable law and appropriate Board Procedures, any broker or dealer affiliated
with either TAMIC or the Sub-Adviser) to execute transactions on behalf of the
Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth and nature of the market in the security, the price of the security, the
size of the order, the timing of the transaction, the difficulty of the
transaction, the reputation, experience, financial condition and execution
capability of the broker or dealer, the quality of the service and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the 1934 Act) provided to the Portfolio and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Nothing in this paragraph shall be deemed to prohibit the
Sub-Adviser from paying an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that transaction, if the
Sub-Adviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker, or dealer, viewed in terms of either that
particular transaction or its overall responsibilities with respect to the
Portfolio and/or other accounts over which the Sub-Adviser or its affiliate
exercise investment discretion.
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To the extent consistent with the applicable law, Sub-Adviser may
aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of Sub-Adviser or its affiliated
persons. In such event, allocation of Securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by Sub-Adviser in the
manner Sub-Adviser considers to be the most equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. TAMIC hereby acknowledges that such aggregations of orders may not
result in a more favorable price or lower brokerage commissions in all
instances.
5. INFORMATION AND REPORTS
(a) TAMIC will provide Sub-Adviser with a list, to the best of
TAMIC's knowledge, of all affiliated persons of TAMIC (and any
affiliated person of such an affiliated person) and will
promptly update the list whenever TAMIC becomes aware of any
additional affiliated persons.
(b) The Sub-Adviser will maintain books and records relating to its
management of the Portfolio under its customary procedures and
in compliance with applicable regulations under the 1940 Act and
the Advisers Act. Sub-Adviser will permit TAMIC to inspect such
books and records at all reasonable times during normal business
hours, upon reasonable notice. Sub-Adviser agrees that all
records which it maintains for the Portfolio are the property of
the Trust and Sub-Adviser will surrender promptly to the Trust
copies of any such records upon request by the Trust or TAMIC.
Prior to each Board meeting, Sub-Adviser will provide TAMIC and the
Board with reports regarding its management of the Portfolio during the interim
period, in such form as may be mutually agreed upon by Sub-Adviser and TAMIC.
Sub-Adviser will also provide TAMIC with any information regarding its
management of the Portfolio required for any shareholder report, amended
registration statement or prospectus supplement filed by the Portfolio with the
SEC. Sub-Adviser will submit on a quarterly basis to the Board and TAMIC a
written certification detailing any variation from applicable investment
policies or procedure, or from its Code of Ethics.
6. CONDITIONS TO AGREEMENT
Sub-Adviser's and TAMIC's obligations under this Agreement are
subject to the satisfaction of the following conditions precedent:
(a) Receipt of a certification of an officer of the Trust stating
that: (i) this Agreement and the Investment Advisory Agreement
have been approved by the vote of a majority of the Board who
are not interested persons of Sub-Adviser or TAMIC, cast in
person at a meeting of the Board, called for the purpose of
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<PAGE> 6
voting on such approval and (ii) the Shareholders of the
Portfolio have approved this Agreement and the Investment
Advisory Agreement in a manner consistent with the provision of
the 1940 Act;
(b) Receipt of certified copies of instructions from the Portfolio
to its custodian designating the persons specified by
Sub-Adviser as "authorized persons" under the Portfolio's
custody agreement;
(c) The Portfolio's execution and delivery of a limited power of
attorney in favor of Sub-Adviser, in a form mutually agreeable
to Sub-Adviser, TAMIC and the Board;
(d) Receipt of Board resolutions, certified by an officer of the
Portfolio, adopting all procedures and guidelines applicable to
the Portfolio as listed on Schedule 2 attached to this
Agreement, and as such Schedule may be amended from time to
time; and
(e) Receipt of any other documents, certifications or other
instruments that Sub-Adviser or TAMIC may reasonably request
from the Portfolio;
7. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, TAMIC will pay the Sub-Adviser an annual fee calculated at the rate
of 0.375 % of the Portfolio's average daily net assets. These fees are
calculated daily and paid monthly. The Sub-Adviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. The fee
for the period from the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the SAI.
8. EXPENSES
The Sub-Adviser shall bear all expenses in connection with the
performance of its services under this Agreement. In no event will the
Sub-Adviser bear brokerage costs, custodian fees, auditors fees or other
expenses to be borne by the Portfolio or the Trust. The Portfolio will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory fees, sub-advisory fees (other than sub-advisory
fees paid pursuant to this
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<PAGE> 7
Agreement) and administration fees; fees for necessary professional and
brokerage services; costs relating to local administration of securities; fees
for any pricing service; the costs of regulatory compliance; and pro rata costs
associated with maintaining the Trust's legal existence and shareholder
relations. The Portfolio shall assume all other expenses not specifically
assumed by the Sub-Adviser or by TAMIC under the Investment Advisory Agreement
entered into between TAMIC and the Trust.
9. STANDARD OF CARE
The Sub-Adviser shall exercise reasonable care and in a manner
consistent with applicable federal and state laws and regulations in rendering
the services it agrees to provide under this Agreement. Neither the Sub-Adviser
nor its officers, directors, employees, agents, affiliated person, legal
representatives or persons controlled by it (collectively, the "Related
Persons") shall be liable for or subject to any damages, expenses, or losses in
connection with any error of judgment or mistake of law or for any loss suffered
by the Trust, the Portfolio or TAMIC or any shareholder, director, trustee or
officer thereof, in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Sub-Adviser against any liability to TAMIC, the Trust or to the
shareholders of the Trust to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's disregard of its
obligations and duties under this Agreement.
10. LIABILITY
Except as may otherwise be provided by the 1940 Act or federal
securities laws, neither Sub-Adviser nor any Related Persons, any shareholder,
director, trustee or officer thereof, shall be subject to any liability or
subject to any damages, expenses, or losses in connection with any error of
judgment, mistake of law, or any loss to TAMIC or the Trust arising out of any
investment or other act or omission in the course of, connected with, or arising
out of any services to be rendered under this Agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in the performance if its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement. TAMIC shall hold harmless and indemnify Sub-Adviser and each
Related Person against any loss, liability, claim, cost, damage or expense
(including reasonable investigation and defense costs and reasonable attorneys
fees and costs) arising by reason of any matter to which this Agreement relates
unless the Sub-Adviser is negligent in the performance of its duties or it has
reckless disregard of its obligations and duties under this Agreement. The
Sub-Adviser shall hold harmless the Trust and TAMIC for any loss, liability,
cost, damage, or expenses arising from any claim resulting from the
Sub-Adviser's negligence in connection with the performance of its duties or the
reckless disregard of its obligations and duties under this Agreement.
Promptly after receipt by a party seeking to be indemnified under this
Section 10 (the "Indemnified Party") of notice of the commencement of any
action, the Indemnified Party shall,
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<PAGE> 8
if a claim in respect thereof is to be made against a party against whom
indemnification is sought under this Section 10 (the "Indemnifying Party"),
notify the Indemnifying Party in writing of the commencement thereof; but the
omission to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to any Indemnified Party otherwise
than under the provisions hereof, and shall relieve it from liability hereunder
only to the extent that such omission results in the forfeiture by the
Indemnifying Party of rights or defenses with respect to such action.
In any action or proceeding, following provision of proper notice by
the Indemnified Party of the existence of such action, the Indemnifying Party
shall be entitled to participate in any such action and, to the extent that it
shall wish, participate jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel of its choice (unless any
conflict of interest requires the appointment of separate counsel), and after
notice from the Indemnifying Party to such Indemnified Party of its election to
assume the defense of the action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expense of the other counsel
subsequently incurred without the Indemnifying Party's consent by such
Indemnified Party in connection with the defense thereof. The Indemnified Party
shall cooperate in the defense or settlement of claims so assumed. The
Indemnifying Party shall not be liable hereunder for the settlement by the
Indemnified Party for any claim or demand unless it has previously approved the
settlement or it has been notified of such claim or demand and has failed to
provide a defense in accordance with the provisions hereof. In the event that
any proceeding against the Indemnified Party shall be commenced by the
Indemnified Party in connection with this Agreement, or the transactions
contemplated hereunder, and such proceeding shall be finally determined by a
court of competent jurisdiction in favor of the Indemnifying Party, the
Indemnified Party shall be liable to the Indemnifying Party for any reasonable
attorney's fees and court costs relating to such proceedings.
The indemnifications provided in this Section 10 shall survive the
termination of this Agreement.
11. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996, (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the 1940 Act. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Board or by vote of holders
of a majority (as defined in the 1940 Act and the rules thereunder) of the
outstanding voting securities of the Trust, or upon 60 days' written notice, by
the Sub-Adviser. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
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12. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Sub-Adviser and its affiliates act, will
continue to act and may act in the future as investment manager or adviser to
fiduciary and other managed accounts, as an investment manager or adviser to
other investment companies, including any offshore entities, or accounts. TAMIC
has no objection to the Sub-Adviser and its affiliates so acting, provided that
whenever the Portfolio and one or more other investment companies or accounts
managed or advised by the Sub-Adviser and its affiliates have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a formula believed to be equitable to each company and
account. TAMIC recognizes that in some cases this procedure may adversely affect
the size of the position obtainable for the Portfolio. In addition, TAMIC
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate of the
Sub-Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature. This Agreement shall not in any way
limit or restrict Sub-Adviser or any of its directors, officers, employees, or
agents from buying, selling or trading any securities or other investment
instruments for its or their own account or for the account of others for whom
it or they may be acting, provided that such activities will not adversely
affect or otherwise impair the performance by Sub-Adviser of its duties and
obligations under this Agreement.
13. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this Agreement each agree to cooperate in a
reasonable manner with each other in the event that any of them should become
involved in a legal, administrative, judicial or regulatory action, claim, or
suit as a result of performing its obligations under this Agreement.
14. REPRESENTATIONS AND WARRANTIES OF TAMIC
TAMIC represents and warrants to the Sub-Adviser as follows:
a. TAMIC is registered with the SEC as an investment adviser under
the Advisers Act;
b. TAMIC is registered and licensed as an investment adviser under
the laws of all jurisdictions in which its activities require it
to be so licensed, except in such jurisdictions where the failure
to be so licensed would not have a material effect on its
business;
c. TAMIC is a corporation duly organized and validly existing under
the laws of the State of New York with the power to own and
possess its assets and carry on its business as it is now being
conducted;
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d. The execution, delivery and performance by TAMIC of this
Agreement are within TAMIC's powers and have been duly authorized
by all necessary action on the part of its directors, and no
action by or in respect of, or filing with, any governmental
body, agency or official is required on the part of TAMIC for the
execution, delivery and performance of this Agreement by the
parties hereto, and the execution, delivery and performance of
this Agreement by the parties hereto does not contravene or
constitute a default under (i) any provision of applicable law,
rule or regulation, (ii) TAMIC's Articles of Incorporation or
By-Laws, or (iii) any agreement, judgment, injunction, order,
decree or other instruments binding upon TAMIC;
e. This Agreement is a valid and binding Agreement of TAMIC;
f. TAMIC has provided the Sub-Adviser with a copy of its Form ADV as
most recently filed with the SEC and will, within a reasonable
time after filing any amendment to its Form ADV with the SEC,
furnish a copy of such amendments to the Sub-Adviser. The
information contained in TAMIC's Form ADV is accurate and
complete in all material respects and does not omit to state any
material fact necessary in order to make the statements made, in
light of the circumstances under this they were made, not
misleading;
g. TAMIC acknowledges that it received a copy of the Sub-Adviser's
Form ADV at least 48 hours prior to the execution of this
Agreement and has delivered a copy of the same to the Trust; and
h. TAMIC has furnished Sub-Adviser true and complete copies of all
documents listed on Schedule 1 and Schedule 2 to this Agreement,
and TAMIC will promptly notify and provide Sub-Adviser with
updated documents as such documents are revised;
i. The Trust and TAMIC have complied with all shareholder approval
requirements concerning the Investment Advisory Agreement and the
Sub-Advisory Agreement for the Portfolio.
15. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER
The Sub-Adviser hereby represents and warrants to TAMIC that:
a. The Sub-Adviser is registered with the SEC as an investment
adviser under the Advisers Act;
b. The Sub-Adviser is registered or licensed as an investment
adviser under the laws of jurisdictions in which its activities
require it to be so registered or licensed, except where the
failure to be so licensed would not have a material adverse
effect on its business;
c. The Sub-Adviser is a business trust duly organized and validly
existing under the laws of the State of Delaware with the power
to own and possess its assets and carry on its business as it is
now being conducted;
d. The execution, delivery and performance by the Sub-Adviser of
this Agreement are within the Sub-Adviser's powers and have been
duly authorized by all
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necessary action on the part of its directors, and no action by
or in respect of, or filing with, any governmental body, agency
or official is required on the part of the Sub-Adviser for the
execution, delivery and performance of this Agreement by the
parties hereto, and the execution, delivery and performance of
this Agreement by the parties hereto does not contravene or
constitute a default under (i) any provision of applicable law,
rule or regulation, (ii) the Sub-Adviser's Articles of
Incorporation or By-Laws, or (iii) any agreement, judgment,
injunction, order, decree or other instruments binding upon the
Sub-Adviser;
e. This Agreement is a valid and binding Agreement of the
Sub-Adviser;
f. The Sub-Adviser has provided TAMIC with a copy of its Form ADV as
most recently filed with the SEC and will, promptly after filing
any amendment to its Form ADV and the SEC, furnish a copy of such
amendments to the Sub-Adviser. The information contained in the
Sub-Adviser's form ADV is accurate and complete in all material
respects and does not omit to state any material fact necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
g. The Sub-Adviser acknowledges that it received a copy of TAMIC's
Form ADV at least 48 hours prior to the execution of this
Agreement.
16. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulations, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. TAMIC shall ensure that its activities
are conducted in a manner consistent with a Code of Ethics maintained pursuant
to Section 17(j) of the 1940 Act. TAMIC agrees to use good faith efforts to
ensure that any Sub-Adviser appointed shall adopt and follow a similar Code of
Ethics. TAMIC also agrees that it shall conduct its activities in a manner
consistent with any No-Action Letter, order or rule promulgated by the SEC
applicable to the Trust or any of the Portfolio.
17. MISCELLANEOUS
This Agreement may be signed in one or more counterpart.
Each party to this Agreement represents and warrants that it is
validly existing and taken all necessary action to obtain the requisite
authority to enter into this Agreement and to perform the duties contemplated
herein.
The Trust represents that a copy of the Declaration of Trust is on
file with the Secretary of the Commonwealth of Massachusetts.
This Agreement shall be governed by the laws of the State of
Connecticut.
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Each party agrees to comply with all applicable reporting requirements
pursuant to state and federal laws and regulations.
All representations and warranties made by the Sub-Adviser and TAMIC
herein shall survive for the duration of this Agreement and the parties hereto
shall immediately notify, but in no event later than five (5) days, each other
in writing upon becoming aware that any of the foregoing representations and
warranties are no longer true.
18. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and affiliates
may use the names "Federated Investment Counseling." or "Federated" or any
derivative thereof or logo associated therewith in offering materials of the
Portfolio only with the prior approval of the Sub-Adviser and only for so long
as this Agreement or any extension, renewal, or amendment hereof remains in
effect. At such time as this Agreement shall no longer be in effect, the Trust
and TAMIC together with its subsidiaries and affiliates each agree that they
shall cease to use such names or any other name indicating that it is advised by
or otherwise connected with the Sub-Adviser and shall promptly change its name
accordingly. The Trust acknowledges that it has adopted the name "Federated
Investment Counseling." or "Federated" or any derivative thereof or logo
associated therewith in offering materials of the Portfolio only with the prior
approval of the Sub-Adviser and through permission of the Sub-Adviser, and
agrees that the Sub-Adviser reserves to itself and any successor to its business
the right to grant the non-exclusive right to use the aforementioned names or
any similar names to any other corporation or entity, including but not limited
to any investment company of which the Sub-Adviser or any subsidiary or
affiliate thereof or any successor to the business of any thereof shall be the
investment advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials thereunto duly
authorized as of the day and year first above written.
Travelers Asset Management International Corporation
By:
----------------------------------------------------
Its:
----------------------------------------------------
Federated Investment Counseling
By:
----------------------------------------------------
Its:
----------------------------------------------------
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Exhibit 5(o)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
LAZARD FRERES ASSET MANAGEMENT
This Investment Sub-Advisory Agreement (the "Agreement") is entered
into as of August 1, 1996, by and between Travelers Asset Management
International Corporation, a corporation duly organized and existing under the
laws of the state of New York ("TAMIC"), and Lazard Freres Asset Management, a
division of Lazard Freres & Co., LLC, a New York limited liability company, (the
Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement dated
August 1, 1996 (the "Investment Advisory Agreement") with The Travelers Series
Trust (a Massachusetts business trust, hereinafter referred to as the "Trust").
A copy of such agreement is attached as Exhibit A hereto, pursuant to which
TAMIC provides investment management and advisory services to the Trust; and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may
engage a duly organized sub-adviser, to furnish investment information, services
and advice to assist TAMIC in carrying out its responsibilities under the
Investment Advisory Agreement; and
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Sub-Adviser desires to provide such investment advisory
services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC, Trust (on behalf of itself and the Lazard
International Stock Portfolio), and Sub-Adviser agree as follows:
1. INVESTMENT DESCRIPTION APPOINTMENT
The Trust, which is divided into segments including the segment
known as the Lazard International Stock Portfolio (the "Portfolio") desires to
employ its capital relating to the Portfolio by investing and reinvesting in
investments of the kind and in accordance with the investment(s), policies and
limitations specified in the prospectus (the "Prospectus") and the statement of
additional information (the "SAI") filed with the Securities and Exchange
Commission (the "SEC") as part of the Company's Registration Statement on Form
N-1A, as amended or supplemented from time to time, and in the manner and to the
extent as may from time to time be approved by the Board of Trustees of the
Trust (the "Board"). TAMIC will supply copies of the Prospectus and the SAI to
the Sub-Adviser. TAMIC agrees promptly to provide copies of all amendments and
supplements to the current Prospectus and the SAI to the Sub-Adviser on an
on-going basis. Until TAMIC delivers any such amendment or supplement,
<PAGE> 2
the Sub-Adviser shall be fully protected in relying on the Prospectus and SAI as
previously furnished to the Sub-Adviser. TAMIC and the Trust desire to employ
and hereby appoint the Sub-Adviser to act as the sub-investment adviser to the
Portfolio. The Sub-Adviser accepts the appointment and agrees to furnish the
services for the compensation and for the term set forth below. Except as
specified herein, the Sub-Adviser agrees that it shall not delegate any material
obligation assumed pursuant to this Agreement to any third party without first
obtaining the written consent of both the Trust and TAMIC.
2. SERVICES AS SUB-ADVISER
Subject to the supervision, direction and approval of the Board and
TAMIC, the Sub-Adviser shall conduct a continual program of investment,
evaluation and, if appropriate in its view, the sale and reinvestment of the
Portfolio's assets. The Sub-Adviser is authorized, in its sole discretion and
without prior consultation with TAMIC, to: (a) manage the Portfolio's assets in
accordance with the Portfolio's investment objective(s) and policies as stated
in the Prospectus and the SAI; (b) make investment decisions for the Portfolio;
(c) place purchase and sale orders for portfolio transactions on behalf of the
Portfolio and manage otherwise uninvested cash assets of the Portfolio; (d)
price such Portfolio securities as TAMIC and Sub-Adviser shall mutually agree
upon from time to time; (e) execute account documentation, agreements, contracts
and other documents as the Sub-Adviser shall be requested by brokers, dealers,
counterparties and other persons in connection with its management of the assets
of the Portfolio (in such respect, and only for this limited purpose, the
Sub-Adviser shall act as TAMIC's and the Trust's agent and attorney-in-fact);
and (f) employ professional portfolio managers and securities analysts who
provide research services to the Portfolio. The Sub-Adviser shall execute
trades, and in general take such action as is appropriate to effectively manage
the Portfolio's investment practices.
In addition, (i) the Sub-Adviser shall furnish TAMIC daily information
concerning portfolio transactions and quarterly and annual reports concerning
transactions and performance of the Portfolio in such form as may be mutually
agreed upon, and the Sub-Adviser agrees to review the Portfolio and discuss the
management of it with TAMIC and Board as either or both shall from time to time
reasonably request.
(ii) Unless TAMIC gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Portfolio's shareholders to
vote or abstain from voting all proxies solicited by or with respect to the
issuers of securities in which assets of the Portfolio may be invested.
(iii) The Sub-Adviser shall maintain and preserve such records related
to the Portfolio's transactions as are required under any applicable state or
federal securities law or regulation including: the Investment Company Act of
1940, as amended (the "1940 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Investment Advisers Act of 1940, as amended
(the "Advisers Act"). TAMIC shall maintain and preserve all books and other
records not related to the Portfolio's transactions as required under such
rules. The Sub-Adviser shall timely furnish to TAMIC all information relating to
the Sub-Adviser's services hereunder reasonably requested by TAMIC to keep and
preserve the books and records of the Trust. The
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Sub-Adviser agrees that all records which it maintains for the Portfolio are the
property of the Trust and the Sub-Adviser will surrender promptly to the Trust
copies of any of such records.
(iv) The Sub-Adviser shall maintain compliance procedures for the
Portfolio that it reasonably believes are adequate to ensure the Portfolio's
compliance with: (i) the 1940 Act and the rules and regulations promulgated
thereunder; and (ii) the Portfolio's investment objective(s) and policies as
stated in the Prospectus and SAI. The Sub-Adviser shall notify TAMIC immediately
upon detection of any material breach of such compliance procedures. The
Sub-Adviser shall maintain compliance procedures that it reasonably believes are
adequate to ensure its compliance with the Investment Advisers Act of 1940.
(v) The Sub-Adviser shall maintain a written code of ethics (the "Code
of Ethics") that it reasonably believes complies with the requirements of Rule
17(j)(i) under the 1940 Act, a copy of which it will provide to TAMIC or Trust
upon any reasonable request. The Sub-Adviser shall follow such Code of Ethics in
performing its services under this Agreement. Further, the Sub-Adviser
represents that it has policies and procedures regarding the detection and
prevention and the misuse of material, nonpublic information by the Sub-Adviser
and its employees as required by the Insider Trading and Securities Fraud
Enforcement Act of 1988.
(vi) The Sub-Adviser shall manage the investment and reinvestment of
the assets of the Portfolio in a manner consistent with the diversification
requirements of Section 817 and Section 851 of the Internal Revenue Code of
1986, as amended (the "IRC"). The Sub-Adviser will also manage the investments
of the Portfolio in a manner consistent with any and all investment restrictions
(including diversification requirements) contained in the 1940 Act, any SEC
No-Action Letter or order applicable to the Company, and any applicable state
securities law or regulation.
(viii) The Sub-Adviser shall submit on a quarterly basis to the Board
and TAMIC a written certification detailing any variation from applicable
investment policies or procedure, or from its Code of Ethics.
3. BROKERAGE
In selecting brokers or dealers (including, if permitted by
applicable law and appropriate Board Procedures, any other broker or dealer
affiliated with TAMIC or the Sub-Adviser) to execute transactions on behalf of
the Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the 1934 Act) provided to the Portfolio and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Nothing in this paragraph shall be deemed to prohibit
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the Sub-Adviser from paying an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that transaction, if the
Sub-Adviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker, or dealer, viewed in terms of either that
particular transaction or its overall responsibilities with respect to the
Portfolio and/or other accounts over which the Sub-Adviser or its affiliate
exercise investment discretion.
4. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, TAMIC will pay the Sub-Adviser an annual fee calculated at the rate
of 0.475 % of the Portfolio's average daily net assets; the fee is calculated
daily and paid monthly. The Sub-Adviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. The fee
for the period from the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the SAI.
5. EXPENSES
The Sub-Adviser shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by the Portfolio or
the Trust) in connection with the performance of its services under this
Agreement. The Portfolio will bear certain other expenses to be incurred in its
operation, including, but not limited to, investment advisory fees, sub-advisory
fees (other than sub-advisory fees paid pursuant to this Agreement) and
administration fees; fees for necessary professional and brokerage services;
costs relating to local administration of securities; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Trust's legal existence and shareholder relations. All other
expenses that neither the Sub-Adviser nor TAMIC (pursuant to the Investment
Advisory Agreement) assume will be borne by the Portfolio or the Trust.
6. STANDARD OF CARE
The Sub-Adviser shall exercise its best judgment and shall act in
good faith and in a manner consistent with applicable federal and state laws and
regulations in rendering the services it agrees to provide under this agreement.
The Sub-Adviser shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Portfolio or TAMIC in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect the Sub-Adviser against any
liability
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<PAGE> 5
to TAMIC, the Trust or to the shareholders of the Trust to which the Sub-Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Sub-Adviser's disregard of its obligations and duties under this Agreement.
7. LIABILITY
Except as may otherwise be provided by the 1940 Act or federal
securities laws, neither Sub-Adviser nor any of its officers, directors,
employees or agents shall be subject to any liability to TAMIC or the Trust for
any error of judgment, mistake of law, or any loss arising out of any investment
or other act or omission in the course of, connected with, or arising out of any
services to be rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance if its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement. TAMIC shall hold harmless and indemnify Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by the Trust or any past or present
shareholder of the Trust that is not based upon the Sub-Adviser's negligence in
the performance of its duties or the disregard of its obligations and duties
under this Agreement. The Sub-Adviser shall hold harmless the Trust and TAMIC
for any loss, liability, cost, damage, or expenses proximately caused by any
claim resulting from the Sub-Adviser's negligence in connection with the
performance of its duties or the disregard of its obligations and duties under
this Agreement.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996, (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually as required by the 1940 Act. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Board or by vote of holders
of a majority (as defined in the 1940 Act and the rules thereunder) of the
outstanding voting securities of the Trust, or upon 60 days' written notice, by
the Sub-Adviser. This Agreement will also terminate automatically in the event
of its assignment or in the event of a breach of Section 15 of this agreement by
TAMIC (as defined in the 1940 Act and the rules thereunder).
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Sub-Adviser acts, will continue to act
and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, as an investment manager or adviser to other investment
companies, including any offshore entities, or accounts. TAMIC has no objection
to the Sub-Adviser's so acting, provided that whenever the Portfolio and one or
more other investment companies or accounts managed or advised by the
Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each company and account. TAMIC recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, TAMIC understands that the persons
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<PAGE> 6
employed by the Sub-Adviser to assist in the performance of the Sub-Adviser's
duties under this Agreement will not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of the Sub-Adviser or any affiliate of the Sub-Adviser to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature. This Agreement shall not in any way limit or restrict
Sub-Adviser or any of its directors, officers, employees, or agents from buying,
selling or trading any securities or other investment instruments for its or
their own account or for the account of others for whom it or they may be
acting, provided that such activities will not adversely affect or otherwise
impair the performance by Sub-Adviser of its duties and obligations under this
Agreement.
10. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this agreement each agree to cooperate with each
other in the event that any of them should become involved in a legal,
administrative, judicial or regulatory action, claim, or suit as a result of
performing its obligations under this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF TAMIC
TAMIC represents and warrants to the Sub-Adviser as follows:
a. TAMIC is registered as an investment adviser under the Advisers
Act;
b. TAMIC is a corporation duly organized and validly existing under
the laws of the State of New York with the power to own and
possess its assets and carry on its business as it is now being
conducted;
c. The execution, delivery and performance by TAMIC of this
Agreement are within TAMIC's powers and have been duly authorized
by all necessary action on the part of its directors, and no
action by or in respect of, or filing with, any governmental
body, agency or official is required on the part of TAMIC for the
execution, delivery and performance of this Agreement by the
parties hereto, and the execution, delivery and performance of
this Agreement by the parties hereto does not contravene or
constitute a default under: (i) any provision of applicable law,
rule or regulation; (ii) TAMIC's Articles of Incorporation or
By-Laws; or (iii) any agreement, judgment, injunction, order,
decree or other instruments binding upon TAMIC;
d. This Agreement is a valid and binding Agreement of TAMIC;
e. TAMIC has provided the Sub-Adviser with a copy of its Form ADV as
most recently filed with the SEC and TAMIC further represents
that it will, within a reasonable time after filing any amendment
to its Form ADV with the SEC, furnish a copy of such amendments
to the Sub-Adviser. The information contained in TAMIC's Form ADV
is accurate and complete in all material respects and does not
omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under this they
were made, not misleading;
f. TAMIC acknowledges that it received a copy of the Sub-Adviser's
current Form ADV.
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12. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER
a. The Sub-Adviser is registered as an investment adviser under the
Advisers Act;
b. The Sub-Adviser is a limited liability company duly organized and
validly existing under the laws of the State of New York with the
power to own and possess its assets and carry on its business as
it is now being conducted;
c. The execution, delivery and performance by the Sub-Adviser of
this Agreement are within the Sub-Adviser's powers and have been
duly authorized, and no action by or in respect of, or filing
with, any governmental body, agency or official is required on
the part of the Sub-Adviser for the execution, delivery and
performance of this Agreement by the parties hereto, and the
execution, delivery and performance of this Agreement by the
parties hereto does not contravene or constitute a default under:
(i) any provision of applicable law, rule or regulation; (ii) the
Sub-Adviser's Articles of Association; or (iii) any agreement,
judgment, injunction, order, decree or other instruments binding
upon the Sub-Adviser;
d. This Agreement is a valid and binding Agreement of the
Sub-Adviser;
e. The Sub-Adviser has provided TAMIC with a copy of its Form ADV as
most recently filed with the SEC and will, promptly after filing
any amendment to its Form ADV and the SEC, furnish a copy of such
amendments to TAMIC. The information contained in the
Sub-Adviser's form ADV is accurate and complete in all material
respects and does not omit to state any material fact necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
f. The Sub-Adviser acknowledges that it received a copy of TAMIC's
current Form ADV.
13. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with
applicable laws and regulations, including but not limited to Sections 2a-7,
5(b), 12, 17, 18, and 36 of the 1940 Act. TAMIC shall also ensure that its
activities are conducted in a manner consistent with a Code of Ethics maintained
pursuant to Section 17(j) of the 1940 Act. TAMIC agrees to use good faith
efforts to ensure that any sub-adviser appointed for this Portfolio or other
Portfolios of the Trust shall adopt and follow a similar Code of Ethics. TAMIC
also agrees that it shall conduct its activities in a manner consistent with any
No-Action Letter, order or rule promulgated by the SEC applicable to the Trust
or any of the Portfolios.
14. MISCELLANEOUS
This Agreement may be signed in one or more counterparts.
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Each party to this Agreement represents and warrants that it is validly
existing and has taken all necessary action to obtain the requisite authority to
enter into this Agreement and to perform the duties contemplated herein.
The Trust represents that a copy of the Declaration of Trust is on file
with the Secretary of the State of Massachusetts.
This Agreement shall be governed by the laws of the state of
Connecticut.
Each party agrees to comply with all applicable reporting requirements
pursuant to state and federal laws and regulations.
The Sub-Adviser agrees that it shall furnish to the California
Commissioner of Insurance any information or reports concerning the Company as
the Commissioner, in the performance of his or her duties may reasonably
request.
15. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and affiliates
may use the names Lazard Freres Asset Management only for so long as this
Agreement or any extension, renewal, or amendment hereof remains in effect.
TAMIC shall permit the Sub-Adviser to review all advertising and promotional
material for the Portfolio prior to use. At such time as this Agreement shall no
longer be in effect, the Trust and TAMIC together with its subsidiaries and
affiliates each agree that they shall cease to use such names or any other name
indicating that it is advised by or otherwise connected with the Sub-Adviser and
shall promptly change its name accordingly. The Trust acknowledges that it has
adopted the name "Lazard International Stock Portfolio" through permission of
the Sub-Adviser, and agrees that the Sub-Adviser reserves to itself and any
successor to its business the right to grant the non-exclusive right to use the
aforementioned names or any similar names to any other corporation or entity,
including but not limited to any investment company of which the Sub-Adviser or
any subsidiary or affiliate thereof or any successor to the business of any
thereof shall be the investment advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials thereunto duly
authorized as of the day and year first above written.
