TRAVELERS SERIES TRUST, 485BPOS, 1997-04-21

TRAVELERS SERIES TRUST
485BPOS, 1997-04-21

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<PAGE> 1
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. 19

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19

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):

immediately upon filing pursuant to paragraph (b).
- -------
X on May 1, 1997 pursuant to paragraph (b).
- -------
60 days after filing pursuant to paragraph (a)(1).
- -------
on pursuant to paragraph (a)(1)
- ------- ----------
75 days after filing pursuant to paragraph (a)(2).
- -------
on pursuant to paragraph (a)(2) of Rule 485.
- ------- ----------

If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- ------ 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, 1996 WAS
FILED ON FEBRUARY 28, 1997.
<PAGE> 2
THE TRAVELERS SERIES TRUST

Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933

<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
- --- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
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 Fund Description; Dividends and
Distributions; Shareholder Rights
Net Asset Value
7. Purchase of Securities Being Offered Shareholder Rights
8. Redemption or Repurchase Net Asset Value
9. Legal Proceedings Legal Proceedings
<CAPTION>
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
--------------------------------------
<S> <C> <C>
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; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Adviser; Investment Subadvisers;
Other Services Additional 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 Additional Information

</TABLE>

<PAGE> 3

PART A

INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-422-3985
- --------------------------------------------------------------------------------

The Travelers Series Trust (the "Series Trust") is a diversified open-end
management investment company (mutual fund) which consists of multiple series of
shares (the "Portfolios"), each with its own investment objective and policies.
The Portfolios of the Series Trust described herein are the U.S. Government
Securities Portfolio, the Utilities Portfolio, and the Zero Coupon Bond Fund
Portfolios (Series 1998, 2000 and 2005).

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

This Prospectus concisely sets forth the information about the Series Trust and
applicable Portfolios that you should know before investing. Please read it and
retain it for future reference. Additional information about the Series Trust
and the Portfolios is contained in a Statement of Additional Information ("SAI")
dated May 1, 1997 which has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. A copy
may be obtained, without charge, by writing to The Travelers, Annuity Services,
One Tower Square, Hartford, Connecticut 06183-5030, or by calling 860-422-3985.

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

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 MAY 1, 1997.
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS -- U.S. Government Securities Portfolio.......................... 3
FINANCIAL HIGHLIGHTS -- Utilities Portfolio........................................... 4
FINANCIAL HIGHLIGHTS -- Zero Coupon Bond Fund Portfolios
(Series 1998, 2000, 2005)........................................................... 5
FUND DESCRIPTION...................................................................... 6
U.S. GOVERNMENT SECURITIES PORTFOLIO.................................................. 6
Investment Objective and Policies................................................... 6
Investment Restrictions............................................................. 7
Risk Factors........................................................................ 7
UTILITIES PORTFOLIO................................................................... 7
Investment Objective and Policies................................................... 7
Investment Restrictions............................................................. 8
Risk Factors and Special Considerations............................................. 9
ZERO COUPON BOND FUND PORTFOLIOS (Series 1998, 2000, 2005)............................ 10
Investment Objective and Policies................................................... 10
Investment Restrictions............................................................. 10
Risk Factors and Special Considerations Relating to Maturity........................ 11
Tax Considerations.................................................................. 12
BOARD OF TRUSTEES..................................................................... 13
INVESTMENT ADVISERS................................................................... 13
TAMIC............................................................................... 13
Portfolio Managers -- U.S. Government Securities Portfolio;
Zero Coupon Bond Fund Portfolios................................................. 13
Advisory Fees -- U.S. Government Securities Portfolio;
Zero Coupon Bond Fund Portfolios................................................. 14
SBMFM............................................................................... 14
Portfolio Manager -- Utilities Portfolio............................................ 14
Advisory Fees -- Utilities Portfolio................................................ 14
FUND ADMINISTRATION................................................................... 14
SECURITIES TRANSACTIONS............................................................... 15
FUND EXPENSES......................................................................... 15
TRANSFER AGENT........................................................................ 15
SHAREHOLDER RIGHTS.................................................................... 16
NET ASSET VALUE....................................................................... 16
TAX STATUS............................................................................ 17
DIVIDENDS AND DISTRIBUTIONS........................................................... 17
LEGAL PROCEEDINGS..................................................................... 17
ADDITIONAL INFORMATION................................................................ 17
EXHIBIT A............................................................................. 18
</TABLE>

SERIES-2
<PAGE> 6

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

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

RATIOS TO AVERAGE NET ASSETS
Expenses(4)............................... 0.62% 0.56% 0.71% 0.58% 0.38%(3)
Net income................................ 5.68% 5.80% 5.56% 5.04% 4.72%(3)
Portfolio turnover rate................... 501% 214% 16% 51% 25%
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares in the U.S. Government Securities Portfolio are only sold to The Travelers separate accounts in
connection with the issuance of variable annuity and variable life insurance contracts. Total return does not
reflect the deduction of any contract charges or fees assessed by The Travelers separate accounts. For the
periods less than one year, total returns are not annualized.
(3) Annualized.
(4) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with voluntary expense limitations. Without the expense reimbursement, the ratio of operating expenses to
average net assets would have been 0.77% and 0.72% for the year ended December 31, 1993 and the period ended
December 31, 1992, respectively. For the years ended December 31, 1996, 1995 and 1994, there were no expense
reimbursements by The Travelers in connection with the voluntary expense limitations.
(5) For the year ended December 31, 1996, distributions from realized gains include both net realized short-term
and long-term capital gains. Prior to 1996, net realized short-term capital gains were included in
distributions from net investment income.
</TABLE>

SERIES-3
<PAGE> 7

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

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

<TABLE>
<CAPTION>
FEBRUARY
YEAR ENDED 4,(1)
DECEMBER 31, TO
--------------------- DECEMBER 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $ 12.85 $ 10.17 $10.00
Income from operations
Net investment income......................................... $ 0.47 0.48 0.35
Net realized and unrealized gain (loss)....................... 0.47 2.44 (0.18)
-------- -------- ------------
Total from operations....................................... 0.94 2.92 0.17
Less Distributions from(6)
Net investment income......................................... (0.84) (0.24) --
Net realized gains............................................ (0.73) -- --
-------- -------- ------------
Total distributions......................................... (1.57) (0.24) --
-------- -------- ------------
Net asset value, end of period................................ $ 12.22 $ 12.85 $10.17
======= ======= ===========
TOTAL RETURN(2)................................................. 7.47% 29.29% 1.70%
NET ASSETS, END OF PERIOD (THOUSANDS)........................... $ 18,214 $ 15,340 $5,757

RATIOS TO AVERAGE NET ASSETS
Expenses to(3)................................................ 1.07% 1.25% 1.25%(5)
Net investment income......................................... 3.88% 4.29% 3.86%(5)
Portfolio turnover rate....................................... 39% 25% 32%
Average Commission Rate Paid(4)............................... $ 0.06 -- --
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares in the Utilities Portfolio are only sold to The Travelers separate accounts in connection with the
issuance of variable annuity and variable life insurance contracts. The total return does not reflect
contract charges or fees assessed by The Travelers separate accounts. For periods less than one year, total
returns are not annualized.
(3) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with the voluntary expense limitations. Without the expense reimbursement, the ratio of operating expenses to
average net assets would have been 1.27% and 3.49% annualized for the years ended December 31, 1995 and the
period ended December 31, 1994, respectively. For the year ended December 31, 1996, there were no expense
reimbursements by the Travelers in connection with the voluntary expense limitations.
(4) The Average Commission Rate Paid is required for funds that have over 10% in equities for which commissions
are paid. This information is required for funds with fiscal year ends on or after September 30, 1996.
(5) Annualized.
(6) For the year ended December 31, 1996, distributions from realized gains include both net short-term and
long-term capital gains. Prior to 1996, net realized short-term capital gains were included in distributions
from net investment income.
</TABLE>

