<PAGE> 1
THE TRAVELERS VARIABLE PRODUCTS
FUNDS
ANNUAL REPORTS
THE TRAVELERS SERIES TRUST:
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
DECEMBER 31, 1995
[LOGO]
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE> 2
[LOGO]
THE TRAVELERS VARIABLE PRODUCTS FUNDS
INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1995
FINANCIAL MARKET REVIEW AND OUTLOOK
Financial markets had a great year in 1995 with the Standard & Poors 500 Stock
Index having its best year since 1958 (+37.6%) and the Lehman
Government/Corporate Bond Index having its best performance since 1985
(+19.2%). Beyond Wall Street, however, signs of economic stress are becoming
apparent. Consumer delinquencies and defaults are increasing. A number of
corporate defaults have already occurred, causing some negative fallout in the
high yield bond market. December retail sales came in below already
pessimistic expectations. Cyclical industries such as paper, steel, and autos
are starting to see price declines, closing plants and laying off workers. In
Washington, many government workers are on furlough as the two parties debate
how much (not whether or not) the Federal deficit will be reduced. Against
this backdrop, the Federal Reserve Board ("Fed") dropped short term interest
rates 25 basis points on December 19th, its first cut since July, 1995.
Looking towards 1996, the slowdown in economic growth combined with few sources
of upside surprises make lower money market rates our most confident forecast.
Current economic weakness will keep the Fed in an easing mode even if budget
talks remain in a stalemate. Theoretical policy rules for determining federal
funds targets argue that short-term interest rates should be between 4% and 5%,
not their current 5.5%. Unlike 1993, when growth had been slow for several
years, there is no pent-up demand for housing, autos, or even capital goods
that can cause an upside surprise in economic growth. The key question for the
bond market is whether slow economic growth causes short rates to go
significantly below 5%. We think they will because the economy continues to
weaken and any backup in rates caused by the budget negotiations in Washington
will further weaken the economy. We are focusing on intermediate maturities
because the yield curve is likely to steepen. We also continue to be
comfortable with an overweighting in corporate issues, although we need to be
diligent to protect against credit surprises. We also continue to think that
mortgaged-backed securities are cheap and have maintained our overweighting in
that area.
In the stock market, cyclical issues led by the railroad, aluminum, machinery,
and semiconductor groups rallied early in the third quarter on strong earnings
momentum, rising analysts estimates, and expectations for a rebound in economic
growth. Mergers in the banking, utility, and media industries also gave an
optimistic tone to the market. However by early September, investors turned
less optimistic about prospects for economic growth, earnings momentum, and
profit margins in late 1995 and 1996. During the fourth quarter, investors
continued to rotate out of cyclical and into defensive groups, such as drugs,
food, and beverages, which were expected to produce the best relative earnings
and gains in 1996. In the energy sector, rising prices for oil and natural
gas, as well as attractive relative yields, supported higher valuations.
Technology stocks declined dramatically on signs of weakening demand for
personal computers and softer prices for semiconductors and other PC
components.
The performance of the stock market in 1996 will be driven by corporate
earnings. The impetus for much of last year's advance to new record highs was
generated by positive earnings surprise. The weaker economic environment that
exists now makes it unlikely that the stock market will repeat its performance.
Generally, the U.S. stock market is fairly valued given the current level of
interest rates and should be able to muddle through with a "normal" 10% year as
long as we avoid a recession. If the economy does worsen, the extent of the
equity market decline will be a function of how quickly companies can adjust
their cost structure to changes in revenues. Judged by the ability of most
companies to sustain earnings growth even in the face of weakening demand in
1995, we think that the most negative "bears" on the outlook for the stock
market are too pessimistic, especially given the valuation support that will be
provided by lower interest rates.
-1-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRAVELERS SERIES TRUST:
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-2-
<PAGE> 4
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIOS
The three Zero Coupon Bond Fund Portfolios commenced operations on October 11,
1995. These funds were set up to provide a fixed income option for a new
Travelers Single Premium Variable Universal Life Product offered by Travelers
Insurance Company and Travelers Life and Annuity Company. The three funds have
target maturity dates of December 1998, December 2000, and December 2005. The
funds invest primarily in zero coupon bonds which provide a "locked-in" a rate
of return.
To boost yield we have added corporates and other spread assets. Because
spread assets are hard to find, we vary the maturities within a one or two year
range to increase the universe of spread assets. We balance the portfolio's
maturities to match the interest rate risk of a zero coupon with the
portfolio's target maturity date.
Through December 31st, each of the funds is closely matched with its maturity
target. Each fund has approximately 25% invested in Zero Coupon Corporates.
We expect the corporate number to increase over time towards the 50% level.
-3-
<PAGE> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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> 15
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> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
This page is intentionally left blank.
<PAGE> 26
INVESTMENT ADVISOR
THE TRAVELERS SERIES TRUST: ZERO COUPON BOND FUND PORTFOLIO SERIES 1998,
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000 AND ZERO COUPON BOND FUND PORTFOLIO
SERIES 2005
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
THE CHASE MANHATTAN BANK, N.A.
New York, New York
This report is prepared for the general information of contract owners and is
not an offer of shares of Zero Coupon Bond Fund Portfolio Series 1998, Zero
Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio
Series 2005. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Universal Life Insurance
products offered by The Travelers Insurance Company and the Prospectuses for
the underlying funds, which collectively contain all pertinent information,
including the applicable sales commissions.
VG-ZERO (Annual) (12-95) Printed in U.S.A.