Travelers Asset Management International Corporation.
By:
------------------------------------------------------
Its:
------------------------------------------------------
Lazard Freres Asset Management
By:
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Its:
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8
<PAGE> 9
SUBADVISORY AGREEMENT
This Agreement is entered into as of the 1st day of August, 1996, by and
between THE TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, INC.
("Manager"), a Connecticut corporation, and FIDELITY MANAGEMENT & RESEARCH
COMPANY, a Massachusetts corporation (the "Subadviser"). In consideration
of the mutual covenants contained herein, the parties agree as follows:
I. APPOINTMENT OF SUBADVISER; COMPENSATION
1.1 Subadviser hereby agrees to serve as investment subadviser to the
investment portfolios of The Travelers Series Trust (the "Trust") shown on
Appendix A hereto (the "Portfolios"), subject to the terms of this
Agreement and subject to the supervision of the Trustees of the Trust.
Subadviser shall manage the investment and reinvestment of the assets of
the Portfolios. Subadviser will be an independent contractor and will have
no authority to act for or represent the Trust or Manager in any way or
otherwise be deemed an agent of either of them unless expressly authorized
in this Agreement or in another writing by the Trust and Adviser.
1.2 Manager will pay Subadviser compensation with respect to each
Portfolio as specified in Appendix A to this Agreement.
II. SERVICES TO BE RENDERED BY SUBADVISER TO THE TRUST
2.1 Subadviser, on a discretionary basis, will manage the investments and
determine the composition of the assets of the Portfolios, subject always
to the direction and control of the Trustees of the Trust, and in
accordance with the provisions of the Trust's registration statement. In
fulfilling its obligations to manage the investments and reinvestments of
the assets of the Portfolios, Subadviser will:
(1) obtain and evaluate pertinent economic, statistical, financial and
other information affecting the economy generally and individual companies
or industries the securities of which are included in the Portfolios or are
under consideration for inclusion in the Portfolios;
(2) formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
(3) take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities and other investments
authorized in the Trust's registration statement, including the selection
of brokers or dealers and the placing of orders for such purchases and
sales;
(4) regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
(5) provide advice and assistance in the determination of the fair value
of certain securities when market quotations are not readily available for
purposes of calculating net asset values for the Portfolios in accordance
with procedures and methods established by the Trustees of the Trust.
2.2 Subadviser will, at its expense, furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it
to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolios (excluding
determination of net asset values and shareholder accounting services).
2.3 Subadviser will select brokers and dealers to effect all transactions
subject to the following conditions: Subadviser will place all necessary
orders with brokers, dealers, or issuers, and will negotiate brokerage
commissions if applicable. Subadviser is directed at all times to act
consistently with applicable law in seeking to execute brokerage
transactions for the Portfolios in accordance with such policies or
practices as may be established by the Trustees of the Trust and described
in the Trust's registration statement, as amended. Subadviser may pay a
broker-dealer which provided research and brokerage services a higher
commission for a particular transaction than otherwise might have been
charged by another broker-dealer, if Subadviser determines that the higher
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of
either the particular transaction or Subadviser's overall responsibilities
with respect to accounts managed by Subadviser. Subadviser may use for the
benefit of Subadviser's other clients, or make available to companies
affiliated with Subadviser, for the benefit of its clients, any such
brokerage and research services that Subadviser obtains from brokers or
dealers, and brokerage and research services received by the Subadviser
with respect to other clients or affiliates of Subadviser may be used for
the benefit of the Portfolios.
2.4 Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment adviser of a registered
investment company pursuant to the Investment Company Act of 1940 (the
"Investment Company Act") and the Investment Advisers Act of 1940 (the
"Investment Advisers Act") and the rules thereunder.
2.5 The Manager shall be granted reasonable access to the records and
documents in Subadviser's possession relating to the Portfolios and/or
relating to the owners of variable annuities or variable life insurance
policies on whose behalf moneys have been invested in the Portfolios.
2.6 The Subadviser will develop or demonstrate to the Manager's
reasonable satisfaction a program to ensure compliance with applicable
state and federal laws and regulations governing the performance of the
Subadviser's duties hereunder. This program will include at a minimum,
written portfolio managers' handbooks (copies of which will be provided to
Manager from time to time upon request), reasonable compliance testing
procedures, and such reports as to which the Advisor and Subadviser may
agree from time to time.
2.7 The Subadviser will manage each Portfolio's investments so that its
portfolio holdings will not render it ineligible to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986,
as amended, (the "Code"), and Subadviser will notify the Manager
immediately upon having a reasonable basis for believing that any Portfolio
has ceased to be able to so qualify or that it might not be able to so
qualify in the future. In addition, the Subadviser will manage each
Portfolio's investments in a manner consistent with the requirements of
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment or life
insurance contracts and any amendments or other modifications to such
Section or Regulations, and Subadviser will notify the Manager immediately
upon having a reasonable basis for believing that any Portfolio has failed
to comply with the requirements of Section 817(h) or Regulation 1.817-5 or
that it might not be able to comply with any requirements thereof in the
future.
III. COMPLIANCE; CONFIDENTIALITY OF PORTFOLIO HOLDINGS
3.1 The parties to this Agreement recognize that the Sub-Adviser must
comply with certain provisions of the Investment Company Act and the
Investment Advisers Act, and applicable state and federal law. The parties
also agree that because the Manager does not oversee the day to day
activities of the Subadviser in connection with the carrying out of its
duties specified under this Agreement, it is important that the Subadviser
keep the Manager informed of its activities. Accordingly, the Subadviser
and the Manager will meet on a periodic basis to discuss the Subadviser's
activities. Such meetings may be held by the telephone, and shall involve
each Portfolio's portfolio manager(s). At such periodic meetings, the
Subadviser shall prepare a summary of the investment activities since the
last such meeting. Such reports will focus on investment performance and
compliance with the Portfolio's investment objectives and restrictions as
contained in the Trust's then current registration statement.
3.2 Manager acknowledges that the securities holdings of the Portfolios
constitute information of value to Subadviser, and agrees: (1) not to use
for any purpose, other than to supervise the Subadviser, holdings and other
trading-related information; and (2) not to disclose the Portfolio's
holdings as of any given date for at least thirty (30) days following such
date, except to the Trustees of the Trust or if required by applicable law.
Further, Manager agrees that information supplied by the Subadviser,
including approved lists, internal procedures, compliance procedures, and
any other board materials, is valuable to the Subadviser, and the Manager
agrees not to use or disclose any of the information contained in such
materials, except to the Trustees, or as required by law, or as expressly
permitted by the Subadviser, in writing, addressed to the Manager.
IV. LIABILITY OF SUBADVISER
4.1 Neither Subadviser, nor any of its directors, officers or employees
shall be liable to Manager or the Trust for any loss suffered by the
Manager or the Trust resulting from its acts or omissions as Subadviser to
the Portfolios, except for losses resulting from willful misfeasance, bad
faith, or gross negligence in the performance of, or from reckless
disregard of, the duties of Subadviser or any of its directors, officers or
employees. In such event, Subadviser agrees to hold harmless Manager and
the Trust for any losses suffered as a result of the Subadviser's willful
misfeasance, bad faith, or gross negligence. Notwithstanding the
foregoing, Subadviser, its directors, officers and/or employees shall not
be liable to Manager or to the Trust for any loss suffered as a consequence
of any action or inaction of the custodian or any other service provider of
any Portfolio in failing to observe the instructions of Subadviser.
V. SUPPLEMENTAL ARRANGEMENTS; EXPENSES
5.1 Subadviser may enter into arrangements with other persons affiliated
with Subadviser to better fulfill its obligations under this Agreement for
the provision of certain personnel and facilities to Subadviser.
5.2 It is understood that the Portfolios will pay all of their expenses
other than those expressly stated to be payable by Subadviser hereunder, by
Manager under its management agreement with the Trust and the Portfolios,
or by any Sub-Subadviser to the Portfolios. Expenses paid by the
Portfolios will include, but not be limited to, (i) interest and taxes;
(ii) brokerage commissions and other costs in connection with the purchase
or sale of securities and other investment instruments; (iii) fees and
expenses of the Trust's trustees other than those who are "interested
persons" of the Trust, the Manager, the Subadviser, or any Sub-Subadviser;
(iv) legal and audit expenses; (v) custodian, registrar and transfer agent
fees and expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolios' shares for distribution
under state and federal securities laws; (viii) expenses of printing and
mailing reports and notices and proxy material to shareholders of the
Portfolios; (viii) all other expenses incidental to holding meetings of the
Portfolios' shareholders, including proxy solicitations therefor; (ix)
insurance premiums for fidelity bond and other coverage; (x) investment
management fees; (xi) expenses of typesetting for printing prospectuses and
statements of additional information and supplements thereto; (xii)
expenses of printing and mailing prospectuses and statements of additional
information and supplements thereto; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions,
suits or proceedings to which a Portfolio is a party and any legal
obligation that a Portfolio may have to indemnify the Trust's trustees,
officers and/or employees or agents with respect thereto.
Manager represents and warrants that all expenses not specifically assumed
by Subadviser under this Agreement, are borne either by Manager under its
management agreement with the Trust, or by the Portfolios or the Trust.
The Subadviser shall not cause the Trust or the Portfolios to incur any
expenses, other than those reasonably necessary for Subadviser to fulfill
its obligations under this Agreement, unless Subadviser has first notified
Manager of its intention to do so. Further, it is understood that each
Portfolios is initially subject to an expense limitation of 1.25% of the
Portfolio's total assets. Expenses in excess of this level will be borne
by the Manager or an affiliate of Manager. The Subadviser will use its
best efforts to notify the Manager when Portfolio expenses exceed this
limitation.
VI. CONFLICTS OF INTEREST
6.1 It is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in Subadviser as trustees, officers,
stockholders or otherwise; that directors, officers, agents and
stockholders of Subadviser are or may be interested in the Trust as
Trustees, officers, shareholders or otherwise; that Subadviser may be
interested in the Trust; and that the existence of any such dual interest
shall not affect the validity of this Agreement or of any transactions
hereunder except as otherwise provided in the Agreement and Declaration of
the Trust and the Articles of Organization of Subadviser, respectively, or
by specific provisions of applicable law.
VII. REGULATION
7.1 Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement
any information, reports or other material which any such body by reason of
this Agreement may reasonably request or require pursuant to applicable
laws and regulations.
VIII. DURATION AND TERMINATION OF AGREEMENT
8.1 This Agreement shall become effective with respect to each Portfolio
on the latter of (a) execution of this Agreement, and (b) the effective
date Subadviser is appointed to manage the Portfolios by the Trustees
pursuant to Rule 15a-3 under the Investment Company Act.
8.2 This Agreement shall continue in force until July 31, 1998, and
indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Trust or by a majority of the outstanding voting securities
of each of the Portfolios, provided that in either event such continuance
shall also be approved by the vote of a majority of the Trustees of the
Trust who are not "interested persons" (as defined in the Investment
Company Act) of any party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval.
8.3 The required shareholder approval of the Agreement or any continuance
of the Agreement shall be effective with respect to any Portfolio if a
majority of the outstanding voting securities of the series (as defined in
Rule 18f-2(h) under the Investment Company Act) of shares of that Portfolio
votes to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by
the Agreement, or (b) all the portfolios of the Trust.
8.4 If the shareholders of any Portfolio fail to approve the Agreement or
any continuance of the Agreement, Subadviser will continue to act as
investment subadviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of any contract with
Subadviser or a different adviser or subadviser or other definitive action,
provided that the compensation received by Subadviser in respect of such
Portfolio during such period is in compliance with Rule 15a-4 under the
Investment Company Act.
8.5 This Agreement may be terminated at any time, upon sixty days'
written notice, without the payment of any penalty, (a) by the Trustees of
the Trust, (b) by the vote of a majority of the outstanding voting
securities of the Trust, or (c) with respect to any Portfolio, by the vote
of a majority of the outstanding voting securities of such Portfolio; or
(d) by Manager, or (e) by Subadviser.
8.6 This Agreement will terminate automatically with respect to a
Portfolio, without the payment of any penalty, in the event of its
assignment (as defined in the Investment Company Act) or in the event the
management agreement between Manager and the Trust terminates for any
reason with respect to that Portfolio.
8.7 The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act as now in effect or as hereafter amended.
IX. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
9.1 Subadviser will promptly notify Manager in writing of the occurrence
of any of the following events.
(1) Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement.
(2) Any material change in the Subadviser's overall business activities
that may have a material adverse affect on the Subadviser's ability to
perform under its obligations under this Agreement.
(3) The chief executive officer or controlling stockholder of Subadviser
or the portfolio manager of any Portfolio changes.
(4) Any change in the Subadviser's Code of Ethics or Form ADV which is
material to a Portfolio.
(5) The existence of any pending or threatened audit, investigation,
complaint, examination or other inquiry relating to the Portfolios
conducted by an individual contract owner, or any state or federal
governmental regulatory authority which is material to a Portfolio.
(6) Receipt of any written complaint from any contract owner.
The Subadviser agrees that it will supply the Manager with copies of any
material changes to the documents contemplated in Sections 9.1(4) and
9.1(5), and will provide copies of any materials received by it that are
described in Section 9.1(6).
X. USE OF SUBADVISER'S NAME
10.1 Manager will not use the name of Subadviser, or any affiliate of
Subadviser, in Trust literature without prior review and approval by
Subadviser, which will not be unreasonably withheld or delayed.
XI. AMENDMENT OF THIS AGREEMENT
11.1 This Agreement may be amended by the parties only if such amendment
is specifically approved by the vote of a majority of the outstanding
voting securities of each of the Portfolios affected by the amendment and
by the vote of a majority of the Trustees of the Trust who are not
interested persons of any person to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to any Portfolio if a
majority of the outstanding voting securities of that Portfolio vote to
approve the amendment, notwithstanding that the amendment may not have been
approved by a majority of the outstanding voting securities of (a) any
other portfolio affected by the amendment or (b) all the portfolios of the
Trust.
XII. ENTIRE AGREEMENT
12.1 This Agreement contains the entire understanding and agreement of
the parties with respect to the Portfolios.
XIII. HEADINGS
13.1 The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part of the
Agreement.
XIV. NOTICES
14.1 All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business of the Trust, Manager or
Subadviser, as the case may be, in person or by registered mail or a
private mail or delivery service providing the sender with notice of
receipt. Notice shall be deemed given on the date delivered or mailed in
accordance with this paragraph.
XV. SEVERABILITY
15.1 Should any portion of this Agreement, for any reason, be held to be
void at law or in equity, the Agreement shall be construed, insofar as is
possible, as if such portion had never been contained herein.
XVI. GOVERNING LAW
16.1 The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts (without
giving effect to the Choice of Law provisions thereof), or any of the
applicable provisions of the Investment Company Act. To the extent that
the laws of the Commonwealth of Massachusetts, or any of the provisions in
this Agreement, conflict with applicable provisions of the Investment
Company Act, the latter shall control.
XVII. LIMITATION OF LIABILITY
17.1 The Declaration of Trust establishing the Trust, dated October 11,
1991, a copy of which, together with all amendments, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Travelers Series Trust" refers to the Trustees under the
declaration collectively as Trustees, but not as individuals or personally,
and no Trustee, shareholder, officer, employee or agent of the Trust shall
be held to any personal liability, nor shall resort be had to their private
property, for the satisfaction of any obligation or claim, in connection
with the affairs of the Trust or any Portfolio thereof, but only the assets
belonging to the Trust, or to the particular portfolio with which the
obligee or claimant dealt, shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
THE TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, INC.
By: _____________________________
Name: _____________________________
Title: _____________________________
FIDELITY MANAGEMENT & RESEARCH COMPANY
By: _____________________________
Name: _____________________________
Title: _____________________________
APPENDIX A
Subadviser shall serve as investment subadviser for the following
portfolios of the Trust.
Equity Income
Large Cap
For each Portfolio, Manager will pay Subadviser, as full compensation for
all services provided under this Agreement, a fee computed separately for
each such Portfolio at an annual rate (the "Subadviser Percentage Fee") of
0.45% (45 basis points).
The fee with respect to each Portfolio shall be based on the average of
the net assets of the Portfolio determined as of the close of business on
each business day throughout the month.
Subadviser's fee shall be computed monthly, and within five business days
of the end of each calendar month Manager shall transmit to Subadviser the
fee for the previous month. Payment shall be made in federal funds wired
to a bank account designated by Subadviser. If this Agreement becomes
effective or terminates before the end of any month, the fee (if any) for
the period from the effective date to the end of such month or from the
beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to
the full month in which such effectiveness or termination occurs.
Subadviser agrees to look primarily to Manager for the payment of
Subadviser's fees arising under this Agreement. In the event that Manager
is more than thirty (30) days late in paying any fee due Subadviser,
Subadviser may seek to recover its fee from the Portfolios or from the
Trust.
<PAGE> 10
SUB-SUBADVISORY AGREEMENT
among
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
and
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
and
THE TRAVELERS SERIES TRUST ON BEHALF OF EQUITY INCOME PORTFOLIO AND LARGE
CAP PORTFOLIO
AGREEMENT made as of the 1st day of August, 1996 by and between Travelers
Asset Management International Corporation, a Connecticut corporation with
principal offices at One Tower Square, Hartford, Connecticut (hereinafter
called the "Manager"); Fidelity Management & Research Company, a
Massachusetts corporation with its principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the "Sub-Adviser"),
Fidelity Management & Research (U.K.) Inc. (hereinafter called the
"Sub-Subadviser"); and The Travelers Series Trust, a Massachusetts business
trust which may issue one or more series of shares of beneficial interest
(hereinafter called the "Trust") on behalf of Equity Income Portfolio and
Large Cap Portfolio (hereinafter called the "Portfolios").
WHEREAS the Trust and the Manager have entered or will enter into a
Management Contract on behalf of the Portfolios, pursuant to which the
Manager is to act as investment manager of the Portfolios; and
WHEREAS, the Manager and the Subadviser have entered or will enter into a
Subadvisory Agreement on behalf of the Portfolios, under which the
Subadviser is to have investment discretion over the Portfolios; and
WHEREAS the Sub-Subadviser and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and have
been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of various
countries, and securities of issuers located in such countries, and
providing investment advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Manager, the Subadviser and the
Sub-Subadviser agree as follows:
1. Duties: The Subadviser may, in its discretion, appoint the
Sub-Subadviser to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolios. The
services and the portion of the investments of the Portfolios to be advised
or managed by the Sub-Subadviser shall be as agreed upon from time to time
by the Subadviser and the Sub-Subadviser. The Sub-Subadviser shall pay the
salaries and fees of all personnel of the Sub-Subadviser performing
services for the Portfolios relating to research, statistical and
investment activities.
(a) Investment Advice: If and to the extent requested by the Subadviser,
the Sub-Subadviser shall provide investment advice to the Portfolios and
the Subadviser with respect to all or a portion of the investments of the
Portfolios, and in connection with such advice shall furnish the Portfolios
and the Subadviser such factual information, research reports and
investment recommendations as the Subadviser may reasonably require. Such
information may include written and oral reports and analyses.
(b) Investment Management: If and to the extent requested by the
Subadviser, the Sub-Subadviser shall, subject to the supervision of the
Subadviser, manage all or a portion of the investments of the Portfolios in
accordance with the investment objective, policies and limitations provided
in the Portfolios' Prospectus(es) or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 (the "1940
Act") and rules thereunder, as amended from time to time, and such other
limitations as the Trust, the Manager or Subadviser may impose with respect
to a Portfolio or the Portfolios by notice to the Sub-Subadviser. With
respect to the portion of the investments of the Portfolios under its
management, the Sub-Subadviser is authorized to make investment decisions
on behalf of the Portfolios with regard to any stock, bond, other security
or investment instrument, and to place orders for the purchase and sale of
such securities through such broker-dealers as the Sub-Subadviser may
select. The Sub-Subadviser may also be authorized, but only to the extent
such duties are delegated in writing by the Subadviser, to provide
additional investment management services to the Portfolios, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolios. All investment
management and any other activities of the Sub-Subadviser shall at all
times be subject to the control and direction of the Manager, the
Subadviser and the Trust's Board of Trustees.
(c) Subsidiaries and Affiliates: The Sub-Subadviser may perform any or
all of the services contemplated by this Agreement directly or through such
of its subsidiaries or other affiliated persons as the Sub-Subadviser shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and the rules
thereunder.
2. Information to be Provided to the Trust and the Subadviser: The
Sub-Subadviser shall furnish such reports, evaluations, information or
analyses to the Trust, the Manager and the Subadviser as the Trust's Board
of Trustees, the Manager or the Subadviser may reasonably request from time
to time, or as the Sub-Subadviser may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Subadviser shall
place all orders for the purchase and sale of portfolio securities for the
Portfolios' account(s) with brokers or dealers selected by the
Sub-Subadviser, which may include brokers or dealers affiliated with the
Manager, the Subadviser or Sub-Subadviser. The Sub-Subadviser shall use
its best efforts to seek to execute portfolio transactions at prices which
are advantageous to the Portfolios and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers or
dealers qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of l934)
to the Portfolios and/or to the other accounts over which the Manager, the
Sub-Subadviser or Subadviser exercise investment discretion. The
Sub-Subadviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Sub-Subadviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Subadviser has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust may
periodically review the commissions paid by the Portfolios to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolios.
4. Compensation: The Subadviser shall compensate the Sub-Subadviser on
the following basis for the services to be furnished hereunder.
(a) Investment Advisory Fee: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Subadviser agrees to pay the
Sub-Subadviser a monthly Sub-Subadvisory Fee. The Sub-Subadvisory Fee
shall be equal to 110% of the Sub-Subadviser's costs incurred in connection
with rendering the services referred to in subparagraph (a) of paragraph 1
of this Agreement. The Sub-Subadvisory Fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Manager or Subadviser,
if any, in effect from time to time.
(b) Investment Management Fee: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Subadviser agrees to pay the
Sub-Subadviser a monthly Investment Management Fee. The Investment
Management Fee shall be equal to: (i) 50% of the monthly management fee
rate (including performance adjustments, if any) that the Manager is
obligated to pay the Subadviser under the Subadviser's Subadvisory
Agreement, multiplied by: (ii) the fraction equal to the net assets of the
Portfolio as to which the Sub-Subadviser shall have provided investment
management services divided by the net assets of the Portfolio for that
month. If in any fiscal year the aggregate expenses of the Portfolio
exceed any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Manager or Subadviser waives all or
a portion of its management fee or reimburses the Portfolio for expenses to
the extent required to satisfy such limitation, the Investment Management
Fee paid to the Sub-Subadviser will be reduced by 50% of the amount of such
waivers or reimbursements multiplied by the fraction determined in (ii).
If the Sub-Subadviser reduces its fees to reflect such waivers or
reimbursements and the Manager or Subadviser subsequently recovers all or
any portion of such waivers or reimbursements, then the Sub-Subadviser
shall be entitled to receive from the Subadviser a proportionate share of
the amount recovered. To the extent that waivers and reimbursements by the
Manager or Subadviser required by such limitations are in excess of the
Manager's or Subadviser's management fee, the Investment Management Fee
paid to the Sub-Subadviser will be reduced to zero for that month, but in
no event shall the Sub-Subadviser be required to reimburse the Manager or
the Subadviser for all or a portion of such excess reimbursements.
(c) Provision of Multiple Services: If the Sub-Subadviser shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Subadviser with respect to such investments shall
be calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that each Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Subadviser hereunder or by the Manager under its management contract(s)
with the Trust and the Portfolios, or by the Subadviser under the
Subadvisory Agreement with the Manager, the Trust and the Portfolios, which
expenses payable by the Portfolios shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Trust's Trustees other than
those who are "interested persons" of the Trust, the Manager, the
Subadviser, or any Sub-Sub-Adviser; (iv) legal and audit expenses; (v)
custodian, registrar and transfer agent fees and expenses; (vi) fees and
expenses related to the registration and qualification of the Trust and the
Portfolio's shares for distribution under state and federal securities
laws; (viii) expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolios; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders, including
proxy solicitations therefor; (ix) insurance premiums for fidelity bond and
other coverage; (x) investment management fees; (xi) expenses of
typesetting for printing prospectuses and statements of additional
information and supplements thereto; (xii) expenses of printing and mailing
prospectuses and statements of additional information and supplements
thereto; and (xiii) such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which a
Portfolio is a party and any legal obligation that a Portfolio may have to
indemnify the Trust's Trustees, officers and/or employees or agents with
respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Subadviser or the Sub-Subadviser as directors, officers or otherwise and
that directors, officers and stockholders of the Subadviser or the
Sub-Subadviser are or may be or become similarly interested in the Trust,
and that the Subadviser or the Sub-Subadviser may be or become interested
in the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Sub-Subadviser to the Subadviser are not to be deemed to be exclusive,
the Sub-Subadviser being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Subadviser's ability to meet all of its
obligations hereunder. The Sub-Subadviser shall for all purposes be an
independent contractor and not an agent or employee of the Subadviser, the
Manager or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Subadviser, the Sub-Subadviser shall not be subject
to liability to the Manager, the Subadviser, the Trust or to any
shareholder of a Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1998,
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Manager, the
Subadviser, the Sub-Subadviser and the Portfolio(s), such consent on the
part of a Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Manager, the Subadviser, the Sub-Subadviser or a Portfolio
(with respect to that Portfolio only) may, at any time on sixty (60) days'
prior written notice to the other parties, terminate this Agreement,
without payment of any penalty. Action on behalf of a Portfolio may be
taken by the Trust's Board of Trustees, or, with respect to a Portfolio, by
the vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Subadviser is hereby expressly put
on notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Subadviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of a Portfolio. Neither shall the Sub-Subadviser seek
satisfaction of any such obligation from the Trustees or any individual
Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
[This space left blank]
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed in their behalf and under seal by their respective officers
thereunto duly authorized, all as of the date written above.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
BY:___________________________________________
Name_____________________________________
Title______________________________________
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY:___________________________________________
Name_____________________________________
Title______________________________________
THE TRAVELERS SERIES TRUST
on behalf of Equity Income Portfolio and Large Cap Portfolio
BY: ___________________________________________
Name_____________________________________
Title______________________________________
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
BY:___________________________________________
Name_____________________________________
Title______________________________________
<PAGE> 11
SUB-SUBADVISORY AGREEMENT
among
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
and
FIDELITY MANAGEMENT & RESEARCH (Far East) INC.
and
THE TRAVELERS SERIES TRUST ON BEHALF OF EQUITY INCOME PORTFOLIO AND LARGE
CAP PORTFOLIO
AGREEMENT made as of the 1st day of August, 1996 by and between Travelers
Asset Management International Corporation, a Connecticut corporation with
principal offices at One Tower Square, Hartford, Connecticut (hereinafter
called the "Manager"); Fidelity Management & Research Company, a
Massachusetts corporation with its principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the "Sub-Adviser"),
Fidelity Management & Research (Far East) Inc. (hereinafter called the
"Sub-Subadviser"); and The Travelers Series Trust, a Massachusetts business
trust which may issue one or more series of shares of beneficial interest
(hereinafter called the "Trust") on behalf of Equity Income Portfolio and
Large Cap Portfolio (hereinafter called the "Portfolios").
WHEREAS the Trust and the Manager have entered or will enter into a
Management Contract on behalf of the Portfolios, pursuant to which the
Manager is to act as investment manager of the Portfolios; and
WHEREAS, the Manager and the Subadviser have entered or will enter into a
Subadvisory Agreement on behalf of the Portfolios, under which the
Subadviser is to have investment discretion over the Portfolios; and
WHEREAS the Sub-Subadviser and its subsidiaries and other affiliated
persons have personnel in various locations throughout the world and have
been formed in part for the purpose of researching and compiling
information and recommendations with respect to the economies of various
countries, and securities of issuers located in such countries, and
providing investment advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Manager, the Subadviser and the
Sub-Subadviser agree as follows:
1. Duties: The Subadviser may, in its discretion, appoint the
Sub-Subadviser to perform one or more of the following services with
respect to all or a portion of the investments of the Portfolios. The
services and the portion of the investments of the Portfolios to be advised
or managed by the Sub-Subadviser shall be as agreed upon from time to time
by the Subadviser and the Sub-Subadviser. The Sub-Subadviser shall pay the
salaries and fees of all personnel of the Sub-Subadviser performing
services for the Portfolios relating to research, statistical and
investment activities.
(a) Investment Advice: If and to the extent requested by the Subadviser,
the Sub-Subadviser shall provide investment advice to the Portfolios and
the Subadviser with respect to all or a portion of the investments of the
Portfolios, and in connection with such advice shall furnish the Portfolios
and the Subadviser such factual information, research reports and
investment recommendations as the Subadviser may reasonably require. Such
information may include written and oral reports and analyses.
(b) Investment Management: If and to the extent requested by the
Subadviser, the Sub-Subadviser shall, subject to the supervision of the
Subadviser, manage all or a portion of the investments of the Portfolios in
accordance with the investment objective, policies and limitations provided
in the Portfolios' Prospectus(es) or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 (the "1940
Act") and rules thereunder, as amended from time to time, and such other
limitations as the Trust, the Manager or Subadviser may impose with respect
to a Portfolio or the Portfolios by notice to the Sub-Subadviser. With
respect to the portion of the investments of the Portfolios under its
management, the Sub-Subadviser is authorized to make investment decisions
on behalf of the Portfolios with regard to any stock, bond, other security
or investment instrument, and to place orders for the purchase and sale of
such securities through such broker-dealers as the Sub-Subadviser may
select. The Sub-Subadviser may also be authorized, but only to the extent
such duties are delegated in writing by the Subadviser, to provide
additional investment management services to the Portfolios, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolios. All investment
management and any other activities of the Sub-Subadviser shall at all
times be subject to the control and direction of the Manager, the
Subadviser and the Trust's Board of Trustees.
(c) Subsidiaries and Affiliates: The Sub-Subadviser may perform any or
all of the services contemplated by this Agreement directly or through such
of its subsidiaries or other affiliated persons as the Sub-Subadviser shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and the rules
thereunder.
2. Information to be Provided to the Trust and the Subadviser: The
Sub-Subadviser shall furnish such reports, evaluations, information or
analyses to the Trust, the Manager and the Subadviser as the Trust's Board
of Trustees, the Manager or the Subadviser may reasonably request from time
to time, or as the Sub-Subadviser may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Subadviser shall
place all orders for the purchase and sale of portfolio securities for the
Portfolios' account(s) with brokers or dealers selected by the
Sub-Subadviser, which may include brokers or dealers affiliated with the
Manager, the Subadviser or Sub-Subadviser. The Sub-Subadviser shall use
its best efforts to seek to execute portfolio transactions at prices which
are advantageous to the Portfolios and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers or
dealers qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of l934)
to the Portfolios and/or to the other accounts over which the Manager, the
Sub-Subadviser or Subadviser exercise investment discretion. The
Sub-Subadviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Sub-Subadviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Subadviser has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust may
periodically review the commissions paid by the Portfolios to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolios.
4. Compensation: The Subadviser shall compensate the Sub-Subadviser on
the following basis for the services to be furnished hereunder.
(a) Investment Advisory Fee: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Subadviser agrees to pay the
Sub-Subadviser a monthly Sub-Subadvisory Fee. The Sub-Subadvisory Fee
shall be equal to 110% of the Sub-Subadviser's costs incurred in connection
with rendering the services referred to in subparagraph (a) of paragraph 1
of this Agreement. The Sub-Subadvisory Fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Manager or Subadviser,
if any, in effect from time to time.