SERIES-4
<PAGE> 8

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
ZERO COUPON BOND FUND PORTFOLIOS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following information on per share data for the Zero Coupon Bond Fund
Portfolios (Series 1998, 2000, 2005) for the year ended December 31, 1996 and
the period October 11, 1995 (date operations commenced) to December 31, 1995 has
been audited by Coopers & Lybrand L.L.P., Independent Accountants. Their report
on the per share data for each of the applicable periods ended December 31, 1996
is contained in the Funds' Annual Report which should be read along with this
information and which is incorporated by reference into the SAI.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 11(1) TO
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------------------- ---------------------------------------
SERIES 1998 SERIES 2000 SERIES 2005 SERIES 1998 SERIES 2000 SERIES 2005
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $10.25 $ 10.31 $ 10.48 $ 10.00 $ 10.00 $ 10.00
Income from operations
Net investment income........... 0.53 0.50 0.48 0.12 0.13 0.13
Net realized and unrealized gain
(loss)........................ (0.13) (0.22) (0.38) 0.13 0.18 0.35
------------ ----------- ----------- ----------- ----------- -----------
Total from operations......... 0.40 0.28 0.10 0.25 0.31 0.48
Less Distributions From:
Net investment income........... (0.65) (0.63) (0.61) -- -- --
Net realized gains.............. (0.01) -- -- -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total Distributions............... (0.66) (0.63) (0.61) -- -- --
------------ ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD.... $ 9.99 $ 9.96 $ 9.97 $ 10.25 $ 10.31 $ 10.48
========= ========= ========= ========= ========= =========
TOTAL RETURN(2)................... 3.94% 2.76% 0.90% 2.50% 3.10% 4.80%
Net assets, end of period
(thousands)................... $1,303 $ 1,565 $ 2,054 $ 1,024 $ 1,029 $ 1,050
RATIO TO AVERAGE NET ASSETS
Expenses(3)..................... 0.15% 0.15% 0.15% 0.15%(4) 0.15%(4) 0.15%(4)
Net investment income........... 5.64% 5.74% 6.14% 5.55%(4) 5.61%(4) 5.89%(4)
Portfolio turnover rate......... 19% 33% 17% 20% 34% 23%
(1) Date operations commenced.
(2) Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
Shares of the three Zero Coupon Bond Fund Portfolios are only sold to The Travelers separate accounts in
connection with the issuance of variable life insurance contracts. The total return does not reflect contract
charges or fees assessed by The Travelers separate accounts. For periods less than one year, total returns are
not annualized.
(3) The ratio of expenses to average net assets reflects an expense reimbursement by The Travelers in connection
with the voluntary expense limitations. Without the expense reimbursements, the ratios of operating expenses
to average net assets would have been, on an annualized basis for 1995, 6.51%, 6.51%, and 6.48% for Series
1998, 2000 and 2005, respectively and 1996, would have been 2.82%, 2.49% and 2.17%, respectively.
(4) Annualized.
</TABLE>

SERIES-5
<PAGE> 9

FUND DESCRIPTION

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

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

The Series Trust is currently divided into multiple 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"). Five Portfolios, as described below, are contained in this
prospectus. The other Portfolios are described in a separate prospectus.

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

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

SERIES-6
<PAGE> 10

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

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

INVESTMENT RESTRICTIONS

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

RISK FACTORS

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

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

INVESTMENT OBJECTIVE AND POLICIES

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

SERIES-7
<PAGE> 11

return, as determined by the investment adviser. Under normal market conditions,
the Portfolio will invest at least 65% of its assets in such securities. The
Portfolio may invest up to 35% of its assets in equity and debt securities of
non-utility companies believed to afford a reasonable opportunity for achieving
the Portfolio's investment objectives. When the investment adviser believes that
market conditions warrant, the Portfolio may adopt a temporary defensive posture
and may invest, without limit, in debt securities (whether or not they are
utility securities) such as rated or unrated bonds, debentures and commercial
paper, U.S. government securities and money market instruments. The Portfolio
may invest up to 10% of its assets in securities rated BB or B by Standard &
Poor's Corporation ("S&P") or Ba or B by Moody's Investors Service, Inc.
("Moody's") whenever the investment adviser believes that the incremental yield
on such securities is advantageous to the Portfolio in comparison to the
additional risk involved (such lower-rated securities are commonly known as
"junk bonds"). The yields on lower-rated fixed-income securities generally are
higher than the yields available on higher-rated securities. However,
investments in lower-rated securities may be subject to greater market
fluctuations and greater risks of loss of income or principal (including the
possibility of default by, or bankruptcy of, the issuers of such securities)
than higher-rated securities. Lower-rated securities also may have speculative
characteristics. In addition, the Portfolio may enter into repurchase
agreements. (For a description of the rating systems identified above, see the
Appendix to the SAI.)

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

INVESTMENT RESTRICTIONS

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

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

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

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

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

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

SERIES-8
<PAGE> 12

borrowed) at the time the borrowing is made. Whenever borrowings exceed 5% of
the value of the Portfolio's total assets, the Portfolio will not make any
additional investments;

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

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

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

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

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

RISK FACTORS AND SPECIAL CONSIDERATIONS

Investment in the Utilities Portfolio may involve above-average risk of loss
because of, among other things, the Portfolio's use of strategies and techniques
that may be considered to be speculative. The strategy followed by the Portfolio
and certain of the strategies and techniques used by the Portfolio depend on
forecasts made by Greenwich Street Advisors that may or may not prove to be
correct.

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

SERIES-9
<PAGE> 13

degrees. Moreover, price disparities within selected utility groups and
discrepancies in relation to averages and indices have occurred frequently for
reasons not directly related to the general movements or price trends of utility
common stocks. Causes of these discrepancies include changes in the overall
demand for and supply of various securities (including the potentially
depressing effect of new stock offerings), and changes in investment objectives,
market expectations or cash requirements of other purchasers and sellers of
securities.

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.

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 values at
maturity. The Zero Coupon Bond Portfolios may not be appropriate for contract
owners who do not plan to allocate their premiums to the Portfolios for the
long-term or until maturity.

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 in Exhibit A to this prospectus.

The remaining 35% of each Zero Coupon Bond Portfolio's 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.

Each Zero Coupon Bond Portfolio may invest up to 25% of its assets in securities
of foreign issuers. Investments in Stripped Eurodollar Obligations where
delivery takes place outside the U.S. will be made in compliance with any
applicable U.S. and foreign currency restrictions, tax laws and laws limiting
the amount and types of foreign investments. Stripped Eurodollar Obligations
involve special risks associated with investment in foreign securities related
to market, currency, economic, political, and other factors.

To provide income for expenses, redemption payments, and cash dividends, up to
20% of each Portfolio's assets may be invested in 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 1940 Act. 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;

(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;

SERIES-10
<PAGE> 14

(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 as described in this
Prospectus;

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

(9) concentrate in any industry.