(b) Investment Management Fee: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Subadviser agrees to pay the
Sub-Subadviser a monthly Investment Management Fee. The Investment
Management Fee shall be equal to: (i) 50% of the monthly management fee
rate (including performance adjustments, if any) that the Manager is
obligated to pay the Subadviser under the Subadviser's Subadvisory
Agreement, multiplied by: (ii) the fraction equal to the net assets of the
Portfolio as to which the Sub-Subadviser shall have provided investment
management services divided by the net assets of the Portfolio for that
month. If in any fiscal year the aggregate expenses of the Portfolio
exceed any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Manager or Subadviser waives all or
a portion of its management fee or reimburses the Portfolio for expenses to
the extent required to satisfy such limitation, the Investment Management
Fee paid to the Sub-Subadviser will be reduced by 50% of the amount of such
waivers or reimbursements multiplied by the fraction determined in (ii).
If the Sub-Subadviser reduces its fees to reflect such waivers or
reimbursements and the Manager or Subadviser subsequently recovers all or
any portion of such waivers or reimbursements, then the Sub-Subadviser
shall be entitled to receive from the Subadviser a proportionate share of
the amount recovered. To the extent that waivers and reimbursements by the
Manager or Subadviser required by such limitations are in excess of the
Manager's or Subadviser's management fee, the Investment Management Fee
paid to the Sub-Subadviser will be reduced to zero for that month, but in
no event shall the Sub-Subadviser be required to reimburse the Manager or
the Subadviser for all or a portion of such excess reimbursements.
(c) Provision of Multiple Services: If the Sub-Subadviser shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Subadviser with respect to such investments shall
be calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that each Portfolio will pay all of its
expenses other than those expressly stated to be payable by the
Sub-Subadviser hereunder or by the Manager under its management contract(s)
with the Trust and the Portfolios, or by the Subadviser under the
Subadvisory Agreement with the Manager, the Trust and the Portfolios, which
expenses payable by the Portfolios shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Trust's Trustees other than
those who are "interested persons" of the Trust, the Manager, the
Subadviser, or any Sub-Sub-Adviser; (iv) legal and audit expenses; (v)
custodian, registrar and transfer agent fees and expenses; (vi) fees and
expenses related to the registration and qualification of the Trust and the
Portfolio's shares for distribution under state and federal securities
laws; (viii) expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolios; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders, including
proxy solicitations therefor; (ix) insurance premiums for fidelity bond and
other coverage; (x) investment management fees; (xi) expenses of
typesetting for printing prospectuses and statements of additional
information and supplements thereto; (xii) expenses of printing and mailing
prospectuses and statements of additional information and supplements
thereto; and (xiii) such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which a
Portfolio is a party and any legal obligation that a Portfolio may have to
indemnify the Trust's Trustees, officers and/or employees or agents with
respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Subadviser or the Sub-Subadviser as directors, officers or otherwise and
that directors, officers and stockholders of the Subadviser or the
Sub-Subadviser are or may be or become similarly interested in the Trust,
and that the Subadviser or the Sub-Subadviser may be or become interested
in the Trust as a shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Sub-Subadviser to the Subadviser are not to be deemed to be exclusive,
the Sub-Subadviser being free to render services to others and engage in
other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Subadviser's ability to meet all of its
obligations hereunder. The Sub-Subadviser shall for all purposes be an
independent contractor and not an agent or employee of the Subadviser, the
Manager or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Subadviser, the Sub-Subadviser shall not be subject
to liability to the Manager, the Subadviser, the Trust or to any
shareholder of a Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1998,
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Manager, the
Subadviser, the Sub-Subadviser and the Portfolio(s), such consent on the
part of a Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Manager, the Subadviser, the Sub-Subadviser or a Portfolio
(with respect to that Portfolio only) may, at any time on sixty (60) days'
prior written notice to the other parties, terminate this Agreement,
without payment of any penalty. Action on behalf of a Portfolio may be
taken by the Trust's Board of Trustees, or, with respect to a Portfolio, by
the vote of a majority of its outstanding voting securities. This
Agreement shall terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Subadviser is hereby expressly put
on notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Subadviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of a Portfolio. Neither shall the Sub-Subadviser seek
satisfaction of any such obligation from the Trustees or any individual
Trustee.
11. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
[This space left blank]
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed in their behalf and under seal by their respective officers
thereunto duly authorized, all as of the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
BY: ___________________________________________
Name_____________________________________
Title______________________________________
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: ___________________________________________
Name_____________________________________
Title______________________________________
THE TRAVELERS SERIES TRUST
on behalf of Equity Income Portfolio and Large Cap Portfolio
BY: ___________________________________________
Name_____________________________________
Title______________________________________
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
BY:___________________________________________
Name_____________________________________
Title______________________________________
<PAGE> 1
Exhibit 8(b)
FORM OF CUSTODIAN SERVICES AGREEMENT
This Agreement is made as of ________, 1995 by and between SMITH BARNEY
INSTITUTIONAL CASH MANAGEMENT FUND, INC., a Maryland corporation (the "Fund")
and PNC BANK, NATIONAL ASSOCIATION, a national banking association ("PNC Bank").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes to
retain PNC Bank to provide custodian services and PNC Bank wishes to furnish
such services, either directly or through an affiliate or affiliates, as more
fully described herein. In consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is duly authorized by the
Fund's Governing Board, to give Oral and Written Instructions on behalf of the
Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix, as such Appendix may be amended in writing by the
Fund's Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means
Federal Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an exchange registered with the SEC under the
1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures
Trading Commission.
<PAGE> 2
(d) "Governing Board". The term "Governing Board" shall mean
the Fund's Board of Directors if the Fund is a corporation or the Fund's Board
of Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by PNC Bank from an Authorized Person or from a
person reasonably believed by PNC Bank to be an Authorized Person.
(f) "SEC". The term "SEC" shall mean the Securities and
Exchange Commission.
(g) "Securities and Commodities Laws". The term "Securities
and Commodities Laws" shall mean the "1933 Act" which shall mean the Securities
Act of 1933, the "1934 Act" which shall mean the Securities Exchange Act of
1934, the 1940 Act, and the "CEA" which shall mean the Commodities Exchange Act,
as amended.
(h) "Shares". The term "Shares" shall mean the shares of stock
of any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
(i) "Property". The term "Property" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with PNC Bank or which PNC
Bank may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to
time, from or on behalf of the Fund.
<PAGE> 3
(j) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by one Authorized Person and received by
PNC Bank. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund, and PNC Bank accepts such appointment and agrees to
furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of
the Fund's Governing Board, approving the appointment of PNC Bank or its
affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreements if PNC Bank
is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PNC Bank
undertakes to comply with all applicable requirements of the Securities and
Commodities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to all duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral and Written Instructions. PNC Bank shall be entitled to
rely upon any Oral and Written Instructions it receives from an Authorized
<PAGE> 4
Person (or from a person reasonably believed by PNC Bank to be an Authorized
Person) pursuant to this Agreement. PNC Bank may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents or this Agreement or of any vote,
resolution or proceeding of the Fund's Governing Board or of the Fund's
shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming
Oral Instructions so that PNC Bank receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by PNC Bank
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the
Fund in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any
action it should or should not take, PNC Bank may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's advisor or PNC Bank, at the option of
PNC Bank).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC Bank receives from the
Fund, and the advice it receives from counsel, PNC Bank shall be entitled to
rely upon and follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral
<PAGE> 5
or Written Instructions it receives from the Fund or from counsel and which PNC
Bank believes, in good faith, to be consistent with those directions, advice or
Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PNC Bank (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action.
7. Records. The books and records pertaining to the Fund which are in
the possession of PNC Bank, shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
Authorized Persons, shall have access to such books and records at all time
during PNC Bank's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PNC Bank to the
Fund or to an Authorized Person of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of
the Fund and information relative to the Fund and its shareholders (past,
present and potential), unless the release of such records or information is
otherwise consented to, in writing, by the Fund. The Fund agrees that such
consent shall not be unreasonably withheld and may not be withheld where PNC
Bank may be exposed to civil or criminal contempt proceedings or when required
to divulge. The Fund further agrees that, should PNC Bank be required to provide
such information or records to duly constituted authorities (who may institute
civil or criminal contempt proceedings for failure to comply), PNC Bank shall
not be required to seek the Fund's consent prior to disclosing such information.
9. Cooperation with Accountants. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
<PAGE> 6
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
11. Compensation. As compensation for custody services rendered by PNC
Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or
fees as may be agreed to in writing from time to time by the Fund and PNC Bank.
12. Indemnification. The Fund agrees to indemnify and hold harmless PNC
Bank and its nominees from all taxes, charges, expenses, assessment, claims and
liabilities (including, without limitation, liabilities arising under the
Securities and Commodities Laws and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PNC Bank takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PNC Bank, nor any of its nominees, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PNC Bank's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
13. Responsibility of PNC Bank. PNC Bank shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PNC Bank, in writing. PNC Bank shall
<PAGE> 7
be obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best effort, within reasonable
limits, in performing services provided for under this Agreement. PNC Bank shall
be responsible for its own negligent failure to perform its duties under this
Agreement. Notwithstanding the foregoing, PNC Bank shall not be responsible for
losses beyond its control, provided that PNC Bank has acted in accordance with
the standard of care set forth above; and provided further that PNC Bank shall
only be responsible for that portion of losses or damages suffered by the Fund
that are attributable to the negligence of PNC Bank.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PNC Bank, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and shall
not be liable for (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, and which PNC Bank reasonably
believes to be genuine; or (b) delays or errors or loss of data occurring by
reason of circumstances beyond PNC Bank's control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PNC Bank
shall have no liability to the Fund for any consequential, special or indirect
losses or damages which the Fund may incur or suffer by or as a consequence of
PNC Bank's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
<PAGE> 8
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange
for delivery to PNC Bank, all the property owned by the Fund, including cash
received as a result of the distribution of its Shares, during the period that
is set forth in this Agreement. PNC Bank will not be responsible for such
property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon
Written Instructions, shall open and maintain separate account(s) in the Fund's
name using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank shall
open separate custodial accounts for each separate series, class or portfolio of
the Fund and shall hold in such account(s) all cash received from or for the
accounts of the Fund specifically designated to each separate series, class or
portfolio. PNC Bank shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of the Fund or
PNC Bank or PNC Bank's nominee as provided in
sub-paragraph j and for which PNC Bank has received a
copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to PNC Bank;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by the Fund;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent for
the shareholders, an amount equal to the amount of
dividends and distributions stated in the Written
<PAGE> 9
Instructions to be distributed in cash by the
transfer agent to shareholders, or, in lieu of paying
the Fund's transfer agent, PNC Bank may arrange for
the direct payment of cash dividends and
distributions to shareholders in accordance with
procedures mutually agreed upon from time to time by
and among the Fund, PNC Bank and the Fund's transfer
agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Fund and
held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short; payments made to a
sub-custodian pursuant to provisions in sub-paragraph
c of this Paragraph; and
(viii) payments, upon Written Instructions made for other
proper Fund purposes. PNC Bank is hereby authorized
to endorse and collect all checks, drafts or other
orders for the payment of money received as custodian
for the account of the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities received by it
for the account of the Fund in a separate account
that physically segregates such securities from those
of any other persons, firms or corporations, except
for securities held in a Book-Entry System. All such
securities shall be held or disposed of only upon
Written Instructions of the Fund pursuant to the
terms of this Agreement. PNC Bank shall have no power
or authority to assign, hypothecate, pledge or
<PAGE> 10
otherwise dispose of any such securities or
investment, except upon the express terms of this
Agreement and upon Written Instructions, accompanied
by a certified resolution of the Fund's Governing
Board, authorizing the transaction. In no case may
any member of the Fund's Governing Board, or any
officer, employee or agent of the Fund withdraw any
securities. At PNC Bank's own expense and for its own
convenience, PNC Bank may enter into sub-custodian
agreements with other banks or trust companies to
perform duties described in this sub-paragraph c.
Such bank or trust company shall have an aggregate
capital, surplus and undivided profits, according to
its last published report, of at least one million
dollars ($1,000,000), if it is a subsidiary or
affiliate of PNC Bank, or at least twenty million
dollars ($20,000,000) if such bank or trust company
is not a subsidiary or affiliate of PNC Bank. In
addition, such bank or trust company must agree to
comply with the relevant provisions of the 1940 Act
and other applicable rules and regulations. PNC Bank
shall remain responsible for the performance of all
of its duties as described in this Agreement and
shall hold the Fund harmless from PNC Bank's own (or
any sub-custodian chosen by PNC Bank under the terms
of this sub-paragraph c) acts or omissions, under the
standards of care provided for herein.
<PAGE> 11
(d) Transactions Requiring Instructions. Upon receipt of Oral
or Written Instructions and not otherwise, PNC Bank, directly or through the use
of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as
owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that,
in any such case, the cash or other consideration is
to be delivered to PNC Bank;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise
of any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or
other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to
evidence such delivery;
<PAGE> 12
(vi) make such transfer or exchanges of the assets of the
Fund and take such other steps as shall be stated in
said Oral or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to the Fund to any bank
or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be
released only upon payment to PNC Bank of the monies
borrowed, except that in cases where additional
collateral is required to secure a borrowing already
made subject to proper prior authorization, further
securities may be released for that purpose; and
repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into
on behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in
connection with such repurchase agreements, but only
upon the delivery of the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
<PAGE> 13
(x) release and deliver securities owned by the Fund for
the purpose of redeeming in kind shares of the Fund
upon delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes. PNC Bank must
also receive a certified resolution describing the
nature of the corporate purpose and the name and
address of the person(s) to whom delivery shall be
made when such action is pursuant to sub-paragraph d
above.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Governing Board approving, authorizing and
instructing PNC Bank on a continuous and on-going basis, to deposit in the
Book-Entry System all securities belonging to the Fund eligible for deposit
therein and to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PNC Bank shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of the Fund which
are maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the records
of PNC Bank shall identify by Book-Entry or otherwise
those securities belonging to the Fund. PNC Bank
shall furnish the Fund a detailed statement of the
Property held for the Fund under this Agreement at
<PAGE> 14
least monthly and from time to time and upon written
request.
(ii) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated
from any assets and cash controlled by PNC Bank in
other than a fiduciary or custodian capacity but may
be commingled with other assets held in such
capacities. PNC Bank and its sub-custodian, if any,
will pay out money only upon receipt of securities
and will deliver securities only upon the receipt of
money.
(iii) All books and records maintained by PNC Bank which
relate to the Fund's participation in the Book-Entry
System will at all times during PNC Bank's regular
business hours be open to the inspection of the
Fund's duly authorized employees or agents, and the
Fund will be furnished with all information in
respect of the services rendered to it as it may
require.
(iv) PNC Bank will provide the Fund with copies of any
report obtained by PNC Bank on the system of internal
accounting control of the Book-Entry System promptly
after receipt of such a report by PNC Bank. PNC Bank
will also provide the Fund with such reports on its
own system of internal control as the Fund may
reasonably request from time to time.
(f) Registration of Securities. All Securities held for the
Fund which are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by PNC Bank in bearer form; all
other securities held for the Fund may be registered in the name of the Fund;
PNC Bank; the Book-Entry System; a sub-custodian; or any duly appointed
nominee(s)
<PAGE> 15
of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register its registered nominee or in the name of the Book-Entry System,
any securities which it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. PNC Bank shall hold all such
securities which are not held in the Book-Entry System in a separate account for
the Fund in the name of the Fund physically segregated at all times from those
of any other person or persons.
(g) Voting and Other Action. Neither PNC Bank nor its nominee
shall vote any of the securities held pursuant to this Agreement by or for the
account of the Fund, except in accordance with Written Instructions. PNC Bank,
directly or through the use of the Book-Entry System, shall execute in blank and
promptly deliver all notice, proxies, and proxy soliciting materials to the
registered holder of such securities. If the registered holder is not the Fund
then Written or Oral Instructions must designate the person(s) who owns such
securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account
of the Fund, all income, dividends,
distributions, coupons, option
premiums, other payments and similar
items, included or to be included in
the Property, and, in addition,
promptly advise the Fund of such
receipt and credit such income, as
collected, to the Fund's custodian
account;
<PAGE> 16
(B) endorse and deposit for collection,
in the name of the Fund, checks,
drafts, or other orders for the
payment of money;
(C) receive and hold for the account of
the Fund all securities received as
a distribution on the Fund's
portfolio securities as a result of
a stock dividend, share split-up or
reorganization, recapitalization,
readjustment or other rearrangement
or distribution of rights or similar
securities issued with respect to
any portfolio securities belonging
to the Fund held by PNC Bank
hereunder;
(D) present for payment and collect the
amount payable upon all securities
which may mature or be called,
redeemed, or retired, or otherwise
become payable on the date such
securities become payable; and
(E) take any action which may be
necessary and proper in connection
with the collection and receipt of
such income and other payments and
the endorsement for collection of
checks, drafts, and other negotiable
instruments.
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver or
cause to be delivered Property
against payment or other
consideration or written receipt
therefor in the following cases:
(1) for examination by a broker
or dealer selling for the
account of the Fund in
accordance with street
delivery custom;
<PAGE> 17
(2) for the exchange of interim
receipts or temporary
securities for definitive
securities; and
(3) for transfer of securities
into the name of the Fund
or PNC Bank or nominee of
either, or for exchange of
securities for a different
number of bonds,
certificates, or other
evidence, representing the
same aggregate face amount
or number of units bearing
the same interest rate,
maturity date and call
provisions, if any;
provided that, in any such
case, the new securities
are to be delivered to PNC
Bank.
(B) Unless and until PNC Bank receives
Oral or Written Instructions to the
contrary, PNC Bank shall:
(1) pay all income items held
by it which call for
payment upon presentation
and hold the cash received
by it upon such payment for
the account of the Fund;
(2) collect interest and cash
dividends received, with
notice to the Fund, to the
Fund's account;
(3) hold for the account of the
Fund all stock dividends,
rights and similar
securities issued with
respect to any securities
held by PNC Bank; and
(4) execute as agent on behalf
of the Fund all necessary
ownership certificates
required by the Internal
Revenue Code or
<PAGE> 18
the Income Tax Regulations
of the United States
Treasury Department or
under the laws of any State
now or hereafter in effect,
inserting the Fund's name,
on such certificate as the
owner of the securities
covered thereby, to the
extent it may lawfully do
so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or
Oral Instructions establish and maintain
segregated account(s) on its records for and
on behalf of the Fund. Such account(s) may
be used to transfer cash and securities,
including securities in the Book-Entry
System:
(A) for the purposes of compliance by
the Fund with the procedures
required by a securities or option
exchange, providing such procedures
comply with the 1940 Act and any
releases of the SEC relating to the
maintenance of segregated accounts
by registered investment companies;
and
(B) Upon receipt of Written
Instructions, for other proper
corporate purposes.
(ii) PNC Bank may enter into separate custodial
agreements with various futures commission
merchants ("FCMs") that the Fund uses ("FCM
Agreement"). Pursuant to an FCM Agreement,
the Fund's margin deposits in any
transactions involving futures contracts and
options on futures contracts will be held by
PNC Bank in accounts ("FCM Account") subject
to the disposition by
<PAGE> 19
the FCM involved in such contracts and in
accordance with the customer contract
between FCM and the Fund ("FCM Contract"),
SEC rules and the rules of the applicable
commodities exchange. Such FCM Agreements
shall only be entered into upon receipt of
Written Instructions from the Fund which
state that:
(A) a customer agreement between the
FCM and the Fund has been entered
into; and
(B) the Fund is in compliance with all
the rules and regulations of the
CFTC. Transfers of initial margin
shall be made into a FCM Account
only upon Written Instructions;
transfers of premium and variation
margin may be made into a FCM
Account pursuant to Oral
Instructions.
Transfers of funds from a FCM
Account to the FCM for which PNC
Bank holds such an account may only
occur upon certification by the FCM
to PNC Bank that pursuant to the FCM
Agreement and the FCM Contract, all
conditions precedent to its right to
give PNC Bank such instructions have
been satisfied.
(iii) PNC Bank shall arrange for the establishment
of IRA custodian accounts for such share-
holders holding Shares through IRA accounts,
in accordance with the Fund's prospectuses,
the Internal Revenue Code (including
regulations), and with such other procedures
as are mutually agreed upon from time to
time by and among the Fund, PNC Bank and the
Fund's transfer agent.
<PAGE> 20
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the Fund or its
investment advisor(s) that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if
applicable;
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
and
(vi) the name of the person from whom or the
broker through whom the purchase was made.
PNC Bank shall upon receipt of securities
purchased by or for the Fund pay out of the
moneys held for the account of the Fund the
total amount payable to the person from whom
or the broker through whom the purchase was
made, provided that the same conforms to the
total amount payable as set forth in such
Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities
upon receipt of Oral or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if
applicable;
(ii) the number of shares or principal amount
sold, and accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon
such sale;
(vi) the name of the broker through whom or the
person to whom the sale was made; and
<PAGE> 21
(vii) the location to which the security must be
delivered and delivery deadline, if any. PNC
Bank shall deliver the securities upon
receipt of the total amount payable to the
Fund upon such sale, provided that the total
amount payable is the same as was set forth
in the Oral or Written Instructions. Subject
to the foregoing, PNC Bank may accept
payment in such form as shall be
satisfactory to it, and may deliver
securities and arrange for payment in
accordance with the customs prevailing among
dealers in securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the
following reports:
(A) such periodic and special reports
as the Fund may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the
account of the Fund, listing the
portfolio securities belonging to
the Fund with the adjusted average
cost of each issue and the market
value at the end of such month, and
stating the cash account of the
Fund including disbursement;
(C) the reports to be furnished to the
Fund pursuant to Rule 17f-4; and
(D) such other information as may be
agreed upon from time to time
between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund
any proxy statement, proxy material, notice
of a call or conversion or similar
communication received by it as custodian of
the Property. PNC Bank shall be under no
<PAGE> 22
other obligation to inform the Fund as to
such actions or events.
(m) Collections. All collections of monies or other property,
in respect, or which are to become part of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and telephonic demands thereto, and await instructions from the Fund.
PNC Bank shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. PNC Bank shall also notify the
Fund as soon as reasonably practicable whenever income due on securities is not
collected in due course.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a bank or trust company of PNC Bank's
choice, having an aggregate capital, surplus and undivided profits, as shown by
its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against Property in the Fund's
possession as security for the payment of such fees, compensation, costs and
expenses.
<PAGE> 23
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address: Airport Business Center, International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113, marked for the attention of the Custodian
Services Department (or its successor) (b) if to the Fund, at the address of the
Fund; or (c) if to neither of the foregoing, at such other address as shall have
been notified to the sender of any such notice or other communication. If notice
is sent by confirming telegram, cable, telex or facsimile sending device, it
shall be deemed to have been given immediately. If notice is sent by first-class
mail, it shall be deemed to have been given five days after it has been mailed.
If notice is sent by messenger, it shall be deemed to have been given on the day
it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought. 18. Delegation. PNC Bank may assign its
rights and delegate its duties hereunder to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PNC Bank gives the Fund thirty (30) days prior written notice; (ii) the
delegate agrees with PNC Bank to comply with all relevant provisions of the 1940
Act; and (iii) PNC Bank and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the assignment, including (without limitation) the capabilities of
the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. 20. Further Actions. Each
party agrees to perform such further acts and execute such further documents as
are necessary to effectuate the purposes hereof.
<PAGE> 24
21. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect.
This Agreement shall be deemed to be a contract made in Pennsylvania
and governed by Pennsylvania law, without regard to principles of conflicts of
law. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Title:
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND
INC.
By:_____________________
Title:
<PAGE> 25
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
_________________________ ____________________
_________________________ ____________________
_________________________ ____________________
_________________________ ____________________
_________________________ ____________________
<PAGE> 1
Exhibit 8(c)
CUSTODY AGREEMENT
Agreement made as of this day of , 1996, between The Travelers Series
Trust, a Massachusetts business trust organized and existing under the laws of
the Commonwealth of Massachusetts, having its principal office and place of
business at One Tower Square, Hartford, CT 06183 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a Terminal Link.
<PAGE> 2
4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
8. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
9. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
11. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be
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<PAGE> 3
deposited and withdrawn from time to time in connection with such transactions
as the Fund may from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
12. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other
person or persons, whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
listed in the Certificate annexed hereto as Appendix A or such other Certificate
as may be received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably believed
by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
- 3 -
<PAGE> 4
19. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
21. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the Fund
and listed on Appendix B hereto as amended from time to time.
22. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
23. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
25. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link by or on behalf of the Fund use of an authorization code provided
by
- 4 -
<PAGE> 5
the Custodian and at least two access codes established by the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder,
- 5 -
<PAGE> 6
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys deposited in either the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not limited to,
accounts in which the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's accepting, utilizing
and acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Trustees, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series account from
which payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.
- 6 -
<PAGE> 7
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon
such Securities which are called, but only if either (i) the Custodian receives
a written notice of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior notification or consent
of the Fund;
(c) Present for payment and collect the amount payable upon
all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar
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<PAGE> 8
securities issued with respect to any Securities held by the Custodian for such
Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall
- 8 -
<PAGE> 9
comply with Section 17(f) of the Investment Company Act of 1940, as amended, in
connection with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options, or Futures Contract Options by making payments or
deliveries specified in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing out upon its
receipt from a broker, dealer, or futures commission merchant of a statement or
confirmation reasonably believed by the Custodian to be in the form customarily
used by brokers, dealers, or future commission merchants with respect to such
Futures Contracts, Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund, provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
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<PAGE> 10
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the moneys held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment upon receipt of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount payable as set forth
in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of moneys held for
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<PAGE> 11
the account of the Series to which such Option is to be specifically allocated,
the total amount payable upon such purchase to the Clearing Member through whom
the purchase was made, provided that the same conforms to the total amount
payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the
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<PAGE> 12
amount payable upon the exercise of the Put Option, deliver or direct the
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the
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<PAGE> 13
Depository to deliver, the underlying Securities as specified in the Certificate
against payment of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate
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<PAGE> 14
specifying with respect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) whether such Stock Index Option is a
put or a call; (c) the number of options written; (d) the stock index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt of
the premium specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account specified
in the Certificate, or (2) make the deposits into the Margin Account specified
in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
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<PAGE> 15
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
- 15 -
<PAGE> 16
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the moneys specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required
to be made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from
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<PAGE> 17
the Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
Option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates
of purchase and settlement; (g) the amount of premium to be paid by the Fund
upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the moneys specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b) the type of
Future Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures
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<PAGE> 18
commission merchant through whom the Futures Contract Option is exercised; (f)
the net total amount, if any, payable by the Fund; (g) the amount, if any, to be
received by the Fund; and (h) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall make, out of the moneys and Securities specifically allocated to
such Series, the payments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
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<PAGE> 19
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Future Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the
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<PAGE> 20
Margin Account, if any, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued
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<PAGE> 21
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior
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<PAGE> 22
Security Account, specified in such Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
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<PAGE> 23
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
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<PAGE> 24
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the moneys held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
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<PAGE> 25
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys held in
the separate account of the Series of the Shares being redeemed.
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<PAGE> 26
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate or Oral Instructions, or
which results in an overdraft in the separate account of such Series for some
other reason, or if the Fund is for any other reason indebted to the Custodian
with respect to a Series, including any indebtedness to The Bank of New York
under the Fund's Cash Management and Related Services Agreement, (except a
borrowing for investment or for temporary or emergency purposes using Securities
as collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien and security
interest in and to any property specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/ or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently
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<PAGE> 27
employed by any such bank setting forth the amount which such bank will loan to
the Fund against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such borrowing: (a) the Series to which such borrowing relates; (b) the name of
the bank, (c) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral shall
be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only for the purpose
of the Fund providing Certificates to the Custodian with respect to transactions
involving Securities or for the transfer of money to be applied to the payment
of
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<PAGE> 28
dividends, distributions or redemptions of Fund Shares, and shall be utilized by
the Custodian only for the purpose of providing notices to the Fund. Such use
shall commence only after the Fund shall have delivered to the Custodian a
Certificate substantially in the form of Exhibit D and shall have established
access codes. Each use of the Terminal Link by the Fund shall constitute a
representation and warranty that the Terminal Link is being used only for the
purposes permitted hereby, that at least two Officers have each utilized an
access code, that such safekeeping procedures have been established by the Fund,
and that such use does not contravene the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the Custodian shall not be
responsible for the reliability or availability of any such equipment or
services.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from
time to time without notice to the Fund except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees that the
Fund shall not modify or attempt to modify the Terminal Link without the
Custodian's prior written consent. The Fund acknowledges that any software or
procedures provided the Fund as part of the Terminal Link are the property of
the Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund, or by
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<PAGE> 29
the Custodian and whether with or without the Custodian's consent, shall become
the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link makes any
warranties or representations, express or implied, in fact or in law, including
but not limited to warranties of merchantability and fitness for a particular
purpose.
8. The Fund will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance with
and rely on Certificates received by it through the Terminal Link. The Fund
acknowledges that it is its responsibility to assure that only its Officers use
the Terminal Link on its behalf, and that a Custodian shall not be responsible
nor liable for use of the Terminal Link on the Fund's behalf by persons other
than such persons or Officers, or by only a single Officer, nor for any
alteration, omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section 9(b) of this
Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except for
money damages suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000 provided, however, that the
Custodian shall have no liability under this Section 9 if the Fund fails to
comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in executing or
failing to execute in accordance with a Certificate received through Terminal
Link shall be only with respect to a transfer of funds which is not made in
accordance with such Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon the Fund complying
with the provisions of Section 12 of this Article, and shall be limited to (i)
restoration of the principal amount mistransferred, if and to the extent that
the Custodian would be required to make such restoration under applicable law,
and (ii) the lesser of (A) a Fund's actual pecuniary loss incurred by reason of
its loss of use of the mistransferred funds or the funds which were not
transferred, as the case may be, or (B) compensation for the loss of the use of
the mistransferred funds or the funds which were not transferred, as the case
may be, at a rate per annum equal to the average federal funds rate as computed
from the Federal Reserve Bank of New York's daily determination of the effective
rate for federal funds, for the period during which a Fund has lost use of such
funds. In no event shall the Custodian have any liability for failing to execute
in
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<PAGE> 30
accordance with a Certificate a transfer of funds where the Certificate is
received by the Custodian through Terminal Link other than through the
applicable transfer module for the particular instructions contained in such
Certificate.
10. Without limiting the generality of the foregoing, in no event shall
the Custodian or any manufacturer or supplier of its computer equipment,
software or services relating to the Terminal Link be responsible for any
special, indirect, incidental or consequential damages which the Fund may incur
or experience by reason of its use of the Terminal Link even if the Custodian or
any manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall the Custodian or
any such manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Fund, by use of the Terminal
Link, receipt of each Certificate the Custodian receives through the Terminal
Link, and in the absence of such verification the Custodian shall not be liable
for any failure to act in accordance with such Certificate and the Fund may not
claim that such Certificate was received by the Custodian. Such verification,
which may occur after the Custodian has acted upon such Certificate, shall be
accomplished on the same day on which such Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Foreign Securities (as such term is defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as
amended) and other assets, the foreign banking institutions and foreign
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<PAGE> 31
securities depositories and clearing agencies designated on Schedule I hereto
("Foreign Sub-Custodians") to carry out their respective responsibilities in
accordance with the terms of the sub-custodian agreement between each such
Foreign Sub-Custodian and the Custodian, copies of which have been previously
delivered to the Fund and receipt of which is hereby acknowledged (each such
agreement, a "Foreign Sub-Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form attached as
Exhibit E of the Fund's Board of Trustees, the Fund may designate any additional
foreign sub-custodian with which the Custodian has an agreement for such entity
to act as the Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a
Certificate from the Fund, the Custodian shall cease the employment of any one
or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and
such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
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<PAGE> 32
6. The Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Fund in connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information pertaining to (i)
the Foreign Custodians' financial strength, general reputation and standing in
the countries in which they are located and their ability to provide the
custodial services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of securities not
materially different form those prevailing in the United States. The Custodian
shall monitor the general operating performance of each Foreign Sub-Custodian.