In addition, the Portfolios will not purchase illiquid securities (such as
repurchase agreements with maturities in excess of seven days) or other
securities that are not readily marketable if more than 15% of the total assets
of a Portfolio would be invested in such securities.

RISK FACTORS AND SPECIAL CONSIDERATIONS RELATING TO MATURITY

Various levels of risk are involved with each Zero Coupon Bond Portfolio. The
risks inherent in investing in any of the Portfolios are that their net asset
value will fluctuate in response to changes in economic conditions, interest
rates and the market's perception of the underlying securities of the
Portfolios.

Stripped securities investments, like other investments in debt securities, are
subject to certain risks, including credit and market risks. To the extent that
the Portfolios invest in Stripped Securities other than Stripped Treasury
Securities, such investments will be rated at least A by one or more nationally
recognized statistical rating agencies. Such securities are regarded as having
an adequate capacity to pay principal and interest but with greater
vulnerability to adverse economic conditions and have some speculative
characteristics. The Zero Coupon Bond Portfolios will also attempt to minimize
the impact of individual credit risks by diversifying their portfolio
investments.

Stripped Securities do not make any periodic payments of interest prior to
maturity and the stripping of the interest coupons causes the Stripped
Securities to be offered at a substantial or "deep"

SERIES-11
<PAGE> 15

discount from their face amounts. The market value of Stripped Securities and,
therefore, of the shares of the Zero Coupon Bond Portfolios, will fluctuate with
changes in interest rates and other factors and may be subject to greater
fluctuations in response to changing interest rates than would a fund consisting
of debt obligations of comparable maturities that pay interest currently. The
amount of fluctuation increases with a longer period of maturity.

Special Considerations Relating to Maturity: The Series Trust currently offers
three separate Zero Coupon Bond Portfolios, each maturing on the third Friday of
December of its specific maturity year (the "Target Date"): 1998, 2000, and
2005. On each Portfolio's Target Date, the Portfolio will be converted to cash
and an investor may invest in another of the Contract's Funds. If an investor
does not complete an instruction form directing what should be done with
liquidation proceeds, the proceeds will be automatically invested in the Smith
Barney Money Market Portfolio or Cash Income Trust, as applicable, and the
Policyholder will be notified of such event.

Because each Portfolio will be primarily invested in zero coupon securities,
investors whose premiums are invested in shares held to maturity, including
those obtained through reinvestment of dividends and distributions, will
experience a return consisting primarily of the amortization of discount on the
underlying securities in the Portfolio. However, the net asset value of a
Portfolio's shares increases or decreases with changes in the market value of
that Portfolio's investments, which tends to vary inversely with changes in
prevailing interest rates. If shares of a Zero Coupon Bond Portfolio are
redeemed prior to the maturity of the Portfolio, an investor may experience a
significantly different investment return than was anticipated at the time of
purchase.

The Portfolio's investment adviser will attempt to maintain the average duration
of each Portfolio to within twelve months of the Portfolio's Target Date.
Duration is a measure of the length of an investment which takes into account,
through present value analysis, the timing and amount of any interest payments
as well as the amount of the principal repayment. Duration is commonly used by
professional managers to help identify and control reinvestment risk. Since each
Portfolio will not be invested entirely in zero coupon securities maturing on
the Target Date, there will be some reinvestment risk with respect to those
other investments. By balancing investments with slightly longer and shorter
durations, the investment adviser believes it can maintain a Portfolio's average
duration within twelve months of the Portfolio's Target Date and thereby reduce
its reinvestment risk. Because they do not pay interest, zero coupon securities
tend to be subject to greater fluctuation of market value in response to changes
in interest rates than interest-paying securities of similar maturities.
Investors can expect more appreciation from a Zero Coupon Bond Portfolio during
periods of declining interest rates than from interest-paying securities of
similar maturity. Conversely, when interest rates rise, a Zero Coupon Bond
Portfolio will normally decline more in price than interest-paying securities of
similar maturity. Price fluctuations are expected to be greatest in the longer-
maturity Funds and are expected to diminish as a Portfolio approaches its
maturity date. Interest rates can change suddenly and unpredictably.

In addition, due to securities maturing prior to the termination of the Zero
Coupon Bond Portfolio, a risk that the proceeds from the sale of such securities
will not be reinvested at the same interest rate which was available at the time
of the contract owner's purchase may exist. As an example, in a falling interest
rate environment, proceeds for securities that mature prior to the termination
date of a Zero Coupon Bond Portfolio will be reinvested at a lower rate.
Similarly, in a rising interest environment, the proceeds will be invested at a
higher interest rate.

TAX CONSIDERATIONS

Under the federal income tax law, a portion of the difference between the
purchase price of the zero coupon securities and their face value ("original
issue discount") is considered to be income to the Zero Coupon Bond Portfolios
each year, even though such Portfolio will not receive cash payments
representing the discount from these securities. This original issue discount
will comprise a part of the net taxable investment income of such Portfolio
which must be "distributed" to the insurance company shareholders each year,
whether or not such distributions are paid in cash. To the extent

SERIES-12
<PAGE> 16

such distributions are paid in cash, the Portfolio may have to generate the
required cash from interest earned on non-zero coupon securities such as
corporate bonds or possibly from the disposition of zero coupon securities.

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

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

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

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

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

TAMIC

PORTFOLIO MANAGERS -- U.S. GOVERNMENT SECURITIES PORTFOLIO;
ZERO COUPON BOND FUND PORTFOLIOS

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

The Zero Coupon Bond Fund Portfolios are managed by David A. Tyson, Ph.D. and
CFA. Mr. Tyson is currently Senior Vice President and the head of the Company's
Portfolio Management Group. He directly manages The Travelers Annuity, Life
Surplus and Convertible portfolios. His previous

SERIES-13
<PAGE> 17

responsibilities have included managing The Travelers Derivatives,
Mortgage-Backed and Quantitative Investment Groups. Mr. Tyson joined The
Travelers in 1985 and TAMIC in 1994. He previously spent seven years with the
Equitable Investment Management Corporation where he was responsible for
quantitative equity research and new product development.

ADVISORY FEES -- U.S. GOVERNMENT SECURITIES PORTFOLIO;
ZERO COUPON BOND FUND PORTFOLIOS

Under its Advisory Agreement with the U.S. Government Securities Portfolio,
TAMIC is paid an amount equivalent to 0.3233%, on an annual basis, of the
average daily net assets of the Portfolio. Under its Advisory Agreement with the
Zero Coupon Bond Portfolios, TAMIC is paid an amount equivalent on an annual
basis to .10% of the average daily net assets of each Portfolio. The fees are
computed daily and paid weekly. The Travelers has decided to voluntarily
reimburse the Zero Coupon Bond Fund Portfolios for any expenses above 0.15%
(includes the .10% management fee to TAMIC, but excludes brokerage commissions
and interest charges).

SBMFM

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

SBMFM manages the day-to-day operations of the Utilities Portfolio pursuant to
an Investment Advisory Agreement entered into by the Series Trust on behalf of
the Portfolio. Under the Advisory Agreement, SBMFM is responsible for furnishing
or causing to be furnished to the 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.