The Custodian agrees that it will use reasonable care in monitoring compliance
by each Foreign Sub-Custodian with the terms of the relevant Foreign
Sub-Custodian Agreement and that if it learns of any breach of such Foreign
Sub-Custodian Agreement believed by the Custodian to have a material adverse
effect on the Fund or any Series it will promptly notify the Fund of such
breach. The Custodian also agrees to use reasonable and diligent efforts to
enforce its rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.
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<PAGE> 33
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend
by the Fund;
(d) The legality of any borrowing by the Fund using Securities
as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
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<PAGE> 34
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all
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<PAGE> 35
expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or
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<PAGE> 36
expense, including counsel fees, for which it shall be entitled to reimbursement
under the provisions of this Agreement. The expenses for which the Custodian
shall be entitled to reimbursement hereunder shall include, but are not limited
to, the expenses of sub-custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions involving the
purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the
- 36 -
<PAGE> 37
Custodian its expenses of providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on micro-film, whichever the
Custodian elects, any records included in any such delivery which are maintained
by the Custodian on a computer disc, or are similarly maintained, and the Fund
shall reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver and
receive Securities, and receipts with respect to such Securities, and arrange
for payments to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not
- 37 -
<PAGE> 38
less than ninety (90) days after the date of giving of such notice. In the event
such notice is given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by the Secretary, the
Clerk, any Assistant Secretary or any Assistant Clerk, electing to terminate
this Agreement and designating a successor custodian or custodians, each of
which shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Trustees of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon receipt of a notice
of acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers. The Fund agrees to furnish to the Custodian
a new Certificate in similar form in the event that any such present Officer
ceases to be an Officer or in the event that other or additional Officers are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement
- 38 -
<PAGE> 39
upon Oral Instructions or signatures of the present Officers as set forth in the
last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and
- 39 -
<PAGE> 40
that all persons extending credit to, or contracting with or having any claim
against a particular Series of the Fund shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
- 40 -
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
The Travelers Series Trust
[SEAL] By:
--------------------------
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:
--------------------------
Name:
Title:
Attest:
- -----------------------
- 41 -
<PAGE> 42
APPENDIX A
I, , President and I, , of The
Travelers Series Trust, a Massachusetts business trust (the "Fund"), do hereby
certify that:
The following individuals serve in the following positions with the
Fund and each has been duly elected or appointed by the Board of Trustees of the
Fund to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- -------------------------- ------------------------- -----------------------
<PAGE> 43
APPENDIX B
SERIES
Travelers Quality Bond Portfolio
Lazard International Equity Portfolio
MFS Emerging Growth Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Large Cap Portfolio
Equity Income Portfolio
<PAGE> 44
APPENDIX C
I, Stephen Grunston, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 45
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1996, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the
Book-Entry System, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Book-Entry System
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 46
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust,
a Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1996, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated, and to utilize
the Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 47
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust,
a Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1996, (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent
possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 48
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust,
a Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1996, (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transaction in Options, regardless of the
Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 49
EXHIBIT D
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust,
a Massachusetts business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all
times present and that such resolutions have not been modified or rescinded and
are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 1996 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to act in accordance with, and to
rely on Certificates (as defined in the Custody Agreement) given by the Fund to
the Custodian by a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant us of
such access codes only to Officers of the fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of such access codes, shall limit
its use of the Terminal Link to those purposes permitted by the Custody
Agreement, shall require at least two such Officers to utilize their respective
access codes in connection with each such Certificate, and shall use the
Terminal Link only in a manner that does not contravene the Investment Company
Act of 1940, as amended, or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment
of such access codes and such internal safekeeping procedures, advise the
Custodian that the same have been established by delivering a Certificate, as
defined in the Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 50
EXHIBIT E
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Travelers Series Trust, a
Massachusetts business trust (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Trustees of the Fund at a meeting duly
held on , 1996, at which a quorum was at all times present
and that such resolutions have not been modified or rescinded and are in full
force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country
listed in Schedule I hereto be, and hereby is, approved by the Board of Trustees
as consistent with the best interests of the Fund and its shareholders; and
further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the foreign sub-custodians and
depositories listed in Schedule I located in the countries specified therein be,
and hereby is, approved by the Board of Trustees as consistent with the best
interest of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this meeting
between the Bank and each of the foreign sub-custodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the aforementioned foreign branches
and foreign sub-custodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them,
are authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of The
Travelers Series Trust, as of the day of , 1996.
[SEAL]
<PAGE> 51
CUSTODIAN AGREEMENT
Dated as of: August 1, 1996
Between
Each of the Investment Companies
Listed on Appendix "A" Attached Hereto
and
Brown Brothers Harriman & Company
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 2
2.03 Security Purchases 2
2.04 Exchanges of Securities 3
2.05 Sales of Securities 3
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 4
2.08 Stock Dividends, Rights, Etc. 4
2.09 Options 4
2.10 Futures Contracts 4
2.11 Borrowing 5
2.12 Interest Bearing Deposits 5
2.13 Foreign Exchange Transactions 5
2.14 Securities Loans 6
2.15 Collections 6
2.16 Dividends, Distributions and Redemptions 7
2.17 Proceeds from Shares Sold 7
2.18 Proxies, Notices, Etc. 7
2.19 Bills and Other Disbursements 7
2.20 Nondiscretionary Functions 8
2.21 Bank Accounts 8
2.22 Deposit of Fund Assets in Securities Systems 8
2.23 Other Transfers 10
2.24 Establishment of Segregated Account 10
2.25 Custodian's Books and Records . 10
2.26 Opinion of Fund's Independent Certified Public
Accountants 11
2.27 Reports of Independent Certified Public Accountants 11
2.28 Overdraft Facility 11
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 12
3.01 Proper Instructions and Special Instructions 12
3.02 Authorized Persons 12
3.03 Persons Having Access to Assets of the Portfolios 13
3.04 Actions of the Custodian Based on Proper Instructions and
Special Instructions 13
IV. SUBCUSTODIANS 13
4.01 Domestic Subcustodians 13
4.02 Foreign Subcustodians and Interim Subcustodians 14
4.03 Special Subcustodians 15
4.04 Termination of a Subcustodian 15
4.05 Certification Regarding Foreign Subcustodians 15
V. STANDARD OF CARE; INDEMNIFICATION 16
5.01 Standard of Care 16
5.02 Liability of Custodian for Actions of Other Persons 17
5.03 Indemnification 18
5.04 Investment Limitations 18
5.05 Fund's Right to Proceed 19
VI. COMPENSATION 19
VII. TERMINATION 19
7.01 Termination of Agreement as to One or More Funds 19
7.02 Termination as to One or More Portfolios 20
VIII. DEFINED TERMS 21
IX. MISCELLANEOUS 22
9.01 Execution of Documents, Etc. 22
9.02 Representative Capacity; Nonrecourse Obligations 22
9.03 Several Obligations of the Funds and the Portfolios 22
9.04 Representations and Warranties 22
9.05 Entire Agreement 23
9.06 Waivers and Amendments 23
9.07 Interpretation 24
9.08 Captions 24
9.09 Governing Law 24
9.10 Notices 24
9.11 Assignment 24
9.12 Counterparts 25
9.13 Confidentiality; Survival of Obligations 25
APPENDICES
Appendix "A" - List of Funds and Portfolios
Appendix "B" - List of Additional Custodians,
Special Subcustodians and Foreign Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
CUSTODIAN AGREEMENT
AGREEMENT made as of the 1st day of August, 1996 between each of the
Investment Companies Listed on Appendix "A" hereto, as the same may be
amended from time to time (each a "Fund" and collectively the "Funds") and
Brown Brothers Harriman & Company (the "Custodian").
W I T N E S S E T H
WHEREAS, each Fund is or may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio
of cash, securities and other assets (all such existing and additional
series now or hereafter listed on Appendix "A" being hereinafter referred
to individually, as a "Portfolio," and collectively, as the "Portfolios");
and
WHEREAS, each Fund desires to appoint the Custodian as custodian on behalf
of each of its Portfolios in accordance with the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
and regulations thereunder, under the terms and conditions set forth in
this Agreement, and the Custodian has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of each of its Portfolios, each Fund hereby employs and appoints
the Custodian as a custodian, subject to the terms and provisions of this
Agreement. Each Fund shall deliver to the Custodian, or shall cause to be
delivered to the Custodian, cash, securities and other assets owned by each
of its Portfolios from time to time during the term of this Agreement and
shall specify to which of its Portfolios such cash, securities and other
assets are to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article
IV hereof, the Custodian may appoint one or more Subcustodians (as
hereinafter defined) to exercise the powers and perform the duties of the
Custodian set forth in this Article II and references to the Custodian in
this Article II shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of each Fund's Portfolios delivered to the
Custodian and, on behalf of such Portfolios, the Custodian shall, from time
to time, accept delivery of cash, securities and other assets for
safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of each Fund's
Portfolios either: (i) by physical possession of the share certificates or
other instruments representing such securities in registered or bearer
form; or (ii) in book-entry form by a Securities System (as hereinafter
defined) in accordance with the provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of
either of them, unless specifically directed by Proper Instructions to hold
such registered securities in so-called street name; provided that, in any
event, all such securities and other assets shall be held in an account of
the Custodian containing only assets of a Portfolio, or only assets held by
the Custodian as a fiduciary or custodian for customers; and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions
(as hereinafter defined), the Custodian shall pay for and receive
securities purchased for the account of a Portfolio, provided that payment
shall be made by the Custodian only upon receipt of the securities: (a) by
the Custodian; (b) by a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) by a Securities System.
Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in
the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System
that the securities underlying such repurchase agreement have been
transferred by book-entry into the Account (as hereinafter defined)
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of
time deposits, call account deposits, currency deposits, and other
deposits, foreign exchange transactions, futures contracts or options,
pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; (iii) in the case
of the purchase of securities, the settlement of which occurs outside of
the United States of America, the Custodian may make payment therefor and
receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter
defined) in the country in which the settlement occurs, but in all events
subject to the standard of care set forth in Article V hereof; and (iv) in
the case of the purchase of securities in which, in accordance with
standard industry custom and practice generally accepted by Institutional
Clients with respect to such securities, the receipt of such securities and
the payment therefor take place in different countries, the Custodian may
receive delivery of such securities and make payment therefor in accordance
with standard industry custom and practice for such securities generally
accepted by Institutional Clients, but in all events subject to the
standard of care set forth in Article V hereof. For purposes of this
Agreement, an "Institutional Client" shall mean a major commercial bank,
corporation, insurance company, or substantially similar institution,
which, as a substantial part of its business operations, purchases or sells
securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of a Portfolio for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities, and shall deposit any such securities in accordance with the
terms of any reorganization or protective plan. The Custodian shall,
without receiving Proper Instructions: surrender securities in temporary
form for definitive securities; surrender securities for transfer into the
name of the Custodian, a Portfolio or a nominee of either of them, as
permitted by Section 2.02(b); and surrender securities for a different
number of certificates or instruments representing the same number of
shares or same principal amount of indebtedness, provided that the
securities to be issued will be delivered to the Custodian or a nominee of
the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for
the account of a Portfolio, but only against payment therefor in the form
of: (a) cash, certified check, bank cashier's check, bank credit, or bank
wire transfer; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities
System, in accordance with the provisions of Section 2.22 hereof.
Notwithstanding the foregoing: (i) in the case of the sale of securities,
the settlement of which occurs outside of the United States of America,
such securities shall be delivered and paid for in accordance with local
custom and practice generally accepted by Institutional Clients in the
country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof; (ii) in the case of the
sale of securities in which, in accordance with standard industry custom
and practice generally accepted by Institutional Clients with respect to
such securities, the delivery of such securities and receipt of payment
therefor take place in different countries, the Custodian may deliver such
securities and receive payment therefor in accordance with standard
industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care
set forth in Article V hereof; and (iii) in the case of securities held in
physical form, such securities shall be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing agent,
against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure
prompt collection of the payment for, or the return of, such securities by
the broker or its clearing agent, and provided further that the Custodian
shall not be responsible for the selection of or the failure or inability
to perform of such broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively, as "ADRs"),
against a written receipt therefor adequately describing such securities
and written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian or a nominee of the Custodian, for
delivery to the Custodian at such place as the Custodian may from time to
time designate. Upon receipt of Proper Instructions, the Custodian shall
surrender ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof, or to the
agent of such issuer or trustee, for the purpose of exercise or sale,
provided that the new securities, cash or other assets, if any, acquired as
a result of such actions are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian, or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Proper Instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and shall promptly notify each applicable Fund of such
action in writing by facsimile transmission or in such other manner as such
Fund and the Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and,
upon receipt of Proper Instructions, take action with respect to the same
as directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, a Fund on behalf of any
applicable Portfolio relating to compliance with the rules of the Options
Clearing Corporation or of any registered national securities exchange or
similar organization(s), the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or
writing of an option on a security or securities index by the applicable
Portfolio; (b) deposit and maintain in a segregated account, securities
(either physically or by book-entry in a Securities System), cash or other
assets; and (c) pay, release and/or transfer such securities, cash or other
assets in accordance with notices or other communications evidencing the
expiration, termination or exercise of such options furnished by the
Options Clearing Corporation, the securities or options exchange on which
such options are traded, or such other organization as may be responsible
for handling such option transactions. Each Fund, on behalf of its
applicable Portfolios, and the broker-dealer shall be responsible for the
sufficiency of assets held in any segregated account established in
compliance with applicable margin maintenance requirements and the
performance of other terms of any option contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among
a Fund, on behalf of any applicable Portfolio, the Custodian and any
futures commission merchant (a "Procedural Agreement"), the Custodian
shall: (a) receive and retain confirmations, if any, evidencing the
purchase or sale of a futures contract or an option on a futures contract
by the applicable Portfolio; (b) deposit and maintain in a segregated
account, cash, securities and other assets designated as initial,
maintenance or variation "margin" deposits intended to secure the
applicable Portfolio's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts written by
the Portfolio, in accordance with the provisions of any Procedural
Agreement designed to comply with the rules of the Commodity Futures
Trading Commission and/or any commodity exchange or contract market (such
as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release assets from and/or transfer assets
into such margin accounts only in accordance with any such Procedural
Agreements. Each Fund, on behalf of its applicable Portfolios, and such
futures commission merchant shall be responsible for the sufficiency of
assets held in the segregated account in compliance with applicable margin
maintenance requirements and the performance of any futures contract or
option on a futures contract in accordance with its terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of a Portfolio to lenders or their
agents, or otherwise establish a segregated account as agreed to by the
applicable Fund on behalf of such Portfolio and the Custodian, as
collateral for borrowings effected by such Portfolio, provided that such
borrowed money is payable by the lender (a) to or upon the Custodian's
order, as Custodian for such Portfolio, and (b) concurrently with delivery
of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a
Portfolio, the Custodian shall purchase such Interest Bearing Deposits in
the name of the Portfolio with such banks or trust companies (including the
Custodian, any Subcustodian or any subsidiary or affiliate of the
Custodian) (hereinafter referred to as "Banking Institutions") and in such
amounts as the applicable Fund may direct pursuant to Proper Instructions.
Such Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the applicable Fund on behalf of its Portfolio may determine
and direct pursuant to Proper Instructions. The Custodian shall include in
its records with respect to the assets of each Portfolio appropriate
notation as to the amount and currency of each such Interest Bearing Bank
Deposit, the accepting Banking Institution and all other appropriate
details, and shall retain such forms of advice or receipt evidencing such
account, if any, as may be forwarded to the Custodian by the Banking
Institution. The responsibilities of the Custodian to each Fund for
Interest Bearing Deposits accepted on the Custodian's books in the United
States on behalf of the Fund's Portfolios shall be that of a U.S. bank for
a similar deposit. With respect to Interest Bearing Deposits other than
those accepted on the Custodian's books, (a) the Custodian shall be
responsible for the collection of income as set forth in Section 2.15 and
the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with
Proper Instructions, for the failure of such Banking Institution to pay
upon demand. Upon receipt of Proper Instructions, the Custodian shall take
such reasonable actions as the applicable Fund deems necessary or
appropriate to cause each such Interest Bearing Deposit Account to be
insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other Than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and
future delivery on behalf of and for the account of a Portfolio with such
currency brokers or Banking Institutions as the applicable Fund may
determine and direct pursuant to Proper Instructions. The Custodian shall
be responsible for the transmission of cash and instructions to and from
the currency broker or Banking Institution with which the contract or
option is made, the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions and
the maintenance of proper records as set forth in Section 2.25. The
Custodian shall have no duty with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals on behalf of its
Portfolios or, so long as the Custodian acts in accordance with Proper
Instructions, for the failure of such brokers or Banking Institutions to
comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to a Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper
Instructions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of a Portfolio of such Fund with
the Custodian as principal. The Custodian shall be responsible for the
selection of the currency brokers or Banking Institutions and the failure
of such currency brokers or Banking Institutions to comply with the terms
of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form
of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue
currency completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio,
deliver securities of such Portfolio to the borrower thereof prior to
receipt of the collateral, if any, for such borrowing; provided that, in
cases of loans of securities secured by cash collateral, the Custodian's
instructions to the Securities System shall require that the Securities
System deliver the securities of the Portfolio to the borrower thereof only
upon receipt of the collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to each Fund with
respect to portfolio securities and other assets of each of such Fund's
Portfolios; (b) promptly credit to the account of each applicable Portfolio
all income and other payments relating to portfolio securities and other
assets held by the Custodian hereunder upon Custodian's receipt of such
income or payments or as otherwise agreed in writing by the Custodian and
the applicable Fund; (c) promptly endorse and deliver any instruments
required to effect such collections; (d) promptly execute ownership and
other certificates and affidavits for all federal, state and foreign tax
purposes in connection with receipt of income, capital gains or other
payments with respect to portfolio securities and other assets of each
applicable Portfolio, or in connection with the purchase, sale or transfer
of such securities or other assets; and (e) promptly file any certificates
or other affidavits for the refund or reclaim of foreign taxes paid, and
promptly notify each applicable Fund of any changes to law, interpretative
rulings or procedures regarding such reclaims, and otherwise use all
available measures customarily used to minimize the imposition of foreign
taxes at source, and promptly inform each applicable Fund of alternative
means of minimizing such taxes of which the Custodian shall become aware
(or with the exercise of reasonable care should have become aware);
provided, however, that with respect to portfolio securities registered in
so-called street name, the Custodian shall use its best efforts to collect
amounts due and payable to each Fund with respect to its Portfolios. The
Custodian shall promptly notify each applicable Fund in writing by
facsimile transmission or in such other manner as each such Fund and the
Custodian may agree in writing if any amount payable with respect to
portfolio securities or other assets of the Portfolios of such Fund(s) is
not received by the Custodian when due. The Custodian shall not be
responsible for the collection of amounts due and payable with respect to
portfolio securities or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian
shall promptly release funds or securities: (a) upon receipt of Proper
Instructions, to one or more Distribution Accounts designated by the
applicable Fund or Funds in such Proper Instructions; or (b) upon receipt
of Special Instructions, as otherwise directed by the applicable Fund or
Funds, for the purpose of the payment of dividends or other distributions
to shareholders of each applicable Portfolio, and payment to shareholders
who have requested repurchase or redemption of their shares of the
Portfolio(s) (collectively, the "Shares"). For purposes of this Agreement,
a "Distribution Account" shall mean an account established at a Banking
Institution designated by the applicable Fund on behalf of one or more of
its Portfolios in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from
time to time by the Funds, and shall promptly credit such funds to the
account(s) of the applicable Portfolio(s). The Custodian shall promptly
notify each applicable Fund of Custodian's receipt of cash in payment for
Shares issued by such Fund by facsimile transmission or in such other
manner as the Fund and Custodian may agree in writing. Upon receipt of
Proper Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for Shares in payment for such
investments as may be set forth in such Proper Instructions and at a time
agreed upon between the Custodian and the applicable Fund; and (b) make
federal funds available to the applicable Fund as of specified times agreed
upon from time to time by the applicable Fund and the Custodian, in the
amount of checks received in payment for Shares which are deposited to the
accounts of each applicable Portfolio.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to each
applicable Fund, in the most expeditious manner practicable, all forms of
proxies, all notices of meetings, and any other notices or announcements
affecting or relating to securities owned by one or more of the applicable
Fund's Portfolios that are received by the Custodian, any Subcustodian, or
any nominee of either of them, and, upon receipt of Proper Instructions,
the Custodian shall execute and deliver, or cause such Subcustodian or
nominee to execute and deliver, such proxies or other authorizations as may
be required. Except as directed pursuant to Proper Instructions, neither
the Custodian nor any Subcustodian or nominee shall vote upon any such
securities, or execute any proxy to vote thereon, or give any consent or
take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of each Portfolio.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to
all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
assets of each Portfolio held by the Custodian, except as otherwise
directed from time to time pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall
open and operate a bank account or accounts (hereinafter referred to
collectively, as "Bank Accounts") on the books of the Custodian or any
Subcustodian provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio,
and shall be subject only to the draft or order of the Custodian; provided
however, that such Bank Accounts in countries other than the United States
may be held in an account of the Custodian containing only assets held by
the Custodian as a fiduciary or custodian for customers, and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank
Accounts may be denominated in either U.S. Dollars or other currencies.
The responsibilities of the Custodian to each applicable Fund for deposits
accepted on the Custodian's books in the United States shall be that of a
U.S. bank for a similar deposit. The responsibilities of the Custodian to
each applicable Fund for deposits accepted on any Subcustodian's books
shall be governed by the provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the
Custodian or a nominee of the Custodian, at a Banking Institution other
than the Custodian or any Subcustodian, provided that such account(s) shall
be in the name of the Custodian or a nominee of the Custodian, for the
account of a Portfolio, and shall be subject only to the draft or order of
the Custodian; provided however, that such Bank Accounts may be held in an
account of the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or other
customer for which such securities and other assets are held in such
account and the respective interests therein. Such Bank Accounts may be
denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the applicable Fund deems necessary
or appropriate to cause each deposit account established by the Custodian
pursuant to this Section 2.21 to be insured to the maximum extent possible
by all applicable deposit insurers including, without limitation, the
Federal Deposit Insurance Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by a
Portfolio in: (a) The Depository Trust Company; (b) the Participants Trust
Company; (c) any book-entry system as provided in (i) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (ii) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115; or (d) any other domestic clearing agency registered with the
Securities and Exchange Commission ("SEC") under Section 17A of the
Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository
or clearing agent for the securities or other assets of investment
companies) which acts as a securities depository and the use of which each
applicable Fund has previously approved by Special Instructions (as
hereinafter defined) (each of the foregoing being referred to in this
Agreement as a "Securities System"). Use of a Securities System shall be
in accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder
in a Securities System, provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which Account
shall not contain any assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers and shall be so designated
on the books and records of the Securities System.
(B) The Securities System shall be obligated to comply with the
Custodian's directions with respect to the securities held in such Account
and shall not be entitled to a lien against the assets in such Account for
extensions of credit to the Custodian other than for payment of the
purchase price of such assets.
(C) Each Fund hereby designates the Custodian as the party in whose name
any securities deposited by the Custodian in the Account are to be
registered.
(D) The books and records of the Custodian shall at all times identify
those securities belonging to each Portfolio which are maintained in a
Securities System.
(E) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that
such securities have been transferred to the Account of the Custodian, and
(x) the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Portfolio. The Custodian
shall transfer securities sold for the account of a Portfolio only upon (y)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account of the Custodian, and (z)
the making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Portfolio. Copies of all
advices from the Securities System relating to transfers of securities for
the account of a Portfolio shall identify such Portfolio and shall be
maintained for such Portfolio by the Custodian. The Custodian shall
deliver to each applicable Fund on the next succeeding business day daily
transaction reports which shall include each day's transactions in the
Securities System for the account of each applicable Portfolio. Such
transaction reports shall be delivered to each applicable Fund or any agent
designated by such Fund pursuant to Proper Instructions, by computer or in
such other manner as such Fund and the Custodian may agree in writing.
(F) The Custodian shall, if requested by a Fund pursuant to Proper
Instructions, provide such Fund with all reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System.
(G) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System (except the federal book-entry system) on
behalf of any Portfolio as promptly as practicable and shall take all
actions reasonably practicable to safeguard the securities of any Portfolio
maintained with such Securities System.
Section 2.23. Other Transfers.
(a) Upon receipt of Proper Instructions, the Custodian shall transfer to
or receive from a third party that has been appointed to serve as an
additional custodian of one or more Portfolios (an "Additional Custodian")
securities, cash and other assets of such Portfolio(s) in accordance with
such Proper Instructions. Each Additional Custodian shall be identified as
such on Appendix B, as the same may be amended from time to time in
accordance with the provisions of Section 9.06(c).
(b) Upon receipt of Special Instructions, the Custodian shall make such
other dispositions of securities, funds or other property of a Portfolio in
a manner or for purposes other than as expressly set forth in this
Agreement, provided that the Special Instructions relating to such
disposition shall include a statement of the purpose for which the delivery
is to be made, the amount of funds and/or securities to be delivered, and
the name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of a Portfolio,
into which account or accounts may be transferred cash and/or securities or
other assets of such Portfolio, including securities maintained by the
Custodian in a Securities System pursuant to Section 2.22 hereof, said
account or accounts to be maintained: (a) for the purposes set forth in
Sections 2.09, 2.10 and 2.11 hereof; (b) for the purposes of compliance by
the Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as set forth, from time to time,
in Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide
any assistance reasonably requested by a Fund in the preparation of reports
to such Fund's shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete
and accurate records with respect to securities and other assets held for
the accounts of each Portfolio as required by the rules and regulations of
the SEC applicable to investment companies registered under the 1940 Act,
including: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification numbers,
if any), and all receipts and disbursements of cash; (b) ledgers or other
records reflecting (i) securities in transfer, (ii) securities in physical
possession, (iii) securities borrowed, loaned or collateralizing
obligations of each Portfolio, (iv) moneys borrowed and moneys loaned
(together with a record of the collateral therefor and substitutions of
such collateral), (v) dividends and interest received, (vi) the amount of
tax withheld by any person in respect of any collection made by the
Custodian or any Subcustodian, and (vii) the amount of reclaims or refunds
for foreign taxes paid; and (c) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of each
Fund as such Fund shall reasonably request. All such books and records
maintained by the Custodian shall be maintained in a form acceptable to the
applicable Fund and in compliance with the rules and regulations of the
SEC, including, but not limited to, books and records required to be
maintained by Section 31(a) of the 1940 Act and the rules and regulations
from time to time adopted thereunder. All books and records maintained by
the Custodian pursuant to this Agreement shall at all times be the property
of each applicable Fund and shall be available during normal business hours
for inspection and use by such Fund and its agents, including, without
limitation, its independent certified public accountants. Notwithstanding
the preceding sentence, no Fund shall take any actions or cause the
Custodian to take any actions which would cause, either directly or
indirectly, the Custodian to violate any applicable laws, regulations or
orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as a Fund may request to
obtain from year to year favorable opinions from such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Fund's Form N-1A and
the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of a Fund, the Custodian shall deliver to such Fund a written
report prepared by the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding cash,
securities and other assets, including cash, securities and other assets
deposited and/or maintained in a Securities System or with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by any Fund and as may reasonably be obtained by the
Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of a Portfolio for which there would be, at the close of business on
the date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Portfolio, the Custodian may, in its
discretion, provide an overdraft (an "Overdraft") to the applicable Fund on
behalf of such Portfolio, in an amount sufficient to allow the completion
of such payment. Any Overdraft provided hereunder: (a) shall be payable
on the next Business Day, unless otherwise agreed by the applicable Fund
and the Custodian; and (b) shall accrue interest from the date of the
Overdraft to the date of payment in full by the applicable Fund on behalf
of the applicable Portfolio at a rate agreed upon in writing, from time to
time, by the Custodian and the applicable Fund. The Custodian and each
Fund acknowledge that the purpose of such Overdrafts is to temporarily
finance the purchase or sale of securities for prompt delivery in
accordance with the terms hereof, or to meet emergency expenses not
reasonably foreseeable by such Fund. The Custodian shall promptly notify
each applicable Fund in writing (an "Overdraft Notice") of any Overdraft by
facsimile transmission or in such other manner as such Fund and the
Custodian may agree in writing. At the request of the Custodian, each
applicable Fund, on behalf of one or more of its Portfolios, shall pledge,
assign and grant to the Custodian a security interest in certain specified
securities of the applicable Portfolio, as security for Overdrafts provided
to such Portfolio, under the terms and conditions set forth in Appendix "C"
attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification
signed or initialed by or on behalf of the applicable Fund by one or more
Authorized Persons (as hereinafter defined); (ii) a telephonic or other
oral communication by one or more Authorized Persons; or (iii) a
communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) by or on behalf
of the applicable Fund by one or more Authorized Persons; provided,
however, that communications of the types described in clauses (ii) and
(iii) above purporting to be given by an Authorized Person shall be
considered Proper Instructions only if the Custodian reasonably believes
such communications to have been given by an Authorized Person with respect
to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the applicable Fund by tested telex or
in writing in the manner set forth in clause (i) above, but the lack of
such confirmation shall in no way affect any action taken by the Custodian
in reliance upon such oral instructions prior to the Custodian's receipt of
such confirmation. Each Fund and the Custodian are hereby authorized to
record any and all telephonic or other oral instructions communicated to
the Custodian. Proper Instructions may relate to specific transactions or
to types or classes of transactions, and may be in the form of standing
instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the applicable Fund or any other
person designated by the Treasurer of such Fund in writing, which
countersignature or confirmation shall be (i) included on the same
instrument containing the Proper Instructions or on a separate instrument
relating thereto, and (ii) delivered by hand, by facsimile transmission, or
in such other manner as the applicable Fund and the Custodian agree in
writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from
time to time by the Custodian and the applicable Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, each Fund
shall deliver to the Custodian, duly certified as appropriate by a
Treasurer or Assistant Treasurer of such Fund, a certificate setting forth:
(a) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of such Fund
(collectively, the "Authorized Persons" and individually, an "Authorized
Person"); and (b) the names, titles and signatures of those persons
authorized to issue Special Instructions. Such certificate may be accepted
and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes the name(s) of a person previously
authorized by a Fund to give Proper Instructions or to issue Special
Instructions, such persons shall no longer be considered an Authorized
Person or authorized to issue Special Instructions for that Fund.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of any Fund shall
have physical access to the assets of any Portfolio of that Fund held by
the Custodian nor shall the Custodian deliver any assets of a Portfolio for
delivery to an account of such person; provided, however, that nothing in
this Section 3.03 shall prohibit (a) any Authorized Person from giving
Proper Instructions, or any person authorized to issue Special Instructions
from issuing Special Instructions, so long as such action does not result
in delivery of or access to assets of any Portfolio prohibited by this
Section 3.03; or (b) each Fund's independent certified public accountants
from examining or reviewing the assets of the Portfolios of the Fund held
by the Custodian. Each Fund shall deliver to the Custodian a written
certificate identifying such Authorized Persons, Trustees, officers,
employees and agents of such Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts
in accordance with (a) Proper Instructions or Special Instructions, as the
case may be, and (b) the terms of this Agreement, the Custodian shall not
be responsible for the title, validity or genuineness of any property, or
evidence of title thereof, received by it or delivered by it pursuant to
this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to
act on behalf of a Portfolio. (For purposes of this Agreement, all duly
appointed Domestic Subcustodians, Foreign Subcustodians, Interim
Subcustodians, and Special Subcustodians are hereinafter referred to
collectively, as "Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of one
or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other
functions of the Custodian within the United States (a "Domestic
Subcustodian"); provided, that, the Custodian shall notify each applicable
Fund in writing of the identity and qualifications of any proposed Domestic
Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and such Fund may, in its sole discretion, by
written notice to the Custodian executed by an Authorized Person disapprove
of the appointment of such Domestic Subcustodian. If, following notice by
the Custodian to each applicable Fund regarding appointment of a Domestic
Subcustodian and the expiration of thirty (30) days after the date of such
notice, such Fund shall have failed to notify the Custodian of its
disapproval thereof, the Custodian may, in its discretion, appoint such
proposed Domestic Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time
to time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the
1940 Act and the rules and regulations thereunder or by order of the
Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of one or more Portfolios as a subcustodian for
purposes of holding cash, securities and other assets of such Portfolios
and performing other functions of the Custodian in countries other than the
United States of America (a "Foreign Subcustodian"); provided, that, prior
to the appointment of any Foreign Subcustodian, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
other governing body or entity of each applicable Fund on behalf of its
applicable Portfolio(s) (which approval may be withheld in the sole
discretion of such Board of Trustees or other governing body or entity)
with respect to (i) the identity and qualifications of any proposed Foreign
Subcustodian, (ii) the country or countries in which, and the securities
depositories or clearing agencies, if any, through which, any proposed
Foreign Subcustodian is authorized to hold securities and other assets of
the applicable Portfolio(s), and (iii) the form and terms of the
subcustodian agreement to be entered into between such proposed Foreign
Subcustodian and the Custodian. Each such duly approved Foreign
Subcustodian and the countries where and the securities depositories and
clearing agencies through which they may hold securities and other assets
of the applicable Portfolios shall be listed on Appendix "B" attached
hereto, as it may be amended, from time to time, in accordance with the
provisions of Section 9.05(c) hereof. Each Fund shall be responsible for
informing the Custodian sufficiently in advance of a proposed investment by
one of its Portfolios which is to be held in a country in which no Foreign
Subcustodian is authorized to act, in order that there shall be sufficient
time for the Custodian to effect the appropriate arrangements with a
proposed foreign subcustodian, including obtaining approval as provided in
this Section 4.02(a). The Custodian shall not amend any subcustodian
agreement entered into with a Foreign Subcustodian, or agree to change or
permit any changes thereunder, or waive any rights under such agreement,
which materially affect a Fund's rights or the Foreign Subcustodian's
obligations or duties to a Fund under such agreement, except upon prior
approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event
that a Portfolio shall invest in a security or other asset to be held in a
country in which no Foreign Subcustodian is authorized to act, the
Custodian shall promptly notify the applicable Fund in writing by facsimile
transmission or in such other manner as such Fund and Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in
such country; and the Custodian shall, upon receipt of Special
Instructions, appoint any Person designated by the applicable Fund in such
Special Instructions to hold such security or other asset. (Any Person
appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter
referred to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of one or more Portfolios,
appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act as a subcustodian for purposes of: (i)
effecting third-party repurchase transactions with banks, brokers, dealers
or other entities through the use of a common custodian or subcustodian;
(ii) establishing a joint trading account for the applicable Portfolio(s)
and other registered open-end management investment companies for which
Fidelity Management & Research Company serves as investment adviser,
through which such Portfolios and such other investment companies shall
collectively participate in certain repurchase transactions; (iii)
providing depository and clearing agency services with respect to certain
variable rate demand note securities; and (iv) effecting any other
transactions designated by each applicable Fund in Special Instructions.