PORTFOLIO MANAGER -- UTILITIES PORTFOLIO

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

ADVISORY FEES -- UTILITIES PORTFOLIO

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

FUND ADMINISTRATION

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

SERIES-14
<PAGE> 18

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

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

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

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

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

Pursuant to Management Agreements dated May 1, 1996 between the Series Trust and
The Travelers Insurance Company and between the Series Trust and The Travelers
Life and Annuity Company, each Company agreed to reimburse the Series Trust for
the amount by which each Portfolio's aggregate annual expenses, including
investment advisory fees but excluding brokerage commissions, interest charges
and taxes, exceeds a specific percentage of each Portfolio's average net assets
for any fiscal year. For the U.S. Government Securities Portfolio and the
Utilities Portfolio, this amount is 1.25%; for the three Zero Coupon Bond Fund
Portfolios, the amount is .15%

For the fiscal year ended December 31, 1996, the U.S. Government Securities
Portfolio, and the Utilities Portfolio paid .62% and 1.07%, respectively, of
their average net assets in expenses. For the U.S. Government Securities
Portfolio and the Utilities Portfolio, there were no expense reimbursements for
the fiscal year ended December 31, 1996.

The three Zero Coupon Bond Fund Portfolios began operating on October 11, 1995.
Series 1998 paid .15%, Series 2000 paid .15% and Series 2005 paid .15% of their
average assets in expenses. These expenses would have been, on an annualized
basis, 2.82%, 2.49% and 2.17%, of the respective Portfolio's average net assets
if the Company had not paid for any of their expenses.

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

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

SERIES-15
<PAGE> 19

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

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

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

Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of each series are entitled to vote
separately to approve investment advisory agreements or changes in fundamental
investment restrictions, but shares of all series vote together in the election
of Trustees and the selection of accountants. Shares are redeemable,
transferable and freely assignable as collateral. There are no sinking fund
provisions. (See the accompanying separate account prospectus for a discussion
of voting rights applicable to purchasers of variable annuity and variable life
insurance contracts.)

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

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

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

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

SERIES-16
<PAGE> 20

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.

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

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

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

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

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

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

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

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

SERIES-17
<PAGE> 21

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

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

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

REPURCHASE AGREEMENTS

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

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

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.

SERIES-18
<PAGE> 22

WHEN-ISSUED SECURITIES

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

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

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

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

CERTIFICATES OF DEPOSIT

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

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

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

BANKERS' ACCEPTANCES

Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific

SERIES-19
<PAGE> 23

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

FUTURES CONTRACTS

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

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

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

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

SERIES-20
<PAGE> 24

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

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

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

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

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

WRITING COVERED CALL OPTIONS

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

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

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

SERIES-21
<PAGE> 25

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

BUYING PUT AND CALL OPTIONS

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

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

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

SHORT SALES AGAINST THE BOX

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

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

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

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

SERIES-22
<PAGE> 26

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

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

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

LENDING PORTFOLIO SECURITIES

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

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

STRIPPED SECURITIES

(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");

SERIES-23
<PAGE> 27

(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 which consist of stripped debt obligations and
coupons of asset-backed securities, or other zero coupon-type
securities which may exist today or may be developed in the future.
These securities may be illiquid and are subject to the 10% limitation
for illiquid securities, as described under Investment Restrictions.

(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").

SERIES-24
<PAGE> 28

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)

TIC Ed. 5-97
L-11788-L Printed in U.S.A.
<PAGE> 29

THE TRAVELERS SERIES TRUST

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

ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-422-3985
- --------------------------------------------------------------------------------

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

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.

<PAGE> 30

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 31

TABLE OF CONTENTS

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

SERIES-3
<PAGE> 32

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

SERIES-4
<PAGE> 33

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

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

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

SERIES-5
<PAGE> 34

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

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

SERIES-6
<PAGE> 35

FUND DESCRIPTION

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

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

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

INVESTMENT OBJECTIVE AND POLICIES

SERIES-7
<PAGE> 36

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

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

INVESTMENT RESTRICTIONS

RISK FACTORS

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

SERIES-8
<PAGE> 37

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

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

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

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

INVESTMENT RESTRICTIONS

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

SERIES-9
<PAGE> 38

RISK FACTORS

The investment experience of equity investments over time will tend to reflect
levels of stock market prices and dividend payouts. Both are affected by diverse
factors, including not only business conditions and investor confidence in the
economy, but current conditions in a particular industry or company. The yield
on a common stock is not contractually determined. Equity securities are subject
to financial risks relating to the earning stability and overall financial
soundness of an issue. They are also subject to market risks relating to the
effect of general changes in the securities market on the price of a security.

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

SERIES-10
<PAGE> 39

INVESTMENT RESTRICTIONS

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;

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

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

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

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

RISK FACTORS AND SPECIAL CONSIDERATIONS

SERIES-11
<PAGE> 40

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

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

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

SERIES-12
<PAGE> 41

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

TAMIC

PORTFOLIO MANAGER -- U.S. GOVERNMENT SECURITIES PORTFOLIO

ADVISORY FEES -- U.S. GOVERNMENT SECURITIES PORTFOLIO

SBMFM

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

PORTFOLIO MANAGER -- SOCIAL AWARENESS STOCK PORTFOLIO

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

SERIES-13
<PAGE> 42

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

ADVISORY FEES -- SOCIAL AWARENESS STOCK PORTFOLIO

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

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

PORTFOLIO MANAGER -- UTILITIES PORTFOLIO

ADVISORY FEES -- UTILITIES PORTFOLIO

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

SERIES-14
<PAGE> 43

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

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

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

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

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

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

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-15
<PAGE> 44

Series Trust's obligations. Disclaimers of such liability are included in each
agreement entered into by the Series Trust or its Portfolios.

NET ASSET VALUE

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

the SEC, for the protection of shareholders, so orders.

SERIES-16
<PAGE> 45

DIVIDENDS AND DISTRIBUTIONS

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

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

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

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

SERIES-17
<PAGE> 46

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

REPURCHASE AGREEMENTS

SERIES-18
<PAGE> 47

WHEN-ISSUED SECURITIES

CERTIFICATES OF DEPOSIT

BANKERS' ACCEPTANCES

SERIES-19
<PAGE> 48

FUTURES CONTRACTS

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

SERIES-20
<PAGE> 49

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

WRITING COVERED CALL OPTIONS

SERIES-21
<PAGE> 50

BUYING PUT AND CALL OPTIONS

SHORT SALES AGAINST THE BOX

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

SERIES-22
<PAGE> 51

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

LENDING PORTFOLIO SECURITIES

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

SERIES-23
<PAGE> 52

THE TRAVELERS SERIES TRUST

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

TIC Ed. 5-97

L-11788-U Printed in U.S.A.
<PAGE> 53

THE TRAVELERS SERIES TRUST

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

MID CAP DISCIPLINED EQUITY FUND

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

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

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

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

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

THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.

<PAGE> 54

TABLE OF CONTENTS

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

SERIES-2
<PAGE> 55

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

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

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

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.

(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.

(3) A fund is required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary from
period to period and Fund to Fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.

(4) The Travelers has waived all of its fees for the period ended December 31,
1996. In addition, The Travelers has agreed to reimburse the Equity Income
Portfolio, Large Cap Portfolio, Travelers Quality Bond Portfolio, Lazard
International Stock Portfolio, MFS Emerging Growth Portfolio, Federated High
Yield Portfolio, and Federated Stock Portfolio for $31,911, $32,035,
$10,901, $12,454, $16,407, $9,268, and $15,460, respectively, of the
Portfolios' expenses for the period ended December 31, 1996. If such fees
were not waived or reimbursed, the per share effect on net investment income
and the expense ratios would have been as follows:

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

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

+ Annualized.

SERIES-3
<PAGE> 56

FUND DESCRIPTION

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

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

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

FUNDAMENTAL INVESTMENT POLICIES

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

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

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

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

SERIES-4
<PAGE> 57

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

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

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

INVESTMENT RESTRICTIONS

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

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

RISK FACTORS

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

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.

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

INVESTMENT OBJECTIVE

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

SERIES-5
<PAGE> 58

INVESTMENT POLICIES

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

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

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

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

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

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

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

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

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

INVESTMENT RESTRICTIONS

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

The Lazard International Stock Portfolio may not:

SERIES-6
<PAGE> 59

Portfolio's entry into options, forward contracts, futures contracts,
including those related to indexes shall not constitute borrowing;
- - make loans, except loans of portfolio securities not having a value in excess
of 10% of the Portfolio's total assets and except that the Portfolio may
purchase debt obligations in accordance with its investment objectives and
policies;
- - invest in illiquid securities if immediately after such investment more than
10% of the value of the Portfolio's net assets, taken at market value, would
be invested in such securities;
- - purchase securities of other investment companies, except in connection with a
merger, consolidation, acquisition or reorganization; provided, however, the
Lazard International Stock Portfolio may purchase securities in an amount up
to 5% of the value of its total assets in any one closed-end fund and may
purchase in the aggregate securities of closed-end funds in an amount of up to
10% of the value of the Portfolio's total assets;

- - purchase the securities of issuers conducting their principal business in the
same industry, if the value of the Portfolio's investment exceeds 25% of the
Portfolio's then current net asset value;

- - purchase or sell real estate except in a manner consistent with specific rules
described in greater detail in the SAI;
- - purchase securities on margin;
- - underwrite securities; or
- - make investments for the purpose of exercising control or management.

RISK FACTORS

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

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

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

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

INVESTMENT OBJECTIVE

SERIES-7
<PAGE> 60

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

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

- - emerging market securities;

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

- - corporate asset-backed securities;

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

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

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

- - loan participations.

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

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

SERIES-8
<PAGE> 61

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

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

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

INVESTMENT RESTRICTIONS

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

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

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

- purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interest therein and
securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (excluding currencies
and any type of option, future contracts and forward contracts) in the
ordinary course of its business. The Portfolio does however, reserve the
right to hold and sell real estate, mineral leases, commodities or
commodity contracts (including currencies and any type of option, future
contracts and forward contracts) acquired as a result of the ownership of
securities;

- issue any senior securities except as permitted by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect to any
type of swap, option, forward contract and futures contracts and
collateral arrangements with respect to initial and variation margin are
not deemed to be the issuance of a senior security;

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

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

SERIES-9
<PAGE> 62

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

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

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

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

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

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

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

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

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

RISK FACTORS

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

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

SERIES-10
<PAGE> 63

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

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

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

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

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

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

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

SERIES-11
<PAGE> 64

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

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

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

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

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

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

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

SERIES-12
<PAGE> 65

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

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

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

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

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

INVESTMENT RESTRICTIONS

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

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

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

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

SERIES-13
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- invest in real estate, (although the Federated High Yield Portfolio may
invest in the securities of companies whose business involves the
purchase or sale of real estate or in securities which are secured by
real estate or interest in real estate); or
- purchase the securities of other investment companies, except in limited
situations.

RISK FACTORS

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

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

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

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased. In the event of a restructuring, the Federated High Yield
Portfolio may bear additional legal or administrative expenses in order to
maximize recovery from an issuer. Additionally, an increase in interest rates
may also adversely impact the value of high yield bonds.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

The Federated High Yield Portfolio may, from time to time, own zero coupon bonds
and pay-in-kind securities. A zero coupon bond makes no periodic interest
payments and the entire obligation becomes due only upon maturity. Pay-in-kind
securities make periodic payments in the form of additional securities (as
opposed to cash). The price of zero coupon bonds and pay-in-kind securities is
generally more sensitive to fluctuations in interest rates than are conventional
bonds. Additionally, federal tax law requires that interest on zero coupon bonds
be reported as income to the Federated High Yield Portfolio even though the
Federated High Yield Portfolio receives no cash interest until the maturity or
payment date of such securities.

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Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Federated High Yield
Portfolio owns a bond which is called, the Federated Portfolio will receive its
return of principal earlier than expected and would likely be required to
reinvest the proceeds at lower interest rates, thus reducing income to the
Federated Portfolio.

EVALUATING THE RISKS OF LOWER-RATED SECURITIES. The Federated Portfolio's
Subadviser will follow certain steps to evaluate the risks associated with
investing in lower-rated securities. These techniques include:

CREDIT RESEARCH. The Federated High Yield Portfolio's Subadviser will
perform its own credit analysis in addition to using nationally recognized
statistical rating organizations and other sources, including discussions
with the issuer's management, the judgment of other investment analysts,
and its own informed judgment. The Federated High Yield Portfolio's
Subadviser's credit analysis will consider the issuer's financial
soundness, its responsiveness to changes in interest rates and business
conditions, and its anticipated cash flow, interest or dividend coverage
and earnings. In evaluating an issuer, the Federated High Yield Portfolio's
investment adviser places special emphasis on the estimated current value
of the issuer's assets rather than historical costs.

DIVERSIFICATION. The Federated High Yield Portfolio invests in
securities of many different issuers, industries, and economic sectors to
reduce portfolio risk.

ECONOMIC ANALYSIS. The Federated High Yield Portfolio's investment
adviser will also analyze current developments and trends in the economy
and in the financial markets. When investing in lower-rated securities,
timing and selection are critical and analysis of the business cycle can be
important.

Achievement of the Federated High Yield Portfolio's investment objectives may be
more dependent on the Subadviser's credit analysis of lower rated bonds than
would be the case if the Portfolio invested exclusively in higher rated bonds.

FEDERATED STOCK PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is to provide growth of income and
capital by investing principally in a professionally managed and diversified
portfolio of common stock of high-quality companies. These companies generally
are leaders in their industries and are characterized by sound management and
the ability to finance expected growth. While there is no assurance that the
Portfolio will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. Unless otherwise
noted the investment policies and limitations described below for the Federated
Stock Portfolio can be changed without the approval of shareholders.

INVESTMENT POLICIES

The Portfolio's investment approach is based on the conviction that over the
long term the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of major
corporations. The Portfolio invests primarily in common stocks of companies
selected by the Portfolio's Subadviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of the company's industry. Ordinarily, these
companies will be in the top 25% of their industries with regard to revenues.
However, other factors, such as product position or market share, will be
considered by

SERIES-15
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the Portfolio's Subadviser and may outweigh revenues. Other permitted
investments include, but are not limited to:

- preferred stocks, corporate bonds, notes, and warrants of these
companies. The prices of fixed income securities generally fluctuate
inversely to the direction of interest rates;
- U.S. government securities;
- repurchase agreements;
- reverse repurchase agreements;
- money market instruments;
- securities of foreign issuers which are freely traded on United States
securities exchanges or in the over-the-counter market in the form of
American Depository Receipts ("ADRs") (in an amount of not more than 10%
if its assets);
- when-issued securities;
- restricted and illiquid securities;
- lending of portfolio securities; and
- temporary bank borrowing.

See Exhibit A for a more detailed discussion of the above investments.