(Each such designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be
listed on Appendix "B" attached hereto, as it may be amended from time to
time in accordance with the provisions of Section 9.05(c) hereof. In
connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in
form and substance approved by each applicable Fund, provided that such
agreement shall in all events comply with the provisions of the 1940 Act
and the rules and regulations thereunder and the terms and provisions of
this Agreement. The Custodian shall not amend any subcustodian agreement
entered into with a Special Subcustodian, or agree to change or permit any
changes thereunder, or waive any rights under such agreement, except upon
prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use
its best efforts to cause each Interim Subcustodian and Special
Subcustodian to, perform all of its obligations in accordance with the
terms and conditions of the subcustodian agreement between the Custodian
and such Subcustodian. In the event that the Custodian is unable to cause
such Subcustodian to fully perform its obligations thereunder, the
Custodian shall forthwith, upon the receipt of Special Instructions,
terminate such Subcustodian with respect to each applicable Fund and, if
necessary or desirable, appoint a replacement Subcustodian in accordance
with the provisions of Section 4.01 or Section 4.02, as the case may be.
In addition to the foregoing, the Custodian (A) may, at any time in its
discretion, upon written notification to each applicable Fund, terminate
any Domestic Subcustodian, Foreign Subcustodian or Interim Subcustodian,
and (B) shall, upon receipt of Special Instructions, terminate any
Subcustodian with respect to each applicable Fund, in accordance with the
termination provisions under the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of a Fund, the Custodian shall deliver to such Fund a certificate
stating: (i) the identity of each Foreign Subcustodian then acting on
behalf of the Custodian for such Fund and its Portfolios; (ii) the
countries in which and the securities depositories and clearing agents
through which each such Foreign Subcustodian is then holding cash,
securities and other assets of any Portfolio of such Fund; and (iii) such
other information as may be requested by such Fund to ensure compliance
with Rule 17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under
this Agreement, and shall be liable to each Fund for all loss, damage and
expense suffered or incurred by such Fund or its Portfolios resulting from
the failure of the Custodian to exercise such reasonable care and
diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian, or any nominee of the Custodian
or any Subcustodian (individually, a "Person") is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of: (i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any foreign
country, or political subdivision thereof or of any court of competent
jurisdiction; or (ii) any act of God or war or other similar circumstance
beyond the control of the Custodian, unless, in each case, such delay or
nonperformance is caused by (A) the negligence, misfeasance or misconduct
of the applicable Person, or (B) a malfunction or failure of equipment
operated or utilized by the applicable Person other than a malfunction or
failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to any Fund or Portfolio,
(i) the Custodian shall, (ii) the Custodian shall cause any applicable
Domestic Subcustodian or Foreign Subcustodian to, and (iii) the Custodian
shall use its best efforts to cause any applicable Interim Subcustodian or
Special Subcustodian to, use all commercially reasonable efforts and take
all reasonable steps under the circumstances to mitigate the effects of
such event and to avoid continuing harm to the Funds and the Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without
liability for any action reasonably taken or omitted in good faith pursuant
to the advice of (i) counsel for the applicable Fund or Funds, or (ii) at
the expense of the Custodian, such other counsel as the applicable Fund(s)
and the Custodian may agree upon; provided, however, with respect to the
performance of any action or omission of any action upon such advice, the
Custodian shall be required to conform to the standard of care set forth in
Section 5.01(a).
(e) Expenses of the Funds. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to each applicable Fund
for all reasonable costs and expenses incurred by such Fund in connection
with any claim by such Fund against the Custodian arising from the
obligations of the Custodian hereunder, including, without limitation, all
reasonable attorneys' fees and expenses incurred by such Fund in asserting
any such claim, and all expenses incurred by such Fund in connection with
any investigations, lawsuits or proceedings relating to such claim;
provided, that such Fund has recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by a Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian's
duties hereunder by reason of the Custodian's reliance upon records that
were maintained for such Fund by entities other than the Custodian prior to
the Custodian's appointment as custodian for such Fund.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall
be liable for the actions or omissions of any Domestic Subcustodian or any
Foreign Subcustodian to the same extent as if such action or omission were
performed by the Custodian itself. In the event of any loss, damage or
expense suffered or incurred by a Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian or Foreign Subcustodian
for which the Custodian would otherwise be liable, the Custodian shall
promptly reimburse such Fund in the amount of any such loss, damage or
expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary, the Custodian shall not be liable to a Fund for any loss,
damage or expense suffered or incurred by such Fund or any of its
Portfolios resulting from the actions or omissions of an Interim
Subcustodian unless such loss, damage or expense is caused by, or results
from, the negligence, misfeasance or misconduct of the Custodian; provided,
however, in the event of any such loss, damage or expense, the Custodian
shall take all reasonable steps to enforce such rights as it may have
against such Interim Subcustodian to protect the interests of the Funds and
the Portfolios.
(c) Special Subcustodians and Additional Custodians. Notwithstanding the
provisions of Section 5.01 to the contrary and except as otherwise provided
in any subcustodian agreement to which the Custodian, a Fund and any
Special Subcustodian or Additional Custodian are parties, the Custodian
shall not be liable to a Fund for any loss, damage or expense suffered or
incurred by such Fund or any of its Portfolios resulting from the actions
or omissions of a Special Subcustodian or Additional Subcustodian, unless
such loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against any Special
Subcustodian or Additional Custodian to protect the interests of the Funds
and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to a Fund for any loss,
damage or expense suffered or incurred by such Fund or any of its
Portfolios resulting from the use by the Custodian of a Securities System,
unless such loss, damage or expense is caused by, or results from, the
negligence, misfeasance or misconduct of the Custodian; provided, however,
that in the event of any such loss, damage or expense, the Custodian shall
take all reasonable steps to enforce such rights as it may have against the
Securities System to protect the interests of the Funds and the Portfolios.
(e) Reimbursement of Expenses. Each Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment of its
obligations under this Section 5.02; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, each Fund severally and not jointly agrees to indemnify and
hold harmless the Custodian and its nominees from all loss, damage and
expense (including reasonable attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian on behalf of such Fund in the performance of its duties and
obligations under this Agreement; provided, however, that such indemnity
shall not apply to loss, damage and expense occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian or its nominee.
In addition, each Fund agrees severally and not jointly to indemnify any
Person against any liability incurred by reason of taxes assessed to such
Person, or other loss, damage or expenses incurred by such Person,
resulting from the fact that securities and other property of such Fund's
Portfolios are registered in the name of such Person; provided, however,
that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any
Person.
(b) Notice of Litigation, Right to Prosecute, Etc. No Fund shall be
liable for indemnification under this Section 5.03 unless a Person shall
have promptly notified such Fund in writing of the commencement of any
litigation or proceeding brought against such Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in
such litigation or proceedings for which indemnity by a Fund may be sought
and subject to applicable law and the ruling of any court of competent
jurisdiction, such Fund shall be entitled to participate in any such
litigation or proceeding and, after written notice from such Fund to any
Person, such Fund may assume the defense of such litigation or proceeding
with counsel of its choice at its own expense in respect of that portion of
the litigation for which such Fund may be subject to an indemnification
obligation; provided, however, a Person shall be entitled to participate in
(but not control) at its own cost and expense, the defense of any such
litigation or proceeding if such Fund has not acknowledged in writing its
obligation to indemnify the Person with respect to such litigation or
proceeding. If such Fund is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such Person shall reasonably prosecute such
litigation or proceeding. A Person shall not consent to the entry of any
judgment or enter into any settlement in any such litigation or proceeding
without providing each applicable Fund with adequate notice of any such
settlement or judgment, and without each such Fund's prior written consent.
All Persons shall submit written evidence to each applicable Fund with
respect to any cost or expense for which they are seeking indemnification
in such form and detail as such Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase,
sale or exchange of securities made by or for a Portfolio, the Custodian
shall not be liable to the applicable Fund and such Fund agrees to
indemnify the Custodian and its nominees, for any loss, damage or expense
suffered or incurred by the Custodian and its nominees arising out of any
violation of any investment or other limitation to which such Fund is
subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, each Fund shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's
rights against any Subcustodian, Securities System, or other Person for
loss, damage or expense caused such Fund by such Subcustodian, Securities
System, or other Person, and shall be entitled to enforce the rights of the
Custodian with respect to any claim against such Subcustodian, Securities
System or other Person, which the Custodian may have as a consequence of
any such loss, damage or expense, if and to the extent that such Fund has
not been made whole for any such loss or damage. If the Custodian makes
such Fund whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian,
Securities System or other Person. Upon such Fund's election to enforce
any rights of the Custodian under this Section 5.05, such Fund shall
reasonably prosecute all actions and proceedings directly relating to the
rights of the Custodian in respect of the loss, damage or expense incurred
by such Fund; provided that, so long as such Fund has acknowledged in
writing its obligation to indemnify the Custodian under Section 5.03 hereof
with respect to such claim, such Fund shall retain the right to settle,
compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by such Fund without the Custodian's
consent and provided further, that if such Fund has not made an
acknowledgment of its obligation to indemnify, such Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld
or delayed. The Custodian agrees to cooperate with each Fund and take all
actions reasonably requested by such Fund in connection with such Fund's
enforcement of any rights of the Custodian. Each Fund agrees to reimburse
the Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment of its
obligations under this Section 5.05; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each of its Portfolios, each Fund shall compensate the
Custodian in an amount, and at such times, as may be agreed upon in
writing, from time to time, by the Custodian and such Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement as to One or More Funds. With
respect to each Fund, this Agreement shall continue in full force and
effect until the first to occur of: (a) termination by the Custodian by an
instrument in writing delivered or mailed to such Fund, such termination to
take effect not sooner than ninety (90) days after the date of such
delivery; (b) termination by such Fund by an instrument in writing
delivered or mailed to the Custodian, such termination to take effect not
sooner than thirty (30) days after the date of such delivery; or (c)
termination by such Fund by written notice delivered to the Custodian,
based upon such Fund's determination that there is a reasonable basis to
conclude that the Custodian is insolvent or that the financial condition of
the Custodian is deteriorating in any material respect, in which case
termination shall take effect upon the Custodian's receipt of such notice
or at such later time as such Fund shall designate. In the event of
termination pursuant to this Section 7.01 by any Fund (a "Terminating
Fund"), each Terminating Fund shall make payment of all accrued fees and
unreimbursed expenses with respect to such Terminating Fund within a
reasonable time following termination and delivery of a statement to the
Terminating Fund setting forth such fees and expenses. Each Terminating
Fund shall identify in any notice of termination a successor custodian or
custodians to which the cash, securities and other assets of its Portfolios
shall, upon termination of this Agreement with respect to such Terminating
Fund, be delivered. In the event that no written notice designating a
successor custodian shall have been delivered to the Custodian on or before
the date when termination of this Agreement as to a Terminating Fund shall
become effective, the Custodian may deliver to a bank or trust company
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities and other
assets of such Terminating Fund's Portfolios held by the Custodian and all
instruments held by the Custodian relative thereto and all other property
of the Terminating Fund's Portfolios held by the Custodian under this
Agreement. Thereafter, such bank or trust company shall be the successor
of the Custodian with respect to such Terminating Fund under this
Agreement. In the event that securities and other assets of such
Terminating Fund's Portfolios remain in the possession of the Custodian
after the date of termination hereof with respect to such Terminating Fund
owing to failure of the Terminating Fund to appoint a successor custodian,
the Custodian shall be entitled to compensation for its services in
accordance with the fee schedule most recently in effect, for such period
as the Custodian retains possession of such securities and other assets,
and the provisions of this Agreement relating to the duties and obligations
of the Custodian and the Terminating Fund shall remain in full force and
effect. In the event of the appointment of a successor custodian, it is
agreed that the cash, securities and other property owned by a Terminating
Fund and held by the Custodian, any Subcustodian or nominee shall be
delivered to the successor custodian; and the Custodian agrees to cooperate
with such Terminating Fund in the execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement
may be terminated as to one or more of a Fund's Portfolios (but less than
all of its Portfolios) by delivery of an amended Appendix "A" deleting such
Portfolios pursuant to Section 9.05(b) hereof, in which case termination as
to such deleted Portfolios shall take effect thirty (30) days after the
date of such delivery. The execution and delivery of an amended Appendix
"A" which deletes one or more Portfolios shall constitute a termination of
this Agreement only with respect to such deleted Portfolio(s), shall be
governed by the preceding provisions of Section 7.01 as to the
identification of a successor custodian and the delivery of cash,
securities and other assets of the Portfolio(s) so deleted, and shall not
affect the obligations of the Custodian and any Fund hereunder with respect
to the other Portfolios set forth in Appendix "A," as amended from time to
time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Additional Custodian 2.23(a)
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Fund Preamble
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
Terminating Fund 7.01
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by each Fund. Upon request, each Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of their
respective obligations to such Fund under this Agreement or any applicable
subcustodian agreement with respect to such Fund, provided that the
exercise by the Custodian or any Subcustodian of any such rights shall in
all events be in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to each applicable Fund or to such
other parties as such Fund(s) may designate in such Proper Instructions,
all such documents, instruments or agreements as may be reasonable and
necessary or desirable in order to effectuate any of the transactions
contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY
OF THE DECLARATION OF TRUST OR OTHER ORGANIZATIONAL DOCUMENT OF EACH FUND
IS ON FILE WITH THE SECRETARY OF THE STATE OF THE FUND'S FORMATION, AND
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED ON BEHALF OF THE
TRUSTEES OF ANY FUND AS INDIVIDUALS, AND THE OBLIGATIONS OF THIS AGREEMENT
ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS, SHAREHOLDERS OR
PARTNERS OF ANY FUND INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND
PROPERTY OF EACH FUND'S RESPECTIVE PORTFOLIOS. THE CUSTODIAN AGREES THAT
NO SHAREHOLDER, TRUSTEE, OFFICER OR PARTNER OF ANY FUND MAY BE HELD
PERSONALLY LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF ANY FUND ARISING
OUT OF THIS AGREEMENT.
Section 9.03. Several Obligations of the Funds and the Portfolios. WITH
RESPECT TO ANY OBLIGATIONS OF A FUND ON BEHALF OF ANY OF ITS PORTFOLIOS
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE
OBLIGATIONS ARISING UNDER SECTIONS 2.28, 5.03, 5.05 and ARTICLE VI HEREOF,
THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION
SOLELY TO THE ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION
RELATES AS THOUGH EACH FUND HAD SEPARATELY CONTRACTED WITH THE CUSTODIAN BY
SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO EACH OF ITS PORTFOLIOS.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of Each Fund. Each Fund hereby
severally and not jointly represents and warrants that each of the
following shall be true, correct and complete with respect to each Fund at
all times during the term of this Agreement: (i) the Fund is duly organized
under the laws of its jurisdiction of organization and is registered as an
open-end management investment company under the 1940 Act; and (ii) the
execution, delivery and performance by the Fund of this Agreement are (w)
within its power, (x) have been duly authorized by all necessary action,
and (y) will not (A) contribute to or result in a breach of or default
under or conflict with any existing law, order, regulation or ruling of any
governmental or regulatory agency or authority, or (B) violate any
provision of the Fund's corporate charter, Declaration of Trust or other
organizational document, or bylaws, or any amendment thereof or any
provision of its most recent Prospectus or Statement of Additional
Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants to each Fund that each of the following
shall be true, correct and complete at all times during the term of this
Agreement: (i) the Custodian is duly organized under the laws of its
jurisdiction of organization and qualifies to act as a custodian to
open-end management investment companies under the provisions of the 1940
Act; and (ii) the execution, delivery and performance by the Custodian of
this Agreement are (w) within its power, (x) have been duly authorized by
all necessary action, and (y) will not (A) contribute to or result in a
breach of or default under or conflict with any existing law, order,
regulation or ruling of any governmental or regulatory agency or authority,
or (B) violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the Fund, on the one hand, and the
Custodian, on the other, with respect to the subject matter hereof and
accordingly, supersedes as of the effective date of this Agreement any
custodian agreement heretofore in effect between each Fund and the
Custodian.
Section 9.06. Waivers and Amendments. No provision of this Agreement may
be waived, amended or terminated except by a statement in writing signed by
the party against which enforcement of such waiver, amendment or
termination is sought; provided, however: (a) Appendix "A" listing the
Portfolios of each Fund for which the Custodian serves as custodian may be
amended from time to time to add one or more Portfolios for one or more
Funds, by each applicable Fund's execution and delivery to the Custodian of
an amended Appendix "A", and the execution of such amended Appendix by the
Custodian, in which case such amendment shall take effect immediately upon
execution by the Custodian; (b) Appendix "A" may be amended from time to
time to delete one or more Portfolios (but less than all of the Portfolios)
of one or more of the Funds, by each applicable Fund's execution and
delivery to the Custodian of an amended Appendix "A", in which case such
amendment shall take effect thirty (30) days after such delivery, unless
otherwise agreed by the Custodian and each applicable Fund in writing; (c)
Appendix "B" listing Foreign Subcustodians, Special Subcustodians and
Additional Custodians approved by any Fund may be amended from time to time
to add or delete one or more Foreign Subcustodians, Special Subcustodians
or Additional Custodians for a Fund or Funds by each applicable Fund's
execution and delivery to the Custodian of an amended Appendix "B", in
which case such amendment shall take effect immediately upon execution by
the Custodian; and (d) Appendix "C" setting forth the procedures relating
to the Custodian's security interest with respect to each Fund may be
amended only by an instrument in writing executed by each applicable Fund
and the Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and any Fund may agree in writing from time to
time on such provisions interpretative of or in addition to the provisions
of this Agreement with respect to such Fund as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative
or additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Agreement or affect any other Fund.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities pursuant
to an agreement with a Foreign Subcustodian that is governed by the laws of
the State of New York, the provisions of this Agreement shall be construed
in accordance with and governed by the laws of the State of New York,
provided that in all other instances this Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of
Massachusetts, in each case without giving effect to principles of
conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this
Agreement shall be delivered by hand or by facsimile transmission (provided
that in the case of delivery by facsimile transmission, notice shall also
be mailed postage prepaid to the parties at the following addresses:
(a) If to any Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Treasurer of the Fidelity Funds
Telephone: (617) 563-7000
Telefax: (617) 476-4195
(b) If to the Custodian:
Brown Brothers Harriman & Company
40 Water Street
Boston, Massachusetts 02109
Attn: W. Casey Gildea, Assistant Manager
Telephone: (617) 772-1330
Telefax: (617) 772-2263
or to such other address as a Fund or the Custodian may have designated in
writing to the other.
Section 9.11. Assignment. This Agreement shall be binding on and shall
inure to the benefit of each Fund severally and the Custodian and their
respective successors and assigns, provided that, subject to the provisions
of Section 7.01 hereof, neither the Custodian nor any Fund may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. With respect
to each Fund, this Agreement shall become effective when one or more
counterparts have been signed and delivered by such Fund and the Custodian.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions
of this Agreement and all information provided by each party to the other
regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by any bank examiner of the Custodian or any Subcustodian, any
auditor of the parties hereto, by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Section
9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04,
Section 7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to termination of
this Agreement shall survive any termination of this Agreement.
[This space left blank]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
Each of the Investment Companies Listed on Brown Brothers Harriman &
Company
Appendix "A" Attached Hereto, on Behalf
of each of Their Portfolios Listed Thereon
By: ______________________ By: _______________________
Name: ______________________ Name: _______________________
Title: ______________________ Title: _______________________
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Brown Brothers Harriman & Co. and each of the following Investment
Companies
Dated as of August 1, 1996
The following is a list of Trusts and their respective Portfolios for which
the Custodian shall serve under a Custodian Agreement dated as of August 1,
1996:
Trust Portfolio Effective as of
The Travelers Series Trust Large Cap Portfolio August 1, 1996
The Travelers Series Trust Equity Income Portfolio August 1, 1996
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to
be executed in its name and behalf as of the day and year first set forth
opposite each such Portfolio.
Each of the Investment Companies Brown Brothers Harriman & Co.
Listed on this Appendix "a", on behalf
of each of their portfolios Listed Hereon
By: ________________________ By: ________________________
Name: ________________________ Name: ________________________
Title: ________________________ Title: ________________________
Appendix "B"
To
Custodian Agreement
Between
Brown Brothers Harriman & Co. and Each of the Investment
Companies Listed on Appendix "A" thereto
Dated as of August 1, 1996
The following is a list of Additional Custodians, Special Subcustodians
and Foreign Subcustodians under the Custodian Agreement dated as of August
1, 1996 (the "Custodian Agreement"):
A. Additional Custodians
CUSTODIAN PURPOSE
Bank of New York FICASH
B. Special Subcustodians:
SUBCUSTODIAN PURPOSE
Bank of New York FICASH
C. Foreign Subcustodians:
COUNTRY FOREIGN SUBCUSTODIAN DEPOSITORY
SEE EXHIBITS I AND II, ATTACHED HERETO.
Each of the Investment Companies Brown Brothers Harriman & Co.
Listed on this Appendix "a", on behalf
of each of their portfolios Listed Thereon
By: ________________________ By: ________________________
Name: ________________________ Name: ________________________
Title: ________________________ Title: ________________________
FOREIGN BANKS
AND
FOREIGN SUBSIDIARIES OF U.S. BANKS/
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COUNTRY NAME OF BANK GLOBAL TOTAL U.S. BRANCHES REGULATION/AUDITORS
CUSTODIAN SHAREHOLDERS'
EQUITY/
Argentina Citibank, N.A., Buenos Aires BBH $14.9 B Yes Regulated by the Central
Bank of Argentina. Audited
by KPMG Peat Marwick.
First National Bank of Boston, BBH $3.8 B Yes Regulated by the Central
Buenos Aires Bank of Argentina and the
National Securities
Commission. Audited by
Coopers & Lybrand.
Australia National Australia Bank Ltd., BBH $6.7 B Yes Regulated by the Reserve
Melbourne Bank of Australia. Audited
by KPMG Peat Marwick.
Austria Creditanstalt- BBH $2.6 B Yes Regulated by the Austrian
Bankverein, Vienna Federal Ministry of Finance.
Audited by KPMG Austria
Wirtschaftsprufungs-Gesellsc
haft m.b.H.
Bangladesh Standard Chartered Bank Plc, BBH $2.4 B Yes Regulated by the Central
Dhaka Bank and the Ministry of
Finance. Audited by KPMG
Peat Marwick and Ernst &
Young.
Belgium Banque Bruxelles BBH $2.2 B Yes Regulated by the Banking and
Lambert, Brussels Finance Commission (BFC).
Audited by Van der Steen &
Partners s.c.c., Ernst &
Young, s.c.c., (statutory
auditors approved by BFC).
Botswana Barclays Bank of Botswana Ltd., BBH $42.0 M/ No Regulated by the Bank of
Gaborone, a 74.9% direct subsidiary Botswana. Audited by Price
of Barclays Bank Plc Waterhouse.
Brazil First National Bank of Boston, Sao BBH $3.8 B Yes Regulated by the Ministry of
Paulo the Economy through the
Central Bank of Brazil and
the CVM. Audited by
Coopers & Lybrand.
Canada Canadian Imperial Bank of BBH $6.0 B Yes Regulated by the Office of the
Commerce, Toronto Superintendent of Financial
Institutions, under the
authority of the Minister of
Finance. Audited by Arthur
Andersen & Co. and Price
Waterhouse.
Canada Royal Bank of Canada, Toronto BBH $6.1 B Yes Regulated by the
Superintendent of Financial
Institutions and the
Superintendent of Insurance;
also by Minister of Financial
Institutions and
Superintendent of Deposit
Institutions and the Inspector
General of Banks. Audited
by Deloitte & Touche and
Price Waterhouse.
Chile Citibank, N.A. BBH $14.9 B Yes Regulated by the
Santiago Superintendent of Banks and
Financial Institutions.
Audited by KPMG Peat
Marwick.
China-
Shanghai Standard Chartered Bank, Shanghai BBH $2.4 B Yes Regulated by the People's
Bank of China and the
Securities Commission.
Audited by KPMG Peat
Marwick.
China-
Shenzhen Standard Chartered Bank, Shenzhen BBH $2.4 B Yes Regulated by the People's
Bank of China and the
Securities Commission.
Audited by KPMG Peat
Marwick.
Colombia Cititrust Colombia S.A. Sociedad BBH $14.9 M/ No Regulated by the
Fiduciaria, Bogota, a wholly owned Superintendencia Bancaria.
subsidiary of Citibank, N.A. Audited by KPMG Peat
Marwick.
Czech
Republic Ceskoslovenska Obchodni Banka, BBH $437.0 M No Regulated by the Ministry of
S.A., Prague Finance of the Czech
Republic and the Czech
National Bank. Audited by
KPMG Ceska republika
Audit.
Denmark Den Danske Bank, Copenhagen BBH $3.3 B Yes Regulated by the Danish
Financial Supervisory
Authority under the Ministry
of Business and Industry, and
the Danish Inspectorate of
Banks. Audited by Grothen
& Perregaard,
Revisionsaktiesels-kab, and
KPMG C. Jespersen.
Ecuador Citibank, N.A., Quito BBH $14.9 B Yes Regulated by the
Superintendencia de Bancos.
Audited by KPMG Peat
Marwick.
Egypt Citibank, N.A., Cairo BBH $14.9 B Yes Regulated by the Central
Bank of Egypt and the
Ministry of Finance. Audited
by KPMG Peat Marwick.
Finland Merita Bank Ltd., Helsinki BBH $1.6 B Yes Regulated by the Finnish
Financial Supervision Office
and Bank Inspectorate.
Audited by Eric Haglund and
Esa Hietala, KPMG Wideri
Oy Ab, and Heimo Aho,
Kauko Heuro, Heimo
Karinen, Aimo Pajunen,
Erkki Poronen, Antti
Helenius.
France Banque Paribas, Paris BBH $3.9 B Yes Regulated by the Banking
Commission, the Central
Bank, the Committee for
Credit Establishments and the
Bank Regulatory Committee.
Audited by Socie'te' HSB
Castel Jacquet, Ernst &
Young International, Antoine
Bracchi, and statutory
auditors B.D.A., Ernst &
Young, Deloitte & Touche,
Tohmatsu, Jacques Manardo.
Germany Dresdner Bank AG, Frankfurt BBH $8.3 B Yes Supervised by Federal
Banking Supervisory
Authority and the Deutsche
Bundesbank. Audited by
C&L Treuhand-Vereinigung
AG.
Ghana Barclays Bank of Ghana Ltd., BBH $12.0 M/ No Regulated by the Bank of
Accra, a 60% direct subsidiary of Ghana. Audited by Price
Barclays Bank Plc Waterhouse and KPMG Peat
Marwick Okoh & Co.
Greece Citibank, N.A., Athens BBH $14.9 B Yes Regulated by the Bank of
Greece, the Ministry of
National Economy, the
Ministry of Commerce and
the Ministry of Finance.
Audited by KPMG Peat
Marwick.
Hong Kong Hongkong & Shanghai Banking BBH $6.6 B Yes Regulated by the
Corporation Ltd., Hong Kong Commissioner of Banking
and by the Hong Kong
Monetary Authority. Audited
by KPMG Peat Marwick and
Price Waterhouse.
Hungary Citibank Budapest Rt., Budapest, a BBH $69.0 M/ No Regulated by the State
wholly owned indirect subsidiary of Securities and Banking
Citibank, N.A. Supervisory and Stock
Exchange Boards. Audited
by KPMG Peat Marwick
Budapest and Price
Waterhouse.
India Citibank, N.A., Bombay BBH $14.9 B Yes Regulated by the Reserve
Standard Chartered Bank, Bombay BBH $2.4 B Yes Bank of India. Audited by
KPMG Peat Marwick.
Regulated by the Reserve
Bank of India. Audited by
KPMG Peat Marwick.
Indonesia Citibank, N.A., Jakarta BBH $14.9 B Yes Regulated by the Bank of
Indonesia. Audited by
KPMG Peat Marwick.
Ireland Allied Irish Banks plc, Dublin BBH $938.0 M Yes Regulated by the Central
Banko f Ireland. Audited by
Coopers & Lybrand.
Israel Bank Hapoalim B.M. BBH $1.9 B Yes Regulated by the Bank of
Israel. Audited by H.H.S.L.
Haft & Haft & Co. and
Kesselman & Kesselman (a
member of Cooper's &
Lybrand International).
Italy Banca Commerciale Italiana, Milan BBH $4.6 B Yes Regulated by the Bank of
Italy. Audited by KPMG Peat
Marwick Fides, s.n.c.
Japan Sumitomo Trust & Banking Co., BBH $8.9 B Yes Regulated by the Japanese
Ltd., Osaka Ministry of Finance. Audited
by Asahi & Co.
Jordan Arab Bank, plc, Amman BBH $341.0 M Yes Regulated by the Central
Bank of Jordan. Audited by
Saba & Co.
Kenya Barclays Bank of Kenya Ltd., BBH $78.0 M/ No Regulated by the Central
Nairobi, a 68.5% direct subsidiary Bank of Kenya. Audited by
of Barclays Bank Plc Deloitte & Touche and Price
Waterhouse.
Malaysia Hongkong Bank Malaysia Berhad, BBH $401.0 M No Regulated by the Bank
Kuala Lumpur Negara Malaysia. Audited by
KPMG Peat Marwick.
Mauritius The Hongkong & Shanghai Banking BBH $6.6 B Yes The Hongkong & Shanghai
Corp., Ltd., Port Louis Banking Corporation is
regulated by the Hong Kong
Monetary Authority under the
laws of Hong Kong. Audited
by KPMG Peat Marwick.
Mexico Citibank Mexico, S.A., Mexico BBH $205.0 M No Regulated by the Central
City, a wholly owned subsidiary of Bank of Mexico, the Ministry
Citibank, N.A. of Finance, the National
Banking Commission, and the
National Securities
Commission. Audited by
KPMG Cardenas Dosal, s.c.
Peat Marwick.
Morocco Banque Marocaine du Commerce BBH $294.0 M No Regulated by the Ministry of
Exterieur, Casablanca Finance. Audited by Ernst &
Young International.
Nether-
lands ABN-AMRO Bank N.V., BBH $11.1 B Yes Regulated by the Dutch
Amsterdam Central Bank. Audited by
Moret Ernst & Young
Accountants.
New
Zealand National Australia Bank, Ltd. BBH $6.7 B Yes Regulated by the Reserve
Bank of New Zealand.
Audited by KPMG Peat
Marwick.
Norway Den norske Bank, BBH $2.0 B Yes Regulated by the Royal
Oslo Ministry of Finance, the
Central Bank and The
Banking, Insurance and
Securities Commission of
Norway. Audited by Finn
Berg Jacobsen and Arthur
Andersen & Co.
Pakistan Standard Chartered Bank, Karachi BBH $2.4 B Yes Regulated by the State Bank
of Pakistan. Audited by
KPMG Peat Marwick
McLintock.
Peru Citibank, N.A., Lima BBH $14.9 B Yes Regulated by the
Superintendent of Banks and
Securities, local Securities
and Exchange Commission,
and the Commision Nacional
de Inversiones y Technologies
Extranjeras. Audited by
KPMG Peat Marwick.
Philip-
pines Citibank, N.A., Manila BBH $14.9 B Yes Regulated by the Central
Bank of the Philippines.
Audited by KPMG Peat
Marwick.
Poland Citibank Poland, S.A., Warsaw, a BBH $64.0 M/ No Regulated by the Polish
wholly owned indirect subsidiary of Securities Commission.
Citibank, N.A. Audited by KPMG Peat
Marwick.
Portugal Banco Espirito Santo e Comercial BBH $761.0 M Yes Regulated by the Bank of
de Lisboa, S.A., Lisbon Portugal and the Securities
Exchange Commission.
Audited by Magalhaes, Neves
& Associados, sroc; Price
Waterhouse; and Cesar
Goncalves, Joao Rodrigues &
Associados.
Singapore Hongkong & Shanghai Banking BBH $6.6 B Yes Regulated by the Monetary
Corporation, Ltd., Singapore Authority of Singapore.
Audited by KPMG Peat
Marwick and Price
Waterhouse.
Slovak
Republic Ceskoslovenska Obchodni Banka, BBH $437.0 M No Regulated by the Ministry of
S.A., Bratislava Finance of the Slovak
Republic. Audited by KPMG
Ceska republika Audit.
South
Africa First National Bank of Southern BBH $763.0 M No Regulated by the South
Africa Ltd., Johannesburg African Reserve Bank.
Audited by Deloitte & Touche
and KPMG Aiken & Peat.
South
Korea Citibank, N.A., Seoul BBH $14.9 B Yes Regulated by the Bank of
Korea. Audited by KPMG
Peat Marwick.
Spain Banco Santander S.A., Madrid BBH $3.4 B Yes Regulated by the Spanish
Ministry of Economy and
Finance. Audited by Arthur
Andersen & Co.
Sri Lanka Hongkong & Shanghai Banking BBH $6.6 B Yes Regulated by the Central
Corporation Ltd., Colombo Bank of Sri Lanka. Audited
by KPMG Peat Marwick and
Price Waterhouse.
Swaziland Barclays Bank of Swaziland Ltd., BBH $8.0 M/ No Regulated by the Central
Mbabne, a 60% direct subsidiary of Bank of Swaziland. Audited
Barclays Bank Plc by Coopers & Lybrand.
Sweden Skandinaviska Enskilda Banken, BBH $2.2 B Yes Regulated by the Financial
Stockholm Supervisory Authority.
Audited by SET Svensson;
Erikson & Tjus;
Revisionsbyra HB; KPMG
Bohlins AG; Ernst & Young
AB; Brehmer, Bliv,
Bonnevier, Jacobsson, and
Thiel; and Ohrlings Reveko
AB.
Switzer-
land Swiss Bank Corporation, Basel BBH $9.7 B Yes Regulated by the Swiss
Banking Commission.
Audited by BAI Bank
Auditing Inc., Group
Company of ATAG Ernst &
Young.
Taiwan Standard Chartered Bank, Taipei BBH $2.4 B Yes Regulated by the Ministry of
Finance. Audited by KPMG
Peat Marwick.
Thailand Hongkong & Shanghai BBH $6.6 B Yes Regulated by the Bank of
Banking Corporation, Ltd., Thailand. Audited by KPMG
Bangkok Peat Marwick and Price
Waterhouse.
Turkey Citibank, N.A., Istanbul BBH $14.9 B Yes Regulated by the Central
Bank of Turkey and the
Capital Markets Board.
Audited by KPMG Peat
Marwick and Yalim A.S.
Sorbost Muhasabecilik Mali
Musavirlik, a member of
Arthur Anderson.
United
Kingdom Lloyds Bank Plc, London BBH $6.6 B Yes Regulated by the Bank of
The Bank of New York, BBH $4.3 B Yes England. Audited by Price
London Waterhouse.
Regulated by the Financial
Services Act and the Bank of
England. Audited by Touche
Ross & Co.
Uruguay The First National Bank of Boston, BBH $3.8 B Yes Regulated by the Central
Montevideo Bank of Uruguay. Audited by
Coopers & Lybrand.
Venezuela Citibank, N.A., Caracas BBH $14.9 B Yes Regulated by the
Superintendency of Banks.
Audited by KPMG Peat
Marwick and Debera,
Alcaraz, Cabrera Vaszuez
(representatives of KPMG
Peat Marwick).
Zambia Barclays Bank of Zambia Ltd., BBH $14.0 M/ No Regulated by the Bank of
Lusaka, a wholly owned direct Zambia. Audited by Price
subsidiary of Barclays Plc Waterhouse and Deloitte &
Touche.
Zimbabwe Barclays Bank of Zimbabwe Ltd., BBH $39.0 M/ No Regulated by the Register of
Harare, a 66% direct subsidiary of Banks and Financial
Barclays Bank Plc Institutions and the Register
of Companies. Audited by
Price Waterhouse and
Deloitte & Touche.
</TABLE>
_______________________________
1/ The subcustodian contracts in the BBH network do not limit the amount of
cash maintained by BBH. However, in your resolutions approving the
subcustodian contracts in the BBH network you have limited the authority of
BBH to maintain cash to that reasonably necessary to effect the Funds'
securities transactions in the approved countries.
2/ Estimated U.S. Dollar equivalents. M = Millions; B = Billions.
Shareholders' equity figures are derived from publicly available data for
the most recently completed fiscal year, which is December 31, 1994 for all
subcustodian banks except the following: National Australia Bank and First
National Bank of Southern Africa, which have a fiscal year ending September
30, 1994; Royal Bank of Canada and Canadian Imperial Bank of Commerce,
which have a fiscal year ending October 31, 1994; Sumitomo Trust & Banking
Co., which has a fiscal year ending March 31, 1995; and Citibank, N.A. and
First National Bank of Boston, which have a fiscal year ending December 31,
1995. Under each subcustody contract, each bank is required to notify BBH
if its shareholders' equity declines, or is substantially likely to
decline, below the minimum amount.
3/ Exempted from the shareholders' equity requirement by SEC order. Under
a guarantee, the parent bank remains liable for the negligence of its
subsidiary, as well as for losses due to insolvency of the subsidiary. In
the case of the subsidiaries of Citibank, N.A., the amount of the guarantee
"floats" based on the amount of investment company assets maintained in the
subsidiary, as determined under an SEC-approved formula. The shareholders'
equity figures provided by BBH are for the parent bank that is liable for
its subsidiary's negligence and insolvency.
FOREIGN DEPOSITORIES AND
CLEARING AGENCIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COUNTRY NAME OF REGULATION/AUDITORS
DEPOSITORY OPERATING HISTORY/
NUMBER OF PARTICIPANTS
Argentina Caja de Valores, Established in 1974. More than 700 participants. Regulated by the National
Securities Commission.
S.A. Audited by Coopers & Lybrand.
Australia Austraclear Limited Began operations in 1984 for money market and Regulated by the Australian
Security Commission.
fixed-income securities. Over 300 participants. Audited by KPMG Peat
Marwick.
The Reserve Bank Information and Established in 1991. Over 90 participants. For Regulated by the Reserve Bank
of Australia under the
Transfer System (RITS) handling Commonwealth government securities Commonwealth Inscribed Stock
Act of 1911 (as
and Treasury notes. amended). Audited by W.G.
Nelson, Australian
National Audit Office.
Austria Wertpapiersammelbank, a division of Operating since 1965. Over 100 participants. Regulated by the Federal
Ministry of Finance. Audited
sterreichische Kontrollbank by KPMG Austria.
Aktiengesellschaft (OeKB)
Belgium Caisse Interprofessionnelle de Depots Established in 1968. Over 170 participants. Regulated by the Ministry of
Finance. Auditors are not
et de Virements de Titres, S.A. (CIK) available.
Belgium Banque Nationale de Belgique (BNB) Established in 1991. 170 participants. For Supervised by the Ministry of
Finance. Audited by the
Belgian linear bonds, treasury bonds, commercial College des Censures.
paper, and certificates of deposit.
Brazil Sao Paulo Stock Exchange Established in 1890. Began providing custodial Self-regulated under the
supervision of the Brazilian
(BOVESPA); Systema Especial de services in 1974. Over 150 participants. Securities and Exchange
Commission and the Central
Liquidacao e Custodia (SELIC) Bank of Brazil. Audited by
Coopers & Lybrand.
Rio de Janeiro Exchange (BVRJ); Established in 1990. Over 300 participants. Supervised by the Comissao de
Valores Mobilarios.
Camara de Liquidacao e Custodia Audited by Arthur Andersen.
S.A. (CLC); Central de Custodia e
Liquidacao Financeira de Titulos
(CETIP)
Canada Canadian Depository for Securities, Incorporated in 1970. More than 100 participants. Regulated by the Office of the
Superintendent of
Ltd. (CDS) Financial Institutions, and
the Ontario and Quebec
Securities Commissions.
Audited by KPMG Peat
Marwick Thorne.
China-
Shanghai Shanghai Securities Central Clearing Established in 1993. Over 50 participants. Regulated by the Securities
Commission. Auditors not
& Registration Corporation available.
(SSCCRC)
China-
Shenzhen Shenzhen Securities Clearing Established in 1991. Over 400 participants. Regulated by the Securities
Commission. Auditors not
Company (SSCC) available.
Czech
Republic Stredisko Cennych Papiru (SCP) Established in 1993. Over 6 million account Regulated by the Ministry of
Finance. Audited by the
holders. internal audit department
supervised by the Ministry of
Finance.
Czech
Republic Czech National Bank Established in 1993. 40 participants. For Regulated by The Bank Council.
Audited by Deloitte
(CNB) short-term money market instruments. & Touche.
Denmark Vaerdipapircentralen - VP Center Began operations in 1983 for bonds and in 1988 Supervised by the Danish
Banking, Insurance and
for equities. Over 200 participants. Securities Authority, the Data
Surveillance Authority,
and the Financial Supervisory
Authority. Audited by
Deloitte Touche.
Finland Central Share Register of Finland CSR was established in 1990. Approximately 90 CSR is regulated by the
Securities Association.
Co-operative (CSR) organizations provide registrar information to Auditors are not available.
CSR; it is used for all listed securities on the
Helsinki Stock Exchange.
Helsinki Money Market Center Ltd. The year under review was HMMC's first whole Supervised by the Finnish
Banking Supervision Office.
(HMMC) year of business operations. 102 participants. For Audited by KPMG Wideri Oy AB.
money market debt instruments.
France Socie'te' Interprofessionelle pour la Established in 1949. Over 600 participants. Supervised by the Ministry of
Economy and Finance.
Compensation des Valeurs Mobilieres Audited by internal auditors.
(SICOVAM)
Banque de France Began operations in 1800. 462 participants. For Supervised by the General
Council, which includes a
French treasury bills, treasury notes, certificates
of representative from the
Ministry of the Economic
deposit and bills issued by financial institutions, Affairs and Finance. Audited
by two statutory auditors
and commercial paper. appointed by the General
Council.
Germany Deutscher Kassenverein AG (DKV) Established in 1949. Over 500 participants. Supervised by the Federal
Banking Supervisory
Authority. Audited by KPMG
Deutsche
Treuhand-Gesellschaft.
Greece Central Securities Depository
Socie'te' Established in 1991. Began operations in 1992. Regulated by the Ministry of
the National Economy
Anonyme (CSD) (Apothetirio Titlon Over 70 participants. through the Capital Market
Committee. Audited by
A.E.) Greek Chartered Accountants
Co.
Hong Kong Hong Kong Securities Clearing Co. Established in 1989 and began operations in 1993. Regulated by Securities &
Futures Commission.
Ltd. (HKSCC), Central Clearing & More than 550 participants. Audited by KPMG Peat Marwick.
Settlement System
(CCASS)
Hungary Central Depository and Clearing Established in 1993. Brokerage firms and banks Regulated by the Hungarian
State Securities
House (Budapest) Ltd. (KELER Ltd.) are eligible to participate. Supervision. Audited by Ernst
& Young.
Ireland Gilt Settlement Office (GS0) Established in 1989. Over 40 participants. For Supervised and audited by the
Comptroller & Auditor
Irish government securities. General.
Israel Tel Aviv Stock Exchange (TASE) Established in 1953. Over 20 participants. Regulated by the Israeli
Securities Authority. Auditors
Clearinghouse, Ltd. not available.
Italy Monte Titoli S.p.A. Established in 1978. Over 300 participants. Regulated by the Ministry of
the Treasury, the Bank of
Italy, the Stock Exchange
Council, and CONSOB, the
government agency responsible
for supervising the
stock exchange, listing
companies, and handling
company information. Audited
by KPMG Peat
Marwick.
Banca d'Italia Established in 1893; began operations as a Supervised and audited by the
Ministry of the Treasury.
depository in 1980. Approximately 300
participants. For Italian government securities,
including debt and equity.
Japan Japan Securities Established in 1984. Over 200 participants. Regulated by the Ministry of
Finance and the Ministry
Depository Center Began providing services in 1992. of Justice. Audited by
Tadashi Iwase, New Japan
(JASDEC) Securities Co., and Chiaki
Kurahara, Federation of
Bankers Assoc. of Japan.
Bank of Japan Established in 1980. 394 participants. For Supervised and audited by the
Ministry of Finance.
Japanese government bonds.
Malaysia Malaysian Central Depository Sdn. Established in 1990 and became operational in Supervised by Securities
Commission. Audited by
Bhd. (MCD) 1993. Over 80 participants. Hanafiah Raslan & Mohamad.
Bank Negara Malaysia Established in 1959. 98 participants. For Supervised by the Minister of
Finance. Audited by the
Malaysian government securities, Cagamas bonds, Auditor-General.
treasury bills, government investment certificates,
and Bank Negara Malaysia certificates.
Mexico Institucio'n para el Deposito' de Established in 1978. More than 400 participants. Regulated by the National
Securities Commission and
Valores - S.D. INDEVAL, S.A. Privatized in 1987. the Ministry of Finance.
Audited by Ruiz-Urquiza on
de C.V. behalf of Arthur Andersen &
Co.
Banco de Mexico Established in 1925. Participants are banks, Supervised and audited by the
Ministry of Finance and
brokerage houses, and government agencies. For Public Credit.
Mexican government securities.
Nether-
lands Nederlands Centraal Instituut voor Established in 1974. Over 50 participants. Supervised by the Ministry of
Finance. Audited by
Giraal Effectenverkeer BV Established in 1814. 85 participants. For NLG KPMG Klynveld.
(NECIGEF)/KAS Associatie, N.V. certificates of deposit, commercial paper, and Supervised by the Ministry of
Finance. Audited by G.
(KAS) medium-term notes. Streefland, registered
accountant.
De Nederlandsche Bank (DNB)
New
Zealand Austraclear Limited through the RBNZ was established in 1934, Austraclear in RBNZ is supervised by the
government of New
Reserve Bank of New Zealand 1990. Over 50 participants. Zealand. Austraclear is
supervised by RBNZ. Audited
(RBNZ) by KPMG Peat Marwick.
Norway Verdipapirsentralen (VPS) Established in 1985. Over 900 participants. Supervised by Norwegian
Banking, Insurance and
Securities Commission.
Audited by KPMG Peat
Marwick.
Peru Caja de Valores (CAVAL) Established 1987. Over 50 participants. Supervised by Comision
Nacional Supervisora de
Empresas y Valores. Auditors
not available.
Poland National Depository of Securities Established in 1991. Over 30 participants. Regulated by the Polish
Securities Commission.
Auditors not available.
Portugal Central de Valores Mobiliarios Established in 1991. Over 50 participants. Regulated by Comissao de
Mercado de Valores
(Interbolsa) Mobiliarios (CMVM) and the
Ministry of Finance.
Audited by Deloitte & Touche.
Singapore Central Depository (Pte.) Ltd. (CDP) Established in 1987. Over 90 participants. Managed, regulated, and wholly
owned by the Stock
Exchange of Singapore which is
supervised by the
Monetary Authority of
Singapore. Audited by Foo,
Kon
& Tan.
Slovak
Republic Stredisko Cennych Papierov (SCP) Established in 1993. Over 2 million account Regulated by the Ministry of
Finance. Audited by the
holders. internal audit department
supervised by the Ministry of
Finance.
National Bank of Slovakia (NBS) Established in 1993. Number of participants is not Regulated by The Bank Board.
Audited by Deloitte &
available. For government bonds and corporate Touche.
bills.
South
Africa The Central Depository (Pty) Ltd. Established in 1992. Scheduled to be fully Supervised by the South
African Reserve Bank.
(CD) operational by October 1995. Number of Audited by Deloitte & Touche.
participants is not available.
South
Korea Korean Securities Depository (KSD) Established in 1974. Over 100 participants. Regulated by the Ministry of
Finance and the Korean
Securities and Exchange
Commission. Audited by an
auditor of the Securities
Supervisory Board.
Spain Servicio de Compensacio'n y Established in 1992. Over 100 participants. Supervised by the Comision
Nacional Mercado de
Liquidacio'n de Valores (SCLV) Established in 1987. 282 participants. For Valores (Securities
Commission). Audited by
Arthur
Banco de Espana Spanish government bonds. Andersen & Co.
Supervised by the Ministry of
Economics and Finance.
Audited by Tribunal de
Cuentas, which audits all
state-owned institutions.
Sri Lanka Central Depository System (Pvt) Established in 1991. Wholly owned subsidiary of Regulated by the Colombo Stock
Exchange and the
Limited (CDS) the Colombo Stock Exchange. More than 20 Securities Exchange
Commission. Audited by KPMG
participants. Ford, Rhodes, Thorton & Co.
Sweden Vardepappercentralen VPC AB (VPC) Established in 1971. More than 50 participants. Supervised by the Financial
Supervisory Authority.
Audited by Coopers & Lybrand
and KPMG
Riksrevisions Verket.
Switzer-
land Schweizerische Effekten - Giro AG Established in 1970. Over 350 participants. SEGA is self-regulated.
Audited by E. Koller and R.
(SEGA) Steck, Swiss Certified Public
Accountants.
Taiwan Taiwan Securities Central Depository Established in 1989. Over 300 participants. Jointly supervised by the
Taiwan Stock Exchange Corp.,
Co. (TSCD) Fuh Hwa Securities Corp., and
Yuan Tah Securities
Corp. Audited by T.N. Soong &
Co.
Thailand Thailand Securities Depository Formed in 1988, expanded and began operations Regulated by Stock Exchange
Commission of Thailand.
Company (TSD) as a central depository in 1992. Over 60 Audited by KPMG Peat Marwick
Suthee.
participants.
Transnat-
ional Cedel Bank Socie'te' Anonyme, Established in 1970. Over 2,800 participants. Supervised by the Institute
Monetaire Luxembourgeios.
Luxembourg Audited by KPMG Peat Marwick
Inter-Revision.
Euroclear Clearance System Socie'te' Established in 1968. 2,730 participants. Supervised by the Belgium
Banking & Financial
Cooperative, Belgium Commission. Audited by Price
Waterhouse.
Turkey Takas ve Saklama A.S. (TvS) (ISE Established in 1991 and operations began in 1992. Governed by the Turkish Trade
Code and the Capital
Settlement and Custody Co.) Over 160 participants. Markets Law and is regulated
by the Turkish Capital
Markets Board and the Prime
Ministry. Auditors are not
available.
Central Bank of Turkey (CBT) Established in 1931. Local banks and some Regulated by the
Undersecretariat of Treasury
and
brokerage houses are participants. For treasury Foreign Trade. Audited by a
subcommittee of the
bills and government bonds. Turkish parliament.
United
Kingdom Central Gilts Office (CGO) Established in 1986. 178 participants. For Supervised by the Bank of
England. Audited by
Central Moneymarkets Office (CMO) gilt-edged stocks (government debt). Coopers & Lybrand.
Established in 1990. 72 participants. For money Supervised by the Bank of
England. Audited by
market debt instruments. Coopers & Lybrand.
</TABLE>
Appendix "C" to the
Custodian Agreement
Between
Each of the Investment Companies
Listed on Appendix "A" Thereto
And
BROWN BROTHERS HARRIMAN & COMPANY
Dated as of August 1, 1996
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of
any Portfolio, the applicable Fund, on behalf of such Portfolio, shall
pledge, assign and grant to the Custodian a security interest in Collateral
(as hereinafter defined), under the terms, circumstances and conditions set
forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the following
terms shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio, securities
held by the Custodian on behalf of the Portfolio having a fair market value
(as determined in accordance with the procedures set forth in the
prospectus for the Portfolio) equal to the aggregate of all Overdraft
Obligations of such Portfolio: (i) identified in any Pledge Certificate
executed on behalf of such Portfolio; or (ii) designated by the Custodian
for such Portfolio pursuant to Section 3 of this Appendix C. Such
securities shall consist of marketable securities held by the Custodian on
behalf of such Portfolio or, if no such marketable securities are held by
the Custodian on behalf of such Portfolio, such other securities designated
by the applicable Fund in the applicable Pledge Certificate or by the
Custodian pursuant to Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any Portfolio, the
amount of any outstanding Overdraft(s) provided by the Custodian to such
Portfolio together with all accrued interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached to this Appendix "C" as Schedule 1 executed by a duly authorized
officer of the applicable Fund and delivered by such Fund to the Custodian
by facsimile transmission or in such other manner as the applicable Fund
and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached to this Appendix "C" as Schedule 2 executed by a duly authorized
officer of the Custodian and delivered by the Custodian to the applicable
Fund by facsimile transmission or in such other manner as such Fund and the
Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by
facsimile transmission or in such other manner as the applicable Fund and
the Custodian shall agree in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft
Obligations of a Portfolio are not satisfied by the close of business on
the first Business Day following the Business Day on which the applicable
Fund receives Written Notice requesting security for such Overdraft
Obligation and stating the amount of such Overdraft Obligation, the
applicable Fund, on behalf of such Portfolio, shall pledge, assign and
grant to the Custodian a first priority security interest, by delivering to
the Custodian, a Pledge Certificate executed by such Fund on behalf of such
Portfolio describing the applicable Collateral. Such Written Notice may,
in the discretion of the Custodian, be included within or accompany the
Overdraft Notice relating to the applicable Overdraft Obligations.
Section 3. Failure to Pledge Collateral. In the event that the
applicable Fund shall fail: (a) to pay, on behalf of the applicable
Portfolio, the Overdraft Obligation described in such Written Notice; (b)
to deliver to the Custodian a Pledge Certificate pursuant to Section 2; or
(c) to identify substitute securities pursuant to Section 6 upon the sale
or maturity of any securities identified as Collateral, the Custodian may,
by Written Notice to the applicable Fund specify Collateral which shall
secure the applicable Overdraft Obligation. Such Fund, on behalf of any
applicable Portfolio, hereby pledges, assigns and grants to the Custodian a
first priority security interest in any and all Collateral specified in
such Written Notice; provided that such pledge, assignment and grant of
security shall be deemed to be effective only upon receipt by the
applicable Fund of such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify a Fund by Written Notice that the fair market value
of the Collateral securing any Overdraft Obligation of one of such Fund's
Portfolios is less than the amount of such Overdraft Obligation, such Fund,
on behalf of the applicable Portfolio, shall deliver to the Custodian,
within one (1) Business Day following the Fund's receipt of such Written
Notice, an additional Pledge Certificate describing additional Collateral.
If such Fund shall fail to deliver such additional Pledge Certificate, the
Custodian may specify Collateral which shall secure the unsecured amount of
the applicable Overdraft Obligation in accordance with Section 3 of this
Appendix C.
Section 5. Release of Collateral. Upon payment by a Fund, on behalf of
one of its Portfolios, of any Overdraft Obligation secured by the pledge of
Collateral, the Custodian shall promptly deliver to such Fund a Release
Certificate pursuant to which the Custodian shall release Collateral from
the lien under the applicable Pledge Certificate or Written Notice pursuant
to Section 3 having a fair market value equal to the amount paid by such
Fund on account of such Overdraft Obligation. In addition, if at any time
a Fund shall notify the Custodian by Written Notice that such Fund desires
that specified Collateral be released and: (a) that the fair market value
of the Collateral securing any Overdraft Obligation shall exceed the amount
of such Overdraft Obligation; or (b) that the Fund has delivered a Pledge
Certificate substituting Collateral for such Overdraft Obligation, the
Custodian shall deliver to such Fund, within one (1) Business Day following
the Custodian's receipt of such Written Notice, a Release Certificate
relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. A Fund may substitute securities
for any securities identified as Collateral by delivery to the Custodian of
a Pledge Certificate executed by such Fund on behalf of the applicable
Portfolio, indicating the securities pledged as Collateral.
Section 7. Security for Individual Portfolios' Overdraft Obligations.
The pledge of Collateral by a Fund on behalf of any of its individual
Portfolios shall secure only the Overdraft Obligations of such Portfolio.
In no event shall the pledge of Collateral by one of a Fund's Portfolios be
deemed or considered to be security for the Overdraft Obligations of any
other Portfolio of such Fund or of any other Fund.
Section 8. Custodian's Remedies. Upon (a) a Fund's failure to pay any
Overdraft Obligation of an applicable Portfolio within thirty (30) days
after receipt by such Fund of a Written Notice demanding security
therefore, and (b) one (1) Business Day's prior Written Notice to such
Fund, the Custodian may elect to enforce its security interest in the
Collateral securing such Overdraft Obligation, by taking title to (at the
then prevailing fair market value), or selling in a commercially reasonable
manner, so much of the Collateral as shall be required to pay such
Overdraft Obligation in full. Notwithstanding the provisions of any
applicable law, including, without limitation, the Uniform Commercial Code,
the remedy set forth in the preceding sentence shall be the only right or
remedy to which the Custodian is entitled with respect to the pledge and
security interest granted pursuant to any Pledge Certificate or Section 3.
Without limiting the foregoing, the Custodian hereby waives and
relinquishes all contractual and common law rights of set off to which it
may now or hereafter be or become entitled with respect to any obligations
of any Fund to the Custodian arising under this Appendix "C" to the
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be
executed in its name and behalf on the day and year first above written.
Each of the Investment Companies Listed on BROWN BROTHERS HARRIMAN &
Schedule "A" to the Custodian Agreement, on COMPANY
Behalf of Each of Their Respective
Portfolios Listed Thereon
By: ______________________ By: ______________________
Name: ______________________ Name: ______________________
Title: ______________________ Title: ______________________
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement
dated as of [ ] (the "Agreement"), between [ ] (the
"Fund") and [ ] (the "Custodian"). Capitalized terms used herein
without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to [Section 2 or Section 4] of Appendix "C"
attached to the Agreement, the Fund, on behalf of [ ] (the
"Portfolio"), hereby pledges, assigns and grants to the Custodian a first
priority security interest in the securities listed on Exhibit "A" attached
to this Pledge Certificate (collectively, the "Pledged Securities"). Upon
delivery of this Pledge Certificate, the Pledged Securities shall
constitute Collateral, and shall secure all Overdraft Obligations of the
Portfolio described in that certain Written Notice dated , 19 ,
delivered by the Custodian to the Fund. The pledge, assignment and grant
of security in the Pledged Securities hereunder shall be subject in all
respect to the terms and conditions of the Agreement, including, without
limitation, Sections 7 and 8 of Appendix "C" attached thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Portfolio this day of 19 .
[FUND], on Behalf of [Portfolio]
By: ___________________
Name: ___________________
Title: ___________________
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement
dated as of [ ] (the "Agreement"), between [ ] (the
"Fund") and [ ] (the "Custodian"). Capitalized terms used herein
without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to Section 5 of Appendix "C" attached to the
Agreement, the Custodian hereby releases the securities listed on Exhibit
"A" attached to this Release Certificate from the lien under the [Pledge
Certificate dated ___________, 19 or the Written Notice delivered
pursuant to Section 3 of Appendix "C" dated _________, 19 ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to
be executed in its name and on its behalf this day of 19 .
BROWN BROTHERS HARRIMAN & COMPANY
By: _____________________
Name:______________________
Title:_______________________
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
August 1, 1996
Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109
RE: Custodian Agreement, Dated as of August 1, 1996, Between Brown
Brothers Harriman & Company and Each of the Funds Listed on Appendix "A"
Attached Thereto.
Dear Sirs:
Pursuant to Article VI of the Custodian Agreement (the "Custodian
Agreement"), dated as of August 1, 1996, between Brown Brothers Harriman &
Company (the "Custodian") and each of the Funds listed on Appendix "A"
attached thereto (each a "Fund" and collectively the "Funds"), this letter
sets forth in writing the compensation payable by each Portfolio to the
Custodian under the terms of the Custodian Agreement. Capitalized terms
not otherwise defined herein shall have the respective meanings specified
in the Custodian Agreement.
1. For the services performed by the Custodian on behalf of each
Portfolio pursuant to the Custodian Agreement, each of the Funds, on behalf
of each of their respective Portfolios, hereby agree to compensate the
Custodian in accordance with the schedule of fees and charges set forth as
Schedule "I" attached to this letter (the "Fee Schedule"). The Fee
Schedule shall remain in effect for a period of not less than three years
from the date hereof, subject only to modification by the mutual written
consent of the parties, provided that the fees payable in respect of
foreign assets will be reviewed on an annual basis in order to pass on any
reductions in the Custodian's costs to the Funds. Unless the applicable
Fund shall agree in writing to amend the Fee Schedule, this letter shall
constitute full and complete agreement with respect to compensation to be
provided to the Custodian under Article VI of the Custodian Agreement in
respect of each of such Fund's Portfolios.
2. Unless otherwise agreed in writing, the Fee Schedule shall apply with
respect to future Portfolios for which the Custodian shall agree to serve
as Custodian under the Custodian Agreement, and your execution and delivery
of an amended Appendix "A" to the Custodian Agreement by the Custodian
shall constitute an acceptance of the Fee Schedule with respect to each
such future Portfolio.
3. The Funds shall provide to the Custodian on a monthly basis the asset
levels required by the Custodian to calculate the asset portion of the
custodian fees payable under the Fee Schedule. Such determinations shall
be based on the average monthly assets of each Portfolio and shall specify
the level of domestic assets and foreign assets by country, as appropriate.