RISK FACTORS

As with other mutual funds that invest primarily in equity securities, the
Federated Stock Portfolio is subject to market risks. That is, the possibility
exists that common stocks will decline in value over short or extended periods
of time, and equity markets tend to be cyclical, experiencing both periods of
when prices generally increase and periods when common stock prices generally
decline.

INVESTMENT RESTRICTIONS

The fundamental investment restrictions of the Federated Stock Portfolio are set
forth below. The Federated Stock Portfolio will not:

- borrow money or pledge securities except, under certain circumstances,
the Portfolio may borrow up to one-third of the value of its total assets
and pledge up to 10% of the value of those assets to secure such
borrowings;
- invest more than 5% of its total assets in the securities of one issuer
(except cash and cash items and U.S. government securities);
- acquire more than 10% of the voting securities of any one issuer;
- invest in real estate, (although the Federated Stock Portfolio may invest
in the securities of companies whose business involves the purchase or
sale of real estate or in securities which are secured by real estate or
interests in real estate).
- issue senior securities;
- trade in puts and calls; or
- underwrite securities.

LARGE CAP PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES

Large Cap Portfolio seeks long-term growth of capital by investing primarily in
equity securities of companies with large market capitalizations.

INVESTMENT POLICIES

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policy. The Large Cap Portfolio will invest primarily in common stocks. Other
investments are allowed, including, but not limited to those described below.
The Subadviser, on behalf of the Portfolios, may invest in, or write (as
applicable), the following:

- cash investments;
- equity securities;
- debt securities;
- foreign securities;
- repurchase agreements;
- reverse repurchase agreements;
- various futures and option related techniques and instruments;
- ADRs;
- emerging market securities;
- lending of portfolio securities;
- real estate related instruments;
- corporate asset-backed securities;

- loan participations and other direct indebtedness;

- indexed securities;

- short sales "against the box";

- cash instruments;

- swap agreements; and
- restricted securities.

Please review Exhibit A for a detailed discussion of these investment
techniques.

The Portfolio also reserves the right to invest without limitation in preferred
stocks and investment-grade debt instruments for temporary, defensive purposes,
and to lend portfolio securities.

Policies and limitations are considered at the time of purchase; the sale of
instruments is not required in the event of a subsequent change in
circumstances.

The Large Cap Portfolio may use various investment techniques to hedge a portion
of the fund's risks, but there is no guarantee that these strategies will work
as intended. The Portfolio seeks to spread investment risk by diversifying its
holdings among companies and industries.

The Portfolio may not buy all of these instruments or use all of these
techniques, and those described in Exhibit A, to the full extent permitted
unless it believes that doing so will help achieve its goals. Current holdings
and recent investment strategies are described in the Portfolio's financial
reports which are sent to shareholders twice a year.

Purchase of a debt security is consistent with the Portfolio's debt quality
policy if it is rated at or above the stated level by Moody's Investors Service,
Inc., in the equivalent categories by Standard & Poor's Corporation, or is
unrated but judged to be of equivalent quality by the Portfolio Investment
Adviser. The Portfolio currently intends to limit its investments in lower than
Baa-quality debt securities to less than 35% of its assets.

The Portfolio may invest in money market securities, in a pooled account of
repurchase agreements, and in a money market fund available only to funds and
accounts managed by the Subadviser or its affiliates, whose goal is to seek a
high level of current income while maintaining a stable $1.00 share price. A
major change in interest rates or a default on the money market fund's
investments could cause its share price to change.

More detailed information about the Portfolio's investments policies and
restrictions is contained in the SAI.

ADJUSTING INVESTMENT EXPOSURE. The Portfolio can use various techniques to
increase or decrease its exposure to changing security prices, interest rates,
currency exchange rates, commodity prices or other factors that affect security
prices.

SERIES-17
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RISK FACTORS

Companies with large market capitalizations typically have a large number of
publicly held shares and a high trading volume, resulting in a high degree of
liquidity. These tend to be quality companies with strong management
organizations. Large capitalization companies may have less growth potential
than smaller companies and may be able to react less quickly to changes in the
marketplace.

The value of the Portfolio's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. Investments in
foreign securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to currency
fluctuations.

INVESTMENT RESTRICTIONS

Set forth below are the Large Cap Portfolio's fundamental investment policies.
The Portfolio may not:

- with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities of other investment
companies or securities issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities) if, as a result, (a) more than
5% of the Portfolio's total assets would be invested in the securities of
that issuer, or (b) the Portfolio's would hold more than 10% of the
outstanding voting securities of that issuer;
- issue senior securities, except as permitted under the 1940 Act;
- borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
- underwrite securities issued by others, except to the extent that the
Portfolio may be considered to be an underwriter within the meaning of
the 1933 Act in the disposition of restricted securities;
- purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
- purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate
or securities or companies engaged in the real estate business);
- purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Portfolio from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities);
- lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to
repurchase agreements;
- the Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all the assets in the securities of a single
open-end management investment company managed by the Subadviser or any
affiliate or successor with substantially the same investment objective,
policies, and limitations as the Portfolio.

THE FOLLOWING INVESTMENT LIMITATIONS ALONG WITH ALL OTHER POLICIES OR
LIMITATIONS NOT SPECIFICALLY IDENTIFIED AS FUNDAMENTAL, ARE NOT FUNDAMENTAL.

- The Portfolio does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.

SERIES-18
<PAGE> 71

- The Portfolio does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transaction, and provided that margin payments in
connection with futures contracts and options on futures shall not
constitute purchasing securities on margin.

- The Portfolio may borrow money only (a) from a bank or from a registered
investment company or portfolio for which the Subadviser or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation
definitions). The Portfolio will not borrow money in excess of 25% of net
assets so long as this limitation is required for certification by
certain state insurance departments. Any borrowings that come to exceed
this amount will be reduced within seven days (not including Sundays and
holidays) to the extent necessary to comply with the 25% limitation. The
Portfolio will not purchase any security while borrowings representing
more than 5% of its total assets are outstanding. The Portfolio will not
borrow from other funds advised by the Subadviser or its affiliates if
total outstanding borrowings immediately after such borrowing would
exceed 15% of the Portfolio's total assets. The Portfolio will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The Portfolio will not borrow from other
funds advised by the Subadviser or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the
fund's total assets.

- The Portfolio does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the
prices at which they are valued.
- The Portfolio does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which the Subadviser or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations (where such participations have not
been securitized), or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities
or to repurchase agreements.)
- The Portfolio does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than
three years of continuous operation. For the purposes of this limitation
pass through entities and other special purpose vehicles or pools of
financial assets such as issuers of asset backed securities or investment
companies are not considered "business enterprises."
- The Portfolio does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of the Subadviser who individually own more than 1/2 of 1% of
the securities of such issuer together own more than 5% of such issuer's
securities.
- The Portfolio does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
sub-advised by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment objective,
policies, and limitations as the Portfolio.

EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

SERIES-19
<PAGE> 72

has the flexibility, however, to invest the balance in all types of domestic and
foreign securities, including bonds. The Portfolio seeks to achieve a yield that
exceeds that of the securities comprising the S&P 500. The Portfolio does not
expect to invest in debt securities of companies that do not have proven
earnings or credit. When choosing the Portfolio's investments, the Subadviser
also considers the potential for capital appreciation.