Domestic assets shall include all assets held in the United States
(excluding the average monthly FICASH/FITERM position), including but not
limited to American Depository Receipts. Foreign assets shall include all
assets held outside the United States, including but not limited to
securities which clear through Euroclear or Cedel and Eurodollar money
market certificates. The Custodian will provide as soon as practicable
after receiving the asset level numbers, a bill for each Portfolio,
including such reasonable detail in support of each bill as may be
reasonably requested by the Funds.
4. This letter is solely intended to establish the fee and billing
arrangements between the Custodian and the Funds pursuant to Article VI of
the Custodian Agreement and shall not be construed to modify or amend the
obligations or duties of the parties to the Custodian Agreement. This
letter shall be governed by and construed in accordance with the terms and
provisions of the Custodian Agreement.
If you are in agreement with the foregoing, please countersign the enclosed
copy of this letter and return it to the undersigned, whereupon this letter
shall become a legally binding obligation of each of the Funds on behalf of
their respective Portfolios and the Custodian.
Each of the Funds
Listed on Schedule "A" to the
Custodian Agreement, on Behalf of
of Their Respective Portfolios Listed
Thereon
By____________________
Title___________________
Name__________________
Accepted and agreed to
as of the date hereof:
Brown Brothers Harriman & Company
By: ______________________________
Name_________________________
Title__________________________
SCHEDULE I
FEE SCHEDULE TO THE CUSTODIAN AGREEMENT,
DATED AS OF AUGUST 1, 1996,
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE INVESTMENT COMPANIES LISTED ON APPENDIX "A" THERETO
1. ASSET FEES
Domestic Asset Level1 Basis Points2
$100 million .75
$100 million and $400 million .70
$400 million and $700 million .60
$700 million and $1 billion .50
$1 billion and $10 billion .40
$10 billion and $20 billion .20
$20 billion .15
1 Breakpoints for domestic asset-based fees will be applied at the group
level on the basis of the total aggregate domestic assets of all
Portfolios. The level of domestic assets will be calculated in accordance
with the terms of the Fee Letter.
2 Basis point fees are quoted at annual rates and will be billed on a
monthly basis in accordance with the terms of the Fee Letter.
Foreign:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Asset Charge3 Charge Asset Charge3 Charge
Argentina 20 basis points $100 Indonesia 15 basis points $100
Australia 5 basis points $60 Ireland 6 basis points $50
Austria 6 basis points $60 Israel 25 basis points $50
Bangladesh 40 basis points $150 Italy 5 basis points $60
Belgium 6 basis points $60 Japan 3 basis points $25
Brazil 15 basis points $75 Jordan 25 basis points $85
Canada 3 basis points $25 Kenya 35 basis points $120
Chile 25 basis points $100 Korea 16 basis points $35
China 25 basis points $100 Luxembourg 6 basis points $35
Colombia 30 basis points $100 Malaysia 6 basis points $30
Czech Rep. 30 basis points $65 Mauritius 40 basis points $100
Denmark 5 basis points $60 Mexico 15 basis points $50
Finland 6 basis points $50 Morocco 40 basis points $50
France 5 basis points $50 Netherlands 6 basis points $35
Germany 3 basis points $30 New Zealand 5 basis points $60
Ghana 45 basis points $150 Norway 6 basis points $55
Greece 30 basis points $100 Pakistan 30 basis points $120
Hong Kong 5 basis points $45 Peru 25 basis points $120
Hungary 40 basis points $180 Philippines 15 basis points $125
India 30 basis points $120 Poland 50 basis points $100
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Transaction Transaction
Asset Charge3 Charge Asset Charge3 Charge
Portugal 20 basis points $100 Turkey 25 basis points $100
Russia 45 basis points $100 United Kingdom 4 basis points $30
Singapore 6 basis points $50 Uruguay 65 basis points $175
Slovakia 40 basis points $125 Venezuela 35 basis points $75
South Africa 12 basis points $50 Vietnam 45 basis points $165
Spain 8 basis points $75 Zambia 45 basis points $150
Sri Lanka 20 basis points $100 Zimbabwe 45 basis points $150
Sweden 6 basis points $50 Euroclear/CEDE
L
Switzerland 5 basis points $75 Fixed Income 3 basis points $20
Taiwan 25 basis points $100 Euroclear/CEDE
L
Thailand 12 basis points $75 Equities 5 basis points $35
</TABLE>
3 The level of foreign assets held in a particular country will be
determined in accordance with the terms of the Fee Letter. Basis point
fees are quoted at annual rates and will be billed on a monthly basis in
accordance with the terms of the Fee Letter.
2. U.S. TRANSACTION CHARGES
Charge
DTC Trades (ID affirmed) $ 4.25
DTC Trades (Non-ID affirmed or cancelled) $ 6.50
DTC (principal, interest or maturity) $ 7.00
FBE (including maturities) $ 4.75
PTC $ 10.00
PTC (principal, interest, and maturities) $ 7.00
Physical $ 25.00
Repurchase Agreements $ 5.00
FICASH/FITERM (automated) $ 6.00
FICASH/FITERM (unautomated) $ 10.00
Wires (automated) $ 4.00
Wires (unautomated) $ 6.00
Stock Loans $ 15.00
Mark to Markets $ 7.00
Check processing / disbursement $ 10.00
3. OUT OF POCKET EXPENSES
Domestic: None
Foreign: Government mandated and regulatory charges such as stamp duties,
ad valorem (or equivalent) taxes and local administration charges (as
agreed to in writing) are for the account of the fund.
4. OTHER FEES
Corporate action reporting for securities not held $100.00/mo./security
(no charge if automated)
Third party FX $15.00
Currency hedge transactions $15.00
Euroclear deposit/withdrawal $75.00
Euroclear assets held physically in local markets will be subject to local
market charges.
Precious metals safekeeping as billed by Wilmington Trust.
Extraordinary Proxy Charges Agreed to in writing in advance
5. ADJUSTMENTS
Earning Credits Rate: Federal funds rate
Balance: Daily adjusted positive balance
Overdraft: Fed Funds Rate plus 25 basis points
Brokerage Credits 50% of commission
7. MINIMUMS $5,000 per Portfolio
8. NEW MARKETS/NEW INSTRUMENTS Asset based charges, transaction charges
and foreign out-of-pocket expenses to be negotiated.
Brown Brothers Harriman & Co. Each of the Investment Companies Listed on
Listed on Appendix "A" to the Custodian Agreement, on Behalf of Each of
Their Respective Portfolios Listed Thereon
By: By:
Name: Name:
Title: Title:
<PAGE> 1
Exhibit 9(b)
FORM OF
AMENDMENT TO
TRANSFER AND RECORDKEEPING AGREEMENT
WHEREAS, an AGREEMENT was entered into as of the 25th day of October,
1991 by and between The Travelers Series Trust, a business trust organized and
existing under the laws of Massachusetts, (hereinafter called the "Trust") and
The Travelers Insurance Company, a Connecticut stock insurance company,
(hereinafter called "The Travelers") both parties having their principal place
of business at One Tower Square, Hartford, Connecticut 01683; and
WHEREAS, The Travelers and the Trust desire to amend the Agreement to
remove certain of the portfolios of the Trust from coverage by the Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein contained, the parties hereto agree that the Agreement will
not apply to the following Portfolios of the Trust as follows:
MFS Emerging Growth Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Lazard International Stock Portfolio
Equity Income Portfolio
Large Cap Portfolio
Travelers Quality Bond Portfolio
IN WITNESS WHEREOF, the parties hereto have caused this amendment to
the Agreement to be signed by their respective officials thereunto duly
authorized and seals to be affixed, in the case of the Company, as of the day
and year first above written.
THE TRAVELERS INSURANCE COMPANY
By:_________________________________
Attest: (SEAL)
____________________
THE TRAVELERS SERIES TRUST
By:_________________________________
Chairman, Board of Trustees
WITNESS:
____________________
<PAGE> 2
TRANSFER AGENT AGREEMENT
WITH
FIDELITY INVESTMENTS INSTITUTIONAL
OPERATIONS COMPANY
This Agreement is hereby made as of August 1, 1996, by and between
Fidelity Investments Institutional Operations Company ("FIIOC"), a division
of FMR Corp., a Massachusetts corporation with its principal offices in
Boston, Massachusetts, and each of the investment companies set forth in
Schedule A attached hereto, as the same may be amended from time to time
(the "Trust" and, collectively, the "Trusts"), each of which is a
registered, open-end management investment company with its principal
offices in Hartford, Connecticut.
In consideration of the premises and the mutual promises hereinafter set
forth, FIIOC and each of the Trusts hereby agree as follows:
1. Appointments. The Trust hereby appoints and employs FIIOC as agent to
provide the services described in this Agreement for the Trust, on behalf
of each separate series thereof listed on Schedule A (each a "Portfolio,"
and collectively the "Portfolios"). FIIOC shall perform the obligations
and the services set forth herein in accordance with the terms and
conditions hereof. The reference to a Trust, when applicable to one or
more Portfolios of the Trust, shall refer to each Portfolio listed on
Schedule A.
2. Documents. The Trust has furnished FIIOC copies of the Trust's
Declaration of Trust or other organizational document, bylaws (if any),
management contracts, custodian contracts, current prospectuses and
statements of additional information (each, a "Prospectus"), any other
governing documents, and all forms relating to any plan, program or service
offered by the Trust. The Trust shall furnish promptly to FIIOC a copy of
any amendment or supplement to the above-mentioned documents. The Trust
shall furnish to FIIOC any additional documents requested by it as
necessary for it to perform the services required hereunder.
3. Services to be Performed. FIIOC shall be responsible for performing as
agent, as of the date of this Agreement, the services described as follows:
A. FIIOC shall administer and/or perform transfer agent functions for
each Portfolio. It shall:
(1) receive for acceptance orders for the purchase of Portfolio shares,
and promptly deliver payments received by it and appropriate documentation
therefor to each Portfolio's custodian;
(2) pursuant to purchase orders, issue the appropriate number of
Portfolio shares and properly register such shares to the appropriate
shareholder account;
(3) receive for acceptance, redemption requests and redemption
instructions (including redemptions by check transmitted to FIIOC by any
duly appointed check processing agent) and process payments for redemption
to shareholders in accordance with the terms, conditions and rules
governing each shareholder's account as set forth in the applicable
Portfolio's Prospectus;
(4) effect transfers of shares by the registered owners thereof upon
receipt of appropriate instructions; and
(5) prepare and mail to each Portfolio's shareholder(s) such
confirmations and statements of account as may be required under applicable
law and as may be reasonably requested by a Portfolio.
B. FIIOC shall act as service agent of each Portfolio in connection with
dividend and capital gains distributions by each Portfolio. It shall, for
each Portfolio shareholder who has elected to receive dividends and/or
distributions in shares of the applicable Portfolio, credit such
shareholder's account(s) for the proper number of shares.
C. In addition to the foregoing services, FIIOC shall, with respect to
each Portfolio:
(1) perform all the customary administrative services related to its
transfer agent and dividend and distribution disbursing agent functions,
including but not limited to:
(a) maintaining omnibus accounts;
(b) supervising, but not paying for, various agents and contractors
employed to mail proxy materials and receive and tabulate proxies;
(c) [intentionally omitted];
(d) preparing, distributing and filing all requisite shareholder tax
statements on appropriate forms and responding to inquiries with respect
thereto; and
(e) establishing and supervising the operation of bank accounts for the
receipt of funds for share purchases and the payment of dividends,
distributions and redemption proceeds;
(2) as required, respond to omnibus holder inquiries relating to the
status of their omnibus accounts, Portfolio performance, distributions, and
share price, and furnish omnibus holders with copies of their omnibus
account histories and make adjustments to such accounts to correct such
account's files.
Operating procedures and standards to be followed for each function may be
established from time to time by agreement between each applicable Trust
and FIIOC.
4. Record Keeping and Other Information. FIIOC shall create and maintain
all records required by all applicable laws, rules and regulations relating
to the services to be performed herein, including but not limited to, all
applicable records required by Section 31(a) of the Investment Company Act
of 1940 ("1940 Act") and the rules thereunder, as the same may be amended
from time to time. All records shall be the property of the applicable
Trust and shall be available for inspection and use by the Trust at all
times. Where applicable, such records shall be maintained by FIIOC for the
periods and in the places required by Rule 31a-2 under the 1940 Act.
5. Audits, Inspections and Visits. FIIOC shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the
Trust, any agent or person designated by the Trust, or any regulatory
agency having authority over the Trust. Upon reasonable notice by a Trust,
FIIOC shall make available during regular business hours its facilities and
premises employed in connection with its performance of this Agreement for
reasonable visits by the Trust, any agent or person designated by the
Trust, or any regulatory agency having authority over a Trust.
6. Compensation. For the performance of its obligations hereunder, each
Portfolio shall pay FIIOC in accordance with the fee arrangements described
in Schedule B, attached hereto, as the same may be amended from time to
time.
7. Appointment of Agents. FIIOC may, at its expense, at any time or times
in its discretion appoint (and may at any time remove) one or more other
parties as agent to perform any or all of the services specified hereunder
and carry out such provisions of this Agreement as FIIOC may from time to
time direct; provided, however, that the appointment of any such agent
shall not relieve FIIOC of any of its responsibilities or liabilities
hereunder.
8. Use of FIIOC's Name. A Trust shall not use the name of FIIOC in any
Prospectus, sales literature or other material relating to the Trust or any
Portfolio of the Trust in a manner not consented to by FIIOC prior to use;
provided, however, that FIIOC shall approve all uses of its name which
merely refer in accurate terms to its appointments, duties or fees
hereunder or which are required by the Securities and Exchange Commission
("SEC") or a state securities commission; and further, provided that in no
event shall such approval be unreasonably withheld.
9. Use of Trust's Name. FIIOC shall not use the name of any Trust or
Portfolio or any material relating to any Trust or Portfolio on any forms
(including any checks, bank drafts or bank statements) for other than
internal use in a manner not consented to by the Trust prior to use;
provided, however, that the Trust shall approve all uses of its name or the
name of any Portfolio of the Trust which merely refer in accurate terms to
the appointment of FIIOC hereunder or which are required by the SEC or a
state securities commission; and further, provided that in no event shall
such approval be unreasonably withheld.
10. Security. FIIOC represents and warrants that, to the best of its
knowledge, the various procedures and systems which FIIOC has implemented
with regard to the safeguarding from loss or damage attributable to fire,
theft or any other cause (including provision for twenty-four hours a day
restricted access) of the Trust's blank checks, certificates, records and
other data and FIIOC's records, data, equipment, facilities and other
property used in the performance of its obligations hereunder are adequate,
and that it will make such changes therein from time to time as in its
judgment are required for the secure performance of its obligations
hereunder. FIIOC shall review such systems and procedures on a periodic
basis and the Trust shall have access to review these systems and
procedures.
11. Insurance. FIIOC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate and shall notify the Trust should
any of its insurance coverage be changed for any reason. Such notification
shall include the date of change and the reason or reasons therefor. FIIOC
shall notify the Trust of any material claims against FIIOC, whether or not
they may be covered by insurance, and shall notify the Trust from time to
time as may be appropriate of the total outstanding claims made by FIIOC
under its insurance coverage. To the extent that policies of insurance may
provide for coverage of claims for liability or indemnity by the parties
set forth in this Agreement, the contracts of insurance shall take
precedence, and no provision of this Agreement shall be construed to
relieve an insurer of any obligation to pay claims to a Trust, FIIOC or
other insured party which would otherwise be a covered claim in the absence
of any provision of this Agreement.
12. Indemnification.
A. Subject to the provisions of Section 17 hereof, the Trust agrees to
indemnify and hold FIIOC harmless against any losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from:
(1) any claim, demand, action or suit brought by any person other than
the Trust, including by a shareholder, which names FIIOC and/or the Trust
as a party and is not based on and does not result from FIIOC's willful
misfeasance, bad faith or negligence or reckless disregard of its duties,
and arises out of or in connection with FIIOC's performance hereunder; or
(2) any claim, demand, action or suit (except to the extent contributed
to by FIIOC's willful misfeasance, bad faith or negligence or reckless
disregard of its duties) which results from the negligence of the Trust, or
from FIIOC's acting upon any instruction(s) reasonably believed by it to
have been executed or communicated by any person duly authorized by the
Trust, or as a result of FIIOC's acting in reliance upon advice reasonably
believed by FIIOC to have been given by counsel for the Trust, or as a
result of FIIOC's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
B. FIIOC shall indemnify and hold the Trust harmless against any losses,
claims, damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit brought by
any person other than FIIOC, which names the Trust and/or FIIOC as a party
and is based upon and arises out of FIIOC's willful misfeasance, bad faith
or negligence or reckless disregard of its duties in connection with its
performance hereunder.
In the event that either party requests the other to indemnify or hold it
harmless hereunder, the party requesting indemnification (the "Indemnified
Party") shall inform the other party (the "Indemnifying Party") of the
relevant facts known to the Indemnified Party concerning the matter in
question. The Indemnified Party shall use reasonable care to identify and
promptly to notify the Indemnifying Party concerning any matter which
presents, or appears likely to present, a claim for indemnification. The
Indemnifying Party shall have the election of defending the Indemnified
Party against any claim which may be the subject of indemnification or of
holding the Indemnified Party harmless hereunder. In the event the
Indemnifying Party so elects, it will so notify the Indemnified Party and
thereupon the Indemnifying Party shall take over defense of the claim and,
if so requested by the Indemnifying Party, the Indemnified Party shall
incur no further legal or other expenses related thereto for which it shall
be entitled to indemnity or to being held harmless hereunder; provided,
however, that nothing herein shall prevent the Indemnified Party from
retaining counsel at its own expense to defend any claim. Except with the
Indemnifying Party's prior written consent, the Indemnified Party shall in
no event confess any claim or make any compromise in any matter in which
the Indemnifying Party will be asked to indemnify or hold the Indemnified
Party harmless hereunder.
13. Acts of God, etc. FIIOC shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot,
or failure of communication equipment of common carriers or power supply.
In the event of equipment breakdowns beyond its control, FIIOC shall, at no
additional expense to any Trust, take reasonable steps to minimize service
interruptions and mitigate their effects but shall have no liability with
respect thereto. FIIOC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment.
14. Amendments. FIIOC and the Trust shall regularly consult with each
other regarding FIIOC's performance of its obligations and its compensation
hereunder. In connection therewith, the Trust shall submit to FIIOC at a
reasonable time in advance of filing with the SEC copies of any amended or
supplemented registration statements (including exhibits) under the
Securities Act of 1933, as amended, and the 1940 Act, a reasonable time in
advance of their proposed use, copies of any amended or supplemented forms
relating to any plan, program or service offered by the Trust. Any change
in such material which would require any change in FIIOC's obligations
hereunder shall be subject to FIIOC's approval, which shall not be
unreasonably withheld. In the event that a change in such documents or in
the procedures contained therein materially increases the cost to FIIOC of
performing its obligations hereunder, FIIOC shall be entitled to receive
reasonable compensation therefor.
15. Schedules to the Agreement. Any schedule to this Agreement may be
amended or deleted, or additional schedules may be included, as deemed
necessary from time to time by agreement between each applicable Trust and
FIIOC. Deletion of any schedule shall be in accordance with the
termination provisions of Section 16 of this Agreement. Each schedule and
any amendments thereto shall be dated and signed by the parties to this
Agreement.
16. Duration, Termination, etc. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated, except by written
instrument which shall make specific reference to this Agreement and which
shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall continue in effect with respect to the Trust until
July 31, 1998 and indefinitely thereafter for so long as such continuance
is approved at least annually by vote of such Trust's Board of Trustees;
provided, however, that this Agreement may be terminated at any time with
respect to a Trust or any Portfolio of such Trust by sixty (60) days'
written notice given by FIIOC to the applicable Trust or sixty (60) days'
written notice given by the applicable Trust to FIIOC; and provided further
that this Agreement may be terminated immediately at any time for cause
either by the applicable Trust or by FIIOC in the event that such cause
remains unremedied for a reasonable period of time not to exceed ninety
(90) days after receipt of written specification of such cause. Any such
termination shall not affect the rights and obligations of the parties
under Paragraph 12 hereof.
Upon the termination hereof, the applicable Portfolio(s) shall pay to
FIIOC such compensation as may be due for the period prior to the date of
such termination. In the event that a Trust designates a successor to any
of FIIOC's obligations hereunder, FIIOC shall, at the expense and direction
of the Trust, transfer to such successor all relevant books, records and
other data established or maintained by FIIOC hereunder (including a
certified list of the shareholders of each applicable Portfolio of the
Trust with name, address, and, if provided, taxpayer identification or
Social Security number, and a complete record of the account of each
shareholder). To the extent that FIIOC incurs expenses related to a
transfer of responsibilities to a successor, FIIOC shall be entitled to be
reimbursed for such expenses, including any out-of-pocket expenses
reasonably incurred by FIIOC in connection with the transfer.
17. LIABILITY. NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED
ON BEHALF OF THE TRUSTEES OF ANY TRUST AS INDIVIDUALS, AND THE OBLIGATIONS
OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS OR
SHAREHOLDERS OF A TRUST INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS
AND PROPERTY OF THE TRUST'S PORTFOLIOS. FIIOC AGREES THAT NO SHAREHOLDER,
TRUSTEE, OR OFFICER OF A TRUST MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE
FOR ANY OBLIGATIONS OF A TRUST ARISING OUT OF THIS AGREEMENT. WITH RESPECT
TO ANY OBLIGATIONS OF A TRUST ON BEHALF OF ITS PORTFOLIOS ARISING OUT OF
THIS AGREEMENT, FIIOC SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY
OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH
OBLIGATION RELATES AS THOUGH THE TRUST HAD SEPARATELY CONTRACTED WITH FIIOC
BY SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO EACH OF ITS PORTFOLIOS.
18. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of law provisions thereof. The captions in
this Agreement are intended for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed simultaneously in
counterparts, each of which taken together shall constitute one and the
same instrument.
[This space left blank]
IN WITNESS WHEREOF, the parties have duly executed this Agreement and
hereunto affixed their respective seals, as of the day and year first above
written.
Each of the Investment Companies Listed on Schedule A, attached hereto, on
behalf of their respective Portfolios Listed Thereon
By_________________________________
Name:______________________________
Title:_______________________________
FMR Corp.
By_________________________________
Name:______________________________
Title:_______________________________
Fidelity Investments Institutional Operations Company
By_________________________________
Name:______________________________
Title:_______________________________
SCHEDULE A TO TRANSFER AGENCY AGREEMENT
BETWEEN
THE FOLLOWING INVESTMENT COMPANIES
AND
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
The following is a list of Investment Companies and their respective
portfolios for which Fidelity Investments Institutional Operations Company
(FIIOC) shall serve pursuant to a Transfer Agency Agreement, dated as of
August 1, 1996 ("Agreement").
TRUST PORTFOLIOS DESIGNATION EFFECTIVE AS OF
The Travelers Series Trust Large Cap Portfolio Equity Fund August 1, 1996
The Travelers Series Trust Equity Income Portfolio Equity Fund August 1,
1996
In witness Whereof, the parties have duly executed this Schedule A to the
Agreement as of August 1, 1996.
FMR Corp. Each of the Investment Companies listed
on this Schedule A, on behalf of each
By_________________________ their respective Portfolios Listed Hereon
Name: _____________________ By__________________________
Title: ______________________ Name: _______________________
Title: ________________________
Fidelity Investment Institutional Operations
Company Fidelity Management & Research Company
By_________________________ By_____________________________
Name: _____________________ Name:___________________________
Title: ______________________ Title:____________________________
SCHEDULE B
TO
TRANSFER AGENT AGREEMENT
BETWEEN
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
AND
THE INVESTMENT COMPANIES LISTED ON SCHEDULE A
Dated as of August 1, 1996
Pursuant to Paragraph 6 of the Transfer Agent Agreement (the "TA
Agreement"), dated as of August 1, 1996, between Fidelity Investments
Institutional Operations Company ("FIIOC") and each of the investment
companies set forth on Schedule A to the TA Agreement, as the same may be
amended from time to time (each a "Trust" and, collectively, the "Trusts"),
effective August 1, 1996, each Portfolio shall compensate FIIOC for the
performance of its obligations under the TA Agreement in accordance with
the terms of this amended and restated Schedule B.
I. Defined Terms
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the TA Agreement. For purposes of this Schedule B, the following
terms shall have the meanings indicated:
1. An "Account" shall mean each and every account or subaccount of a
Portfolio shareholder of record maintained on a transfer agency system by
FIIOC or on a transfer agency system operated by an affiliate of FIIOC or
any other entity to whom FIIOC has delegated all or a portion of its duties
under the TA Agreement. Such term shall not include an account maintained
on any subaccounting system operated by a broker, bank or other
intermediary who is acting on behalf of its customer and who is not acting
pursuant to a delegation of duties by FIIOC or its affiliates.
2. "Account Asset Value" shall mean an Account's asset value, determined
by reference to the applicable Portfolio's net asset value per share, as
most recently calculated in accordance with the provisions of the
Portfolio's prospectus or other governing document prior to 11:59 p.m.,
Boston time, on the date as of which such Account Asset Value is being
determined.
3. "Account Fee" shall mean a fixed dollar rate fee payable by each
Portfolio on a per Account basis in accordance with the provisions of Part
II hereof.
4. "Asset-Based Fee" shall mean a fee based on a percentage (expressed in
basis points ("bp")) of the Account Asset Value of an Account payable by
each Portfolio in accordance with the provisions of Part II hereof.
5. "Equity Fund" shall mean a Portfolio designated as an Equity Fund in
Schedule A to the TA Agreement.
6. "Institutional Account" shall mean any Account maintained by FIIOC on
behalf of (i) an institutional client (such as a bank, investment adviser,
insurance company or other business entity), or (ii) an individual client
through such client's broker-dealer or other financial intermediary. An
"Institutional Investor" shall mean an investor in whose name an
Institutional Account is registered.
7. "Omnibus Account" shall mean any Institutional Account where the
intermediary rolls-up the subaccount data on its recordkeeping system and
presents only an aggregate (Omnibus) account for processing by the
applicable transfer agent or sub-transfer agent.
II. Account and Asset-Based Fees
. A. Institutional Accounts
Each Portfolio shall pay an Account Fee and an Asset-Based Fee for each
Institutional Account in such Portfolio at the annual rates set forth
below:
ASSET BASED FEE
ACCOUNT TYPE ACCOUNT SIZE ACCOUNT FEE (BP)
Equity Funds n/a $125 2.0
B. [Intentionally omitted]
C. Postage Rate Adjustments. On the first day of any month following the
month in which the United States Postal Service implements a postage rate
increase, or, if the increase is effective on the first day of a month,
then commencing on that first day (an "Effective Date"), the Account Fees
then in effect for all Institutional Accounts shall each be increased by
the Average Postage Cost Increase ("APCI") for such type of Account. The
APCI adjustment for each type of Account shall be calculated as follows:
1. The Dollar-Weighted Average Postage Cost Increase for each type of
account shall be calculated by (i) multiplying the percentage increase in
postage rates for each postal class used to service such Accounts by the
total postage costs for each such class incurred in servicing such Accounts
for the 12-month period immediately preceding the Effective Date, and (ii)
dividing the sum of such calculations by the total postage costs incurred
in servicing such Accounts for the 12-month period immediately preceding
the Effective Date.
2. The Total Estimated Postage Cost Increase for each type of Account
shall then be determined by multiplying the Dollar-Weighted Average Postage
Cost Increase for each type of Account by the total postage costs incurred
servicing such Accounts for the 12-month period immediately preceding the
Effective Date.
3. The Average Postal Cost Increase for each type of Account shall then
be determined by dividing the Total Estimated Postage Cost Increase for
such Accounts by the average number of such billable Accounts for the
12-month period immediately preceding the Effective Date.
4. The Account Fees for each type of Account shall be adjusted by adding
the Average Postage Cost Increase for such Accounts to the applicable
Account Fees and rounding the results to the nearest one cent.
D. Schedule of Payments
1. Account Fees. Account Fees shall be billed monthly on a pro rata
basis at one-twelfth of the applicable annual rate as of the end of each
calendar month in which an Account is determined to be billable in
accordance with the following provisions:
a. An Institutional Account shall be a billable Account (i) as of the
end of the month in which it is opened, (ii) as of the end of each month
thereafter for so long as such Account shall have an Account Asset Value of
greater than zero, and (iii) as of the end of each month through December
31 in the calendar year in which the Account Asset Value of such Account
becomes zero. Institutional Accounts with an Account Asset Value of zero
shall be closed as of December 31 of each year, and no Account Fee shall be
paid in respect of such Accounts for any subsequent month unless such
Account is reopened.
b. [Intentionally omitted]
The Account Asset Value of an Account on the last calendar day of a
calendar month shall be the value used to determine the applicable Account
Fee for the entire month. FIIOC may bill for Accounts maintained on
transfer agency systems maintained by an affiliate of FIIOC or any other
entity to whom FIIOC has delegated all or a portion of its duties under
this Schedule B.
2. Asset-Based Fees. Asset-Based Fees shall be billed monthly on a pro
rata basis at one-twelfth of the applicable annual rate as of the end of
the month. The Account Asset Value of an Account on the last calendar day
of a calendar month shall be the value used to determine the applicable
Asset-Based Fee on such Account for the entire month.
III. Shareholders' Fees
FIIOC shall be entitled to charge a Portfolio's shareholders directly, and
may redeem shares of a Portfolio held in a shareholder's Account to satisfy
such charges, in accordance with the following provisions:
A. [Intentionally omitted]
B. Other Shareholder Charges
1. Exchange Fees - FIIOC may from time to time receive, through payment
by shareholders of a Portfolio, all or a portion of the exchange fee in an
amount and under circumstances authorized by the Trustees of the applicable
Trust. If a portion of any exchange fee collected is to be allocated to
the applicable Portfolio, such amount shall be applied to reduce Account
Fees, Asset-Based Fees or other charges otherwise payable to FIIOC
hereunder in accordance with the allocation authorization by the Trustees
of the applicable Trust.
2. Wire fees - FIIOC may receive any fees in effect on January 1, 1996 as
disclosed in a Portfolio's prospectus or which may be approved by the
Trustees of the Trusts for executing a wire transfer of the proceeds of any
wire redemption order placed by a shareholder.
3. [Intentionally omitted]
4. Account Histories - FIIOC may receive any fees reasonably related to
the cost incurred by FIIOC to prepare, at the request of a shareholder, an
account history or provide other research information for any year(s) prior
to the calendar year in which the request is made by the shareholder.
5. Miscellaneous Supplemental Fees - any fees imposed by FIIOC or any
affiliate of FIIOC for providing supplemental services to a shareholder
pursuant to separate arrangements with the customer, including but not
limited to fees for personal advisory services, fees for providing check
redemption services, for maintaining and providing services to an
individual retirement custodian account, a Keogh custodian account, a
Prototype Profit Sharing or Money Purchase Pension Plan account or for
other similar supplemental services.
IV. Costs and Expenses
A. Allocation of Costs - FIIOC will be responsible for all expenses, costs
and other charges arising out of the performance of its obligations
pursuant to the TA Agreement, including the fees and disbursements of any
third party retained to perform any of the services to a Portfolio on
behalf of FIIOC, unless the Trustees of a Portfolio shall have specifically
authorized an allocation to the Portfolio of all or a portion of such
expenses, costs, other charges, fees or disbursements. Notwithstanding
the foregoing, each Portfolio shall be required to bear all expenses for
all Accounts associated with: (1) the printing, handling, forwarding or
mailing of shareholder reports and notices to shareholders who own shares
through an Account of a broker, bank or other intermediary if FIIOC is not
compensated by an Account Fee for each sub-account; (2) the charges of any
bank for establishing and operating accounts for the receipt of funds for
share purchases and the payment of dividends, distributions and redemption
proceeds; (3) all fees and expenses of registering shares for sale under
the state securities laws; and (4) the holding of annual or special
meetings of Portfolio shareholders, including: the costs of typesetting,
printing, postage and mailing of notices, proxy cards and proxy statements
(and, if requested by a shareholder, annual reports sent to those
shareholders that have opened Accounts subsequent to the last regular
mailing date of such reports to shareholders); the fees and other
disbursements of any agent hired to mail proxy materials and/or tabulate
proxies; all charges incurred by any proxy soliciting agent; the reasonable
and customary fees and handling charges of brokers, banks and other
intermediaries for forwarding proxy materials; and all other customary
expenses associated with the holding of shareholder meetings.
B. Reports. Once each year, FIIOC shall submit to each Portfolio a report
setting forth the total amount of costs and expenses incurred by FIIOC in
the performance of its obligations to the Portfolio under the TA Agreement
and the total amounts payable by the Portfolio for such services.
IN WITNESS WHEREOF, the parties have duly executed this Schedule B to the
TA Agreement as of this 1st day of August, 1996.
Each of the Investment Companies Listed on Schedule A, attached
hereto, on behalf of their respective Portfolios Listed Thereon
By_________________________________
Name:______________________________
Title:_______________________________
FMR Corp.
By_________________________________
Name:______________________________
Title:_____________________________
Fidelity Investments Institutional
Operations Company
By_________________________________
Name:______________________________
Title:_____________________________
Fidelity Management & Research Company
By_________________________________
Name:______________________________
Title:_____________________________
<PAGE> 1
Exhibit 9(d)
FORM OF ADMINISTRATIVE
SERVICES AGREEMENT
This Agreement is hereby made as of August 1, 1996, by and between The
Travelers Insurance Company, ("Travelers") a Connecticut corporation with its
principal offices in Hartford, Connecticut, and the Travelers Series Trust (the
"Trust") on behalf of certain of the Trust's portfolios, set forth in Schedule A
attached hereto, as the same may be amended from time to time, each of which is
a registered open end management investment company with its principal office in
Hartford, Connecticut.
In consideration of the premises and the mutual promises hereinafter
set forth, Travelers and the Trust hereby agree as follows:
1. Appointments. Trust hereby appoints and employs Travelers as agent
to provide the services described in this Agreement for the Trust on behalf of
each separate series thereof listed on Schedule A (each a "Portfolio," and
collectively, the "Portfolios"). Travelers shall perform the obligations and the
services set forth herein in accordance with the terms and conditions hereto.
2. Services to be Performed
A. Travelers shall be responsible for performing as agent, as of
the date of this Agreement, the pricing and bookkeeping
services commonly referred to as "back office" services
described as follows:
(1) Accounting relating to each Portfolio and portfolio
transactions of the Portfolio.
(2) The determination of net asset value per share of the
outstanding shares of each Portfolio and the offering
price, if any, at which shares are to be sold, at the
times and in the manner described in the declaration of
trust or other organizational document, as amended, and
the Prospectus of the Portfolio.
(3) The determination of distributions, if any.
(4) Maintaining the books of account of each Portfolio.
(5) In conjunction with each Portfolio's custodian
("Custodian"), receiving information and keeping records
about all corporate actions, including, but not limited
to, cash and stock
<PAGE> 2
distributions or dividends, stock splits and reverse
stock splits, taken by companies whose securities are
held by the Portfolio.
(6) Monitoring foreign corporate actions and foreign trades
and entering orders to convert foreign currency or
establish contracts for future settlement of foreign
currency.
(7) Processing and monitoring of settlement of Variable Rate
Demand Notes, GNMA's and similar instruments.
(8) Monitoring and accounting for futures and options.
B. Travelers shall be responsible for administering a program of
securities lending for each Portfolio by:
(1) Carrying out security loan transactions between approved
borrowers and the Portfolio, including assisting the
Custodian in receiving and returning collateral for
loans;
(2) Marking to market loans outstanding each day; and
(3) Ensuring that the value of collateral for loans is 100%
or more of loaned securities at market price and issuing
demands for additional collateral should the percentage
fall below 100%.
Operating procedures and standards to be followed for each function may
be established from time to time by agreement between the Trust and Travelers.
3. Record Keeping and Other Information. Travelers shall create and
maintain all records required by all applicable laws, rules and regulations
relating to the services to be performed herein, including but not limited to,
all applicable records required by Section 31(a) of the Investment Company Act
of 1940 ("1940 Act") and the rules thereunder, as the same be amended from time
to time. All records shall be the property of the Trust and shall be available
for inspection and use by the Trust at all times. Where applicable, such records
shall be maintained by Travelers for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
4. Audits, Inspections and Visits. Travelers shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by each Trust,
any agent or person designated by the Trust, or any regulatory agency having
authority over the Trust. Upon reasonable notice by the Trust, Travelers shall
make available during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for reasonable
visits by the Trust, any agent or person designated by the Trust, or any
regulatory agency having authority over the Trust.
2
<PAGE> 3
5. Compensation. For the performance of its obligations hereunder,
each Portfolio shall pay Travelers in accordance with the fee arrangements
described in Schedule B, attached hereto, as the same may be amended from time
to tome.
6. Appointment of Agents. Travelers, at its expense, may at any time
or times in its discretion appoint (and may at any time remove) one or more
other parties as agent to perform any or all of the services specified hereunder
and carry out such provisions of this Agreement as Travelers may from time to
time direct; provided, however, that the appointment of any such agent shall not
relieve Travelers of any of its responsibilities or liabilities hereunder.
7. Security. Travelers represents and warrants that, to the best of
its knowledge, the various procedures and systems which Travelers has
implemented with regard to the safeguarding from loss or damage attributable to
fire, theft or any other cause (including provision for twenty-four hours a day
restricted access) of the Trust's blank checks, certificates, records and other
data and Travelers records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate, and that it will
make such changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. Travelers shall review such
systems and procedures on a periodic basis and the Trust shall have access to
review these systems and procedures.
8. Insurance. Travelers shall maintain insurance of the types and in
the amounts deemed by it to be appropriate and shall notify the Trust should any
of its insurance coverage be changed for any reason. Such notification shall
include the date of change and the reason or reasons therefor. Travelers shall
notify the Trust of any material claims against Travelers whether or not they
may be covered by insurance, and shall notify the Trust from time to time as may
be appropriate of the total outstanding claims made by Travelers under its
insurance coverage. To the extent that policies of insurance may provide for
coverage of claims for liability or indemnity by the parties set forth in this
Agreement, the contracts of insurance shall take precedence, and no provision of
this Agreement shall be construed to relieve any insurer of any obligation to
pay claims to the Trust, Travelers or other insured party which would otherwise
be a covered claim in the absence of any provision of this Agreement.
9. Indemnification.
A. The Trust on behalf of the Portfolios set forth in Exhibit A
shall indemnify and hold Travelers harmless against any
losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person
other than the Trust, including by a shareholder, which
names
3
<PAGE> 4
Travelers and/or the Trust as a party and is not based
on and does not result from Travelers willful
misfeasance, bad faith or reckless disregard of its
duties, and arises but of or in connection with
Travelers performance hereunder, or
(2) any claim, demand, action or suit (except to the extent
contributed to by Travelers willful misfeasance, bad
faith or reckless disregard of its duties) which results
from the negligence of the Trust, or from Travelers
acting upon any instruction(s) reasonably believed by it
to have been executed or communicated by any person duly
authorized by the Trust, or as a result of Travelers
acting in reliance with advice reasonably believed by
Travelers to have been given by counsel for the Trust,
or as a result of Travelers acting in reliance upon any
instrument or stock certificate reasonably believed by
it to have been genuine and signed, countersigned or
executed by the proper person.
B. Travelers shall indemnify and hold the Trust harmless
against any losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting
from any claim, demand, action or suit brought by any person
other than Travelers, which names the Trust and/or Travelers
as a party and is based upon and arises out of Travelers
willful misfeasance, bad faith or reckless disregard of its
duties in connection with its performances hereunder.
In the event that either party requests the other to indemnify or hold
it harmless hereunder, the party requesting indemnification (the "Indemnified
Party") shall inform the other party (the "Indemnifying Party") of the relevant
facts known to the Indemnified Party concerning the matter in question. The
Indemnified Party shall use reasonable care to identify and promptly to notify
the Indemnifying Party concerning any matter which presents, or appears likely
to present, a claim for indemnification. The Indemnifying Party shall have the
election of defending the Indemnified Party against any claim which may be the
subject of indemnification or of holding the Indemnified Party harmless
hereunder. In the event the Indemnifying Party so elects, it will so notify the
Indemnified Party and thereupon the Indemnifying Party shall take over defense
of the claim and, if so requested by the Indemnifying Party, the Indemnified
Party shall incur no further legal or other expenses related thereto for which
it shall be entitled to indemnify or to being held harmless hereunder; provided,
however, that nothing herein shall prevent the Indemnified Party from retaining
counsel at its own expense to defend any claim. Except with the Indemnifying
Party's prior written consent, the Indemnified Party shall in no event confess
any claim or make any compromise in any matter in which the Indemnifying Party
will be asked to indemnify or hold the Indemnified Party harmless hereunder.
4
<PAGE> 5
10. Acts of God, etc. Travelers shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication equipment of common carriers or power supply. In the
event of equipment breakdowns beyond it control, Travelers shall, at no
additional expense to the Trust, take reasonable steps to minimize service
interruptions and mitigate their effects but shall have no liability with
respect thereto. Travelers shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment.
11. Amendments. Travelers and the Trust shall regularly consult with
each other regarding Travelers performance of its obligations and its
compensation hereunder. In connection therewith, the Trust shall submit to
Travelers at a reasonable time in advance of filing with the Securities and
Exchange Commission copies of any amended or supplemented registration
statements (including exhibits) under the Securities Act of 1933, as amended,
and the 1940 Act and, a reasonable time in advance of their proposed use, copies
of any amended or supplemented forms relating to any plan, program or service
offered by the Trust. Any change in such material which would require any change
in Travelers obligations hereunder shall be subject to Travelers approval, which
shall not be unreasonably withheld. In the event that a change in such documents
or in the procedures contained therein materially increases the cost to
Travelers of performing its obligations hereunder, Travelers shall be entitled
to receive reasonable compensation therefor.
12. Schedules to the Agreement. Any schedule to this Agreement may be
amended or deleted, or additional schedules may be included, as deemed necessary
from time to time by agreement between the Trust and Travelers. Each schedule
and any amendments thereto shall be dated and signed by the parties to this
agreement.
13. Duration, Termination, etc. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or terminated, except by
written instrument which shall make specific reference to this Agreement and
which shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall continue in effect with respect to the Trust until
July 30, 1998 and indefinitely thereafter so long as such continuance is
approved at least annually by vote of such Trust's Board of Trustees; provided,
however, that this Agreement may be terminated at any time with respect to a
Trust or any Portfolio of such Trust by sixty (60) days' written notice given by
Travelers to the applicable Trust or sixty (60) days' written notice given by
the Trust to Travelers,; and provided further that this Agreement may be
terminated immediately at any time for cause either by the Trust or by Travelers
in the event that such cause remains unremedied for a reasonable period of time
not to exceed ninety (90) days after receipt of written specification of such
cause. Any such
5
<PAGE> 6
termination shall not affect the rights and obligations of the parties under
Paragraph 9 hereof.
Upon the termination hereof, the applicable Portfolio(s) shall pay to
Travelers such compensation as may be due for the period prior to the date of
such termination. In the event that a Trust designates a successor to any
Traveler's obligations hereunder, Travelers shall, at the expense and direction
of the Trust, transfer to such successor all relevant books, records and other
data established or maintained by Travelers hereunder. To the extent that
Travelers incurs expenses related to a transfer of responsibilities to a
successor, Travelers shall be entitled to be reimbursed for such expenses,
including any out-of-pocket expenses reasonably incurred by Travelers in
connection with the transfer.
14. LIABILITY. NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF ANY TRUST AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS
OR SHAREHOLDERS OF A TRUST INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS
AND PROPERTY OF THE TRUST'S PORTFOLIOS. TRAVELERS AGREES THAT NO SHAREHOLDER,
TRUSTEE, OR OFFICER OF A TRUST MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR
ANY OBLIGATIONS OF A TRUST ARISING OUT OF THIS AGREEMENT. WITH RESPECT TO ANY
OBLIGATIONS OF A TRUST ON BEHALF OF ITS PORTFOLIOS ARISING OUT OF THIS
AGREEMENT, TRAVELERS SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION
SOLELY TO THE ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION
RELATES AS THOUGH THE TRUST HAD SEPARATELY CONTRACTED WITH TRAVELERS BY SEPARATE
WRITTEN INSTRUMENT WITH RESPECT TO EACH OF THE PORTFOLIOS.
15. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Connecticut, without giving effect to the
choice of laws provisions thereof. The captions in this Agreement are intended
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in counterparts, each of which taken
together shall constitute one and the same instrument.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement and
hereunto affixed their respective seals, as of the day and year first above
written.
TRAVELERS SERIES TRUST ON BEHALF OF
THEIR RESPECTIVE PORTFOLIOS LISTED ON
SCHEDULE A
By:_______________________
Name:_____________________
Title:____________________
TRAVELERS INSURANCE COMPANY
By:_______________________
Name:_____________________
Title:____________________
7
<PAGE> 8
Schedule A
MFS Emerging Growth Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Lazard International Stock Portfolio
Travelers Quality Bond Portfolio
8
<PAGE> 9
Schedule B
Fees
The Trust on behalf of certain Portfolios agrees to pay fees to Travelers at the
annualized rate of .06% of the daily net assets. Fees will be accrued daily and
paid quarterly within ten days of the end of each calendar quarter.
9
<PAGE> 10
SERVICE AGENT AGREEMENT
WITH
FIDELITY SERVICE COMPANY
This Agreement is hereby made as of August 1, 1996, by and between
Fidelity Service Company ("FSC"), a division of FMR Corp., a Massachusetts
corporation with its principal offices in Boston, Massachusetts, and each
of the investment companies set forth in Schedule A attached hereto, as the
same may be amended from time to time (each, a "Trust," and collectively,
the "Trusts"), each of which is a registered open-end management investment
company with its principal offices in Hartford, Connecticut.
In consideration of the premises and the mutual promises hereinafter set
forth, FSC and each of the Trusts hereby agree as follows:
1. Appointments. Each Trust hereby appoints and employs FSC as agent to
provide the services described in this Agreement for the Trust, on behalf
of each separate series thereof listed on Schedule A (each a "Portfolio,"
and collectively, the "Portfolios"). FSC shall perform the obligations and
the services set forth herein in accordance with the terms and conditions
hereto. The reference to a Trust, when applicable to one or more
Portfolios of the Trust, shall refer to each Portfolio, and only to each
Portfolio, listed in Schedule A.
2. Documents. Each Trust has furnished FSC copies of the Trust's
declaration of trust or other organizational document, bylaws (if any),
management contracts, custodian contracts, current prospectuses and
statements of additional information (each, a "Prospectus"), any other
governing documents, and all forms relating to any plan, program or service
offered by the Trust. Each Trust shall furnish promptly to FSC a copy of
any amendment or supplement to the above-mentioned documents. Each Trust
shall furnish to FSC any additional documents requested by it as necessary
for it to perform the services required hereunder.
3. Services to be Performed.
A. FSC shall be responsible for performing as agent, as of the date of
this Agreement, the pricing and bookkeeping services described as follows:
(1) Accounting relating to each Portfolio and portfolio transactions of
the Portfolio.
(2) The determination of net asset value per share of the outstanding
shares of each Portfolio and the offering price, if any, at which shares
are to be sold, at the times and in the manner described in the declaration
of trust or other organizational document, as amended, and the Prospectus
of the Portfolio.
(3) The determination of distributions, if any.
(4) The timely communication of information determined in B and C above,
to the person or persons designated by each Trust.
(5) Maintaining the books of account of each Portfolio.
(6) In conjunction with each Portfolio's custodian ("Custodian"),
receiving information and keeping records about all corporate actions,
including, but not limited to, cash and stock distributions or dividends,
stock splits and reverse stock splits, taken by companies whose securities
are held by the Portfolio.
(7) Monitoring foreign corporate actions and foreign trades and entering
orders to convert foreign currency or establish contracts for future
settlement of foreign currency.
(8) Processing and monitoring the settlement of Variable Rate Demand
Notes, GNMA's and similar instruments.
(9) Monitoring and accounting for futures and options.
B. FSC shall be responsible for administering a program of securities
lending for each Portfolio's portfolio by:
(1) Carrying out security loan transactions between approved borrowers
and the Portfolio, including assisting the Custodian in receiving and
returning collateral for loans;
(2) Marking to market loans outstanding each day; and
(3) Ensuring that the value of collateral for loans is 100% or more of
loaned securities at market price and issuing demands for additional
collateral should the percentage fall below 100%.
Operating procedures and standards to be followed for each function may be
established from time to time by agreement between each applicable Trust
and FSC.
4. Record Keeping and Other Information. FSC shall create and maintain
all records required by all applicable laws, rules and regulations relating
to the services to be performed herein, including but not limited to, all
applicable records required by Section 31(a) of the Investment Company Act
of 1940 ("1940 Act") and the rules thereunder, as the same may be amended
from time to time. All records shall be the property of the applicable
Trust and shall be available for inspection and use by the Trust at all
times. Where applicable, such records shall be maintained by FSC for the
periods and in the places required by Rule 31a-2 under the 1940 Act.
5. Audits, Inspections and Visits. FSC shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by each
Trust, any agent or person designated by the Trust, or any regulatory
agency having authority over the Trust. Upon reasonable notice by a Trust,
FSC shall make available during regular business hours its facilities and
premises employed in connection with its performance of this Agreement for
reasonable visits by the Trust, any agent or person designated by the
Trust, or any regulatory agency having authority over the Trust.
6. Compensation. For the performance of its obligations hereunder, each
Portfolio shall pay FSC in accordance with the fee arrangements described
in Schedule B, attached hereto, as the same may be amended from time to
time.
7. Appointment of Agents. FSC, at its expense, may at any time or times
in its discretion appoint (and may at any time remove) one or more other
parties as agent to perform any or all of the services specified hereunder
and carry out such provisions of this Agreement as FSC may from time to
time direct; provided, however, that the appointment of any such agent
shall not relieve FSC of any of its responsibilities or liabilities
hereunder.
8. Use of FSC's Name. A Trust shall not use the name of FSC in any
Prospectus, sales literature or other material relating to the Trust or any
Portfolio of the Trust in a manner not consented to by FSC prior to use;
provided, however, that FSC shall approve all uses of its name which merely
refer in accurate terms to its appointments, duties or fees hereunder or
which are required by the Securities and Exchange Commission ("SEC") or a
state securities commission; and further, provided that in no event shall
such approval be unreasonably withheld.
9. Use of Trusts' Name. FSC shall not use the name of any Trust or
Portfolio or material relating to any Trust or Portfolio on any forms
(including any checks, bank drafts or bank statements) for other than
internal use in a manner not consented to by the Trust prior to use,
provided, however, that each Trust shall approve all uses of its name or
the name of any Portfolio of the Trust which merely refer in accurate terms
to the appointment of FSC hereunder or which are required by the SEC or a
state securities commission; and further, provided that in no event shall
such approval be unreasonably withheld.
10. Security. FSC represents and warrants that, to the best of its
knowledge, the various procedures and systems which FSC has implemented
with regard to the safeguarding from loss or damage attributable to fire,
theft or any other cause (including provision for twenty-four hours a day
restricted access) of each Trust's blank checks, certificates, records and
other data and FSC's records, data, equipment, facilities and other
property used in the performance of its obligations hereunder are adequate,
and that it will make such changes therein from time to time as in its
judgment are required for the secure performance of its obligations
hereunder. FSC shall review such systems and procedures on a periodic
basis and each Trust shall have access to review these systems and
procedures.
11. Insurance. FSC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate and shall notify each Trust should
any of its insurance coverage be changed for any reason. Such notification
shall include the date of change and the reason or reasons therefor. FSC
shall notify each Trust of any material claims against FSC, whether or not
they may be covered by insurance, and shall notify each Trust from time to
time as may be appropriate of the total outstanding claims made by FSC
under its insurance coverage. To the extent that policies of insurance may
provide for coverage of claims for liability or indemnity by the parties
set forth in this Agreement, the contracts of insurance shall take
precedence, and no provision of this Agreement shall be construed to
relieve an insurer of any obligation to pay claims to a Trust, FSC or other
insured party which would otherwise be a covered claim in the absence of
any provision of this Agreement.
12. Indemnification.
A. Subject to the provisions of Section 17 hereof, each Trust severally
and not jointly shall indemnify and hold FSC harmless against any losses,
claims, damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than
the Trust, including by a shareholder, which names FSC and/or the Trust as
a party and is not based on and does not result from FSC's willful
misfeasance, bad faith or negligence or reckless disregard of its duties,
and arises out of or in connection with FSC's performance hereunder; or
(2) any claim, demand, action or suit (except to the extent contributed
to by FSC's willful misfeasance, bad faith or negligence or reckless
disregard of its duties) which results from the negligence of the Trust, or
from FSC's acting upon any instruction(s) reasonably believed by it to have
been executed or communicated by any person duly authorized by the Trust,
or as a result of FSC's acting in reliance upon advice reasonably believed
by FSC to have been given by counsel for the Trust, or as a result of FSC's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or executed
by the proper person.
B. FSC shall indemnify and hold each Trust harmless against any losses,
claims, damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit brought by
any person other than FSC, which names the Trust and/or FSC as a party and
is based upon and arises out of FSC's willful misfeasance, bad faith or
negligence or reckless disregard of its duties in connection with its
performance hereunder.
In the event that either party requests the other to indemnify or hold it
harmless hereunder, the party requesting indemnification (the "Indemnified
Party") shall inform the other party (the "Indemnifying Party") of the
relevant facts known to the Indemnified Party concerning the matter in
question. The Indemnified Party shall use reasonable care to identify and
promptly to notify the Indemnifying Party concerning any matter which
presents, or appears likely to present, a claim for indemnification. The
Indemnifying Party shall have the election of defending the Indemnified
Party against any claim which may be the subject of indemnification or of
holding the Indemnified Party harmless hereunder. In the event the
Indemnifying Party so elects, it will so notify the Indemnified Party and
thereupon the Indemnifying Party shall take over defense of the claim and,
if so requested by the Indemnifying Party, the Indemnified Party shall
incur no further legal or other expenses related thereto for which it shall
be entitled to indemnity or to being held harmless hereunder; provided,
however, that nothing herein shall prevent the Indemnified Party from
retaining counsel at its own expense to defend any claim. Except with the
Indemnifying Party's prior written consent, the Indemnified Party shall in
no event confess any claim or make any compromise in any matter in which
the Indemnifying Party will be asked to indemnify or hold the Indemnified
Party harmless hereunder.
13. Acts of God, etc. FSC shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot,
or failure of communication equipment of common carriers or power supply.
In the event of equipment breakdowns beyond its control, FSC shall, at no
additional expense to any Trust, take reasonable steps to minimize service
interruptions and mitigate their effects but shall have no liability with
respect thereto. FSC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment.
14. Amendments. FSC and each Trust shall regularly consult with each
other regarding FSC's performance of its obligations and its compensation
hereunder. In connection therewith, each Trust shall submit to FSC at a
reasonable time in advance of filing with the Securities and Exchange
Commission copies of any amended or supplemented registration statements
(including exhibits) under the Securities Act of 1933, as amended, and the
1940 Act and, a reasonable time in advance of their proposed use, copies of
any amended or supplemented forms relating to any plan, program or service
offered by the Trust. Any change in such material which would require any
change in FSC's obligations hereunder shall be subject to FSC's approval,
which shall not be unreasonably withheld. In the event that a change in
such documents or in the procedures contained therein materially increases
the cost to FSC of performing its obligations hereunder, FSC shall be
entitled to receive reasonable compensation therefor.
15. Schedules to the Agreement. Any schedule to this Agreement may be
amended or deleted, or additional schedules may be included, as deemed
necessary from time to time by agreement between each applicable Trust and
FSC. Deletion of any schedule shall be in accordance with the termination
provisions of Section 16 of this Agreement. Each schedule and any
amendments thereto shall be dated and signed by the parties to this
Agreement.
16. Duration, Termination, etc. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated, except by written
instrument which shall make specific reference to this Agreement and which
shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall continue in effect with respect to each Trust until
July 30, 1998 and indefinitely thereafter so long as such continuance is
approved at least annually by vote of such Trust's Board of Trustees;
provided, however, that this Agreement may be terminated at any time with
respect to a Trust or any Portfolio of such Trust by sixty (60) days'
written notice given by FSC to the applicable Trust or sixty (60) days'
written notice given by the applicable Trust to FSC; and provided further
that this Agreement may be terminated immediately at any time for cause
either by the applicable Trust or by FSC in the event that such cause
remains unremedied for a reasonable period of time not to exceed ninety
(90) days after receipt of written specification of such cause. Any such
termination shall not affect the rights and obligations of the parties
under Paragraph 12 hereof.
Upon the termination hereof, the applicable Portfolio(s) shall pay to FSC
such compensation as may be due for the period prior to the date of such
termination. In the event that a Trust designates a successor to any of
FSC's obligations hereunder, FSC shall, at the expense and direction of the
Trust, transfer to such successor all relevant books, records and other
data established or maintained by FSC hereunder. To the extent that FSC
incurs expenses related to a transfer of responsibilities to a successor,
FSC shall be entitled to be reimbursed for such expenses, including any
out-of-pocket expenses reasonably incurred by FSC in connection with the
transfer.
17. LIABILITY. NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED
ON BEHALF OF THE TRUSTEES OF ANY TRUST AS INDIVIDUALS, AND THE OBLIGATIONS
OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS OR
SHAREHOLDERS OF A TRUST INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS
AND PROPERTY OF THE TRUST'S PORTFOLIOS. FSC AGREES THAT NO SHAREHOLDER,
TRUSTEE, OR OFFICER OF A TRUST MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE
FOR ANY OBLIGATIONS OF A TRUST ARISING OUT OF THIS AGREEMENT. WITH RESPECT
TO ANY OBLIGATIONS OF A TRUST ON BEHALF OF ITS PORTFOLIOS ARISING OUT OF
THIS AGREEMENT, FSC SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY
OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH
OBLIGATION RELATES AS THOUGH THE TRUST HAD SEPARATELY CONTRACTED WITH FSC
BY SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO EACH OF THE PORTFOLIOS.
18. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof. The captions in
this Agreement are intended for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed simultaneously in
counterparts, each of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement and
hereunto affixed their respective seals, as of the day and year first above
written.
Each of the Investment Companies Listed on Schedule A, attached hereto, on
behalf of their respective Portfolios Listed on Schedule A
By:_________________________________
Name:______________________________
Title:_____________________________
Fidelity Service Company
By_________________________________
Name:______________________________
Title:_____________________________
FMR Corp.
By________________________________
Name:_____________________________
Title:______________________________
SCHEDULE A TO SERVICE AGREEMENT
BETWEEN
THE FOLLOWING INVESTMENT COMPANIES
AND
FIDELITY SERVICE COMPANY
The following is a list of Investment Companies and their respective
portfolios for which Service shall serve pursuant to a Service agreement,
dated as of August 1, 1996
("Agreement").
TRUST PORTFOLIOS EFFECTIVE AS OF PORTFOLIO DESIGNATION
The Travelers Series Trust Equity Income August 1, 1996 Equity Fund
The Travelers Series Trust Large Cap August 1, 1996 Equity Fund
SCHEDULE B TO SERVICE AGENT
AGREEMENT BETWEEN
FIDELITY SERVICE COMPANY AND THE
INVESTMENT COMPANIES LISTED ON SCHEDULE A
Dated as of August 1, 1996
Pursuant to Paragraph 6 of the Service Agent Agreement (the "Service
Agreement"), dated as of August 1, 1996, between Fidelity Service Company
("FSC") and each of the investment companies set forth on Schedule A to the
Service Agreement, as the same may be amended from time to time (each a
"Trust," and collectively the "Trusts"), effective August 1, 1996, each
Portfolio shall compensate FSC for the performance of its obligations under
the Service Agreement in accordance with the terms of the following amended
and restated Schedule B.
1. Defined Terms. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Service Agreement. For purposes of this
Schedule B, the following terms shall have the meanings indicated:
(a) "Equity Fund" shall mean a Portfolio designated as an Equity Fund in
Schedule A to the Service Agreement.
(b) [Intentionally omitted]
2. Pricing and Bookkeeping Fees: (a) For the performance of FSC's
obligations with respect to Portfolio pricing and bookkeeping pursuant to
Paragraph 3.A of the Service Agreement, each Portfolio shall pay FSC a
monthly fee equal to a percentage (expressed in basis points) of the
applicable Portfolio's average net asset value (determined in accordance
with the provisions of the Portfolio's prospectus or other governing
documents) determined as of the close of business on each business day
throughout the month at the annual fee rates set forth below, provided that
in no event shall a Portfolio pay less than applicable Minimum Total Annual
Fee or more than the applicable Maximum Total Annual Fee in any single
fiscal year:
PORTFOLIO'S AVERAGE FEE RATE MINIMUM TOTAL MAXIMUM
DAILY NET ASSETS (BP) ANNUAL FEE (PER TOTAL ANNUAL
PORTFOLIO) FEE (PER
PORTFOLIO)
Equity $500 million and under 6 $60,000 $800,000
Over $500 million 3
(b) FSC shall be reimbursed for out-of-pocket expenses for pricing,
dividend and interest quotation services and related communications and
telephone charges.
3. Securities Lending Fees. For the performance of its obligations for
administering a program of securities lending for each Portfolio pursuant
to Section 3.B of the Service Agreement, each Portfolio shall pay FSC a per
transaction fee as set forth below:
TRANSACTION FEE
Opening a loan $15
Closing a loan $15
Daily mark to market
of collateral $ 5
[This space left blank]
IN WITNESS WHEREOF, the parties have duly executed this Schedule B to the
Agreement as of the 1st day of August, 1996.
Each of the Investment Companies Listed on Schedule A, attached hereto, on
behalf of their respective Portfolios Listed on Schedule A
By: _____________________________
Name: ___________________________
Title: ____________________________
Fidelity Service Company
By: _____________________________
Name: ___________________________
Title: ____________________________
FMR Corp.
By: _____________________________
Name: ___________________________
Title: ____________________________
Fidelity Management & Research Company
By:______________________________
Name: ___________________________
Title: ____________________________
<PAGE> 1
Exhibit 10
RE: Opinion of Counsel in Connection with
The Travelers Series Trust, File No. 33-43628
To Whom It May Concern:
In my opinion, the shares of The Travelers Series Trust ("Trust"), if
issued and sold in accordance with the Trust's By-Laws, Declaration of Trust,
and offering Prospectus, are legally issued, fully paid and non-assessable by
the Trust, entitling the holders thereof to the rights set forth in the By-Laws
and Declaration of Trust, and subject to the limitatons stated therein.
My opinion is based upon my examination of the Trust's By-Laws (including
any amendments thereto), Declaration of Trust, Prospectus, and a review of
the minutes of the Board of Trustees of the Trust authorizing the issuance of
such shares.
I hereby consent to the use of this opinion in connection to the
post-effective amendment number 16 to the registration statement of The
Travelers Series Trust.
Very truly yours,
/s/ Kathleen A. McGah
Kathleen A. McGah
Counsel and Assistant Secretary
The Travelers Series Trust
Dated: July 30, 1996
<PAGE> 1
Exhibit 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 16 of this
Registration Statement No. 33-43628 on Form N1-A of our reports dated February
7, 1996, on our audits of the financial statements and financial highlights of
the U.S. Government Securities Portfolio, Social Awareness Stock Portfolio,
Utilities Portfolio and Zero Coupon Bond Fund Portfolios (Series 1998, 2000
and 2005) of The Travelers Series Trust. We also consent to the reference
to our Firm as experts in accounting and auditing under the caption "Additional
Information" in the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
July 29, 1996