INVESTMENT POLICIES

The value of the Portfolio's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. The value of
bonds fluctuates based on changes in interest rates and in the credit quality of
the issuer. Investments in foreign securities may involve risks in addition to
those of U.S. investments, including increased political and economic risk, as
well as exposure to currency fluctuations. The Subadviser may use various
investment techniques to hedge the Portfolio's risks, but there is no guarantee
that these strategies will work as the Subadviser intends. The Portfolio seeks
to spread investment risk by diversifying its holdings among many companies and
industries.

The Subadviser normally invests the Portfolio's assets according to its
investment strategy. The Portfolio also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary, defensive purposes.

Policies and limitations are considered at the time of purchase; the sale of
instruments is not required in the event of a subsequent change in
circumstances.

Equity Income Portfolio may engage in trade of certain other securities and use
other investment techniques as described more fully in Exhibit A attached hereto
including: (i) equity securities; (ii) debt securities; (iii) foreign securities
(including ADRs); (iv) repurchase agreements; (v) reverse repurchase agreements;
(vi) restricted securities; (vii) Portfolio lending (viii) various futures and
options trading activities and techniques; (ix) emerging market securities; (x)
real estate related instruments; (xi) loan participations and other direct
indebtedness; (xii) indexed securities; (xiii) short sales "against the box;"
(xiv) cash instruments; and (xv) swap agreements.

RISK FACTORS

Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty.

INVESTMENT RESTRICTIONS

The Equity Income Portfolio is subject to the same fundamental and
nonfundamental investment limitations as the Large Cap Portfolio described
above. Please refer to "Large Cap -- Investment Restrictions" section of this
prospectus and to the SAI for a complete discussion of such applicable
limitations.

In addition to those limitations, the Equity Income Portfolio will conform its
purchases of debt security to a stated debt quality policy. The Portfolio
currently intends to limit its investments in lower than Baa-quality debt
securities to 20% of its assets. (See Exhibit B for a discussion of rating
agency procedures.) For example, the Portfolio may make purchases of lower-rated
debt securities if such

SERIES-20
<PAGE> 73

securities are rated at or above the stated level by Moody's or rated in the
equivalent categories of S&P, or is unrated but judged to be of equivalent
quality by the Subadviser.

More detailed information about the Portfolio's investments is contained in
Exhibit A and the Portfolio's SAI.

MID CAP DISCIPLINED EQUITY FUND

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

INVESTMENT OBJECTIVE

The investment objective of the Mid Cap Disciplined Equity Fund is to seek
growth of capital by investing primarily in a broadly diversified portfolio of
U.S. common stocks.

The investment Subadviser's approach to equity management is designed to provide
diversified exposure to the mid and small capitalization segments of the U.S.
equity market. Travelers Investment Management Company ("TIMCO") selects stocks
with a primarily quantitative screening process that seeks attractive relative
value and earnings growth. In order to achieve consistent relative performance,
TIMCO manages the portfolio to mirror the overall risk, sector weightings and
style characteristics of the Standard & Poor's 400 stock index ("S&P 400
Index"). The S&P 400 Index is a value-weighted stock index consisting of 400
mid-sized U.S. companies.

Stock selection is based on the intersection of various appraisal models
reflecting valuation, earnings, and relative price performance. Valuation
rankings are derived by comparing price/earnings ratios relative to expected
long-term earnings growth. Stocks are also ranked on the trend and magnitude of
reported earnings, earnings surprises and changes in analysts' earnings
estimates. These fundamental appraisal factors are supplemented by an analysis
of short-term price changes exhibited by individual securities that deviate
significantly from related industry group performance.

Portfolio decision-making follows a disciplined process. Stocks which are ranked
favorable by TIMCO's appraisal models are reviewed by a team of senior portfolio
managers. A sophisticated risk model is used to evaluate each stock's potential
contribution to overall portfolio risk. Stocks that are determined to be
underpriced on a risk-adjusted basis are overweighted in the portfolio relative
to the S&P 400 Index.

Conversely, TIMCO will sell a stock holding if the earnings outlook for the
issuing company becomes less favorable or the stock's valuation is no longer
attractive relative to the company's expected growth rate or risk.

The Mid Cap Disciplined Equity Fund will use exchange-traded financial futures
contracts consisting of stock index futures contracts and futures contracts on
debt securities ("interest rate futures") as a hedge to protect against changes
in stock prices or interest rates. A stock index futures contract is a
contractual obligation to buy or sell a specified index of stocks at a future
date for a fixed price.

The Mid Cap Disciplined Equity Fund will not purchase or sell futures contracts
for which the aggregate initial margin exceeds 5% of the fair market value of
its assets, after taking into account unrealized profits and losses on any such
contracts which it has entered into. When a futures contract is purchased, the
Mid Cap Disciplined Equity Fund will set aside an amount of cash and cash
equivalents equal to the total market value of the futures contact, less the
amount of the initial margin. At no time will the Mid Cap Disciplined Equity
Fund's transactions in such futures be used for speculative purposes.

All financial futures contracts will be traded on exchanges that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC"). To ensure
that its futures transactions meet CFTC standards, the Mid Cap Disciplined
Equity Fund will enter into futures contracts for hedging purposes only (i.e.,
for the purposes or with the intent specified in CFTC regulations and
interpretations, subject to the requirements of the Securities and Exchange
Commission).

The Mid Cap Disciplined Equity Fund may write covered call options on portfolio
securities for which call options are available and which are listed on a
national securities exchange. It may also purchase

SERIES-21
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index or individual equity call options as an alternative to holding stocks or
stock index futures, or purchase index or individual equity put options as a
defensive measure.

RISK FACTORS

There can, of course, be no assurance that the Mid Cap Disciplined Equity Fund
will achieve its investment objective since there is uncertainty in every
investment. Equity securities are subject to financial risks relating to the
earning stability and overall financial soundness of an issue. They are also
subject to market risks relating to the effect of general changes in the
securities market on the price of a security. In addition, there may be more
risk associated with the Mid Cap Disciplined Equity Fund to the extent that it
invests in small or mid-sized companies. More risk is associated with investment
in small or mid-sized companies than with larger companies because such
companies may be dependent on only one or two products and may be more
vulnerable to competition from larger companies with greater resources and to
economic conditions affecting their market sector. Small or mid-sized companies
may be new, without long business or management histories, and perceived by the
market as unproven. Their securities may be held primarily by insiders or
institutional investors, which may affect marketabilty. The prices of these
stocks often fluctuate more than the overall stock market.

FUNDAMENTAL INVESTMENT POLICIES

The investment policies of the Mid Cap Disciplined Equity Fund are fundamental
and may not be changed without a vote of the majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940 ("1940
Act"). These policies permit the Fund to:

1. invest up to 5% of its assets in the securities of any one issuer;

2. borrow money from banks in amounts of up to 10% of its assets, but only
as a temporary measure for emergency or extraordinary purposes;

3. pledge up to 10% of its assets to secure borrowings;

4. invest up to 25% of its assets in the securities of issuers in the same
industry; and

5. invest up to 10% of its assets in repurchase agreements maturing in
more than seven days and securities for which market quotations are not
readily available.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental and may not be
changed without a vote of a majority of the outstanding voting securities of the
Mid Cap Disciplined Equity Fund, as defined in the 1940 Act. The Mid Cap
Disciplined Equity Fund may not:

1. invest more than 5% of its total assets, computed at market value, in
the securities of any one issuer;

2. invest in more than 10% of any class of securities of any one issuer;

3. invest more than 5% of the value of its total assets in companies which
have been in operation for less than three years;

4. borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of up to
33 1/3% of its gross assets computed at cost; while outstanding, a
borrowing may not exceed one-third of the value of its net assets,
including the amount borrowed; the Mid Cap Disciplined Equity Fund has
no intention of attempting to increase its net income by means of
borrowing and all borrowings will be repaid before additional
investments are made; assets pledged to secure borrowings shall be no
more than the lesser of the amount borrowed or 10% of the gross assets
of the Mid Cap Disciplined Equity Fund computed at cost;

5. underwrite securities, except that the Mid Cap Disciplined Equity Fund
may purchase securities from issuers thereof or others and dispose of
such securities in a manner consistent

SERIES-22
<PAGE> 75

with its other investment policies; in the disposition of restricted
securities the Account may be deemed to be an underwriter, as defined
in the Securities Act of 1933 (the "1933 Act");

6. purchase real estate or interests in real estate, except through the
purchase of securities of a type commonly purchased by financial
institutions which do not include direct interest in real estate or
mortgages, or commodities or commodity contracts, except transactions
involving financial futures in order to limit transaction and borrowing
costs and for hedging purposes as described above;

7. invest for the primary purpose of control or management;

8. make margin purchases or short sales of securities, except for
short-term credits which are necessary for the clearance of
transactions, and to place not more than 5% of its net asset value in
total margin deposits for positions in futures contracts;

9. make loans, except that the Mid Cap Disciplined Equity Fund may
purchase money market securities, enter into repurchase agreements, buy
publicly and privately distributed debt securities and lend limited
amounts of its portfolio securities to broker-dealers; all such
investments must be consistent with the Account's investment objective
and policies;

10. invest more than 25% of its total assets in the securities of issuers
in any single industry;

11. purchase the securities of any other investment company, except in the
open market and at customary brokerage rates and in no event more than
3% of the voting securities of any investment company;

12. invest in interests in oil, gas or other mineral exploration or
development programs; or

13. invest more than 5% of its net assets in warrants, valued at the lower
of cost or market; warrants acquired by the Account in units or
attached to securities will be deemed to be without value with regard
to this restriction. The Mid Cap Disciplined Equity Fund is subject to
restrictions in the sale of portfolio securities to, and in its
purchase or retention of securities of, companies in which the
management personnel of TIMCO have a substantial interest.

The Mid Cap Disciplined Equity Fund may make investments in an amount of up to
15% of the value of its net assets in restricted securities which may not be
publicly sold without registration under the 1933 Act. In most instances such
securities are traded at a discount from the market value of unrestricted
securities of the same issuer until the restriction is eliminated. If and when
the Mid Cap Disciplined Equity Fund sells such portfolio securities, it may be
deemed an underwriter, as such term is defined in the 1933 Act, with respect
thereto, and registration of such securities under the 1933 Act may be required.
The Mid Cap Disciplined Equity Fund will not bear the expense of such
registration. The Mid Cap Disciplined Equity Fund intends to reach agreements
with all such issuers whereby they will pay all expenses of registration. In
determining securities subject to the 15% limitation, the Mid Cap Disciplined
Equity Fund will include, in addition to restricted securities, repurchase
agreements maturing in more than seven days and other securities not having
readily available market quotations.

PORTFOLIO TURNOVER

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

Although none of the Portfolios intend to invest for the purpose of seeking
short-term profits, securities held by each Portfolio will be sold whenever the
Portfolio's investment adviser or Subadviser believes it is appropriate to do so
in light of the Portfolio's investment objective, without regard to the length
of time a particular security may have been held. For 1996, the Portfolio
turnover rates were as follows: Quality Bond Portfolio, 35%; Lazard
International Stock Portfolio, 9%; MFS Emerging Growth Portfolio, 49%; Federated
High Yield Portfolio, 23%; Federated Stock Portfolio, 11%; Large Cap Portfolio,
57% (annualized); and Equity Income Portfolio, 14% (annualized). Because the Mid
Cap Disciplined Equity Portfolio is new, no Portfolio turnover information is
presently available. We anticipate this Portfolio turnover rate to be
approximately 100-125%.

SERIES-23
<PAGE> 76

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

INVESTMENT MANAGER
- --------------------------------------------------------------------------------

As described above, the Board of Trustees monitors the activities of those
entities which provide investment management and Subadvisory services to the
Portfolios. The Travelers Asset Management International Corporation ("TAMIC,"
also referred to throughout this prospectus as the "Investment Adviser")
provides investment supervision to the Portfolios described herein (with the
exception of the Quality Bond Portfolio) in accordance with each Portfolio's
investment objectives, policies and restrictions. TAMIC'S responsibilities
generally include the following:

(1) engaging the services of one or more firms to serve as investment
adviser to the Portfolios;

(2) reviewing from time to time the investment policies and restrictions of
the Portfolios in light of the Portfolio's performance and otherwise
and after consultation with the Board, recommending any appropriate
changes to the Board;

(3) supervising the investment program prepared for the Portfolios by the
Subadviser;

(4) monitoring, on a continuing basis, the performance of the Portfolio's
securities;

(5) arranging for the provision of such economic and statistical data as
TAMIC shall determine or as may be requested by the Board; and

(6) providing the Board with such information concerning important economic
and political developments as TAMIC deems appropriate or as the Board
requests.

TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. TAMIC is an indirect wholly owned
subsidiary of Travelers Group, Inc., and its principal offices are located at
One Tower Square, Hartford, Connecticut, 06183. In addition to providing
investment advice to the Portfolio, TAMIC also acts as investment adviser for
other investment companies used to fund variable insurance products. TAMIC also
provides investment advice to individual and pooled pension and profit-sharing
accounts and non-affiliated insurance companies. For serving as investment
adviser to the Trust, TAMIC receives a fee, equal to the average daily net asset
value of each of the following Portfolios: Lazard International Stock Portfolio
0.35%; MFS Emerging Growth 0.375 %; Federated High Yield Portfolio 0.25%;
Federated Stock Portfolio 0.25%; Large Cap Portfolio 0.30%; Equity Income
Portfolio 0.30%; and Mid Cap Disciplined Equity Fund 0.70%. Investment Advisory
fees are computed daily and are paid monthly. These fees do not reflect the
Subadvisory fees paid to the Subadvisers. Additionally, TAMIC provides
investment advisory services to the Travelers Bond Quality Portfolio.

QUALITY BOND PORTFOLIO
INVESTMENT ADVISER: TAMIC

Under its Investment Advisory Agreement with the Trust, TAMIC is paid an amount
equivalent on an annual basis to .3233% of the average daily net assets of the
Portfolio. The fee is computed daily and paid monthly.

PORTFOLIO MANAGER

The Portfolio is managed by F. Denney Voss. Mr. Voss joined The Travelers
Insurance Company in 1980 and currently Mr. Voss is a Senior Vice President of
The Travelers Insurance Company. Mr. Voss is also a Vice President of TAMIC. Mr.
Voss has also managed TAMIC's Quality Bond Account for

SERIES-24
<PAGE> 77

Variable Annuities since March 1995 and has been responsible for managing the
Travelers portfolios backing general account insurance products since August
1994. Prior to transferring to the Travelers Securities Department in 1994, Mr.
Voss performed various sales and trading functions for Smith Barney Inc., a
Travelers Group subsidiary.

INVESTMENT SUBADVISERS
- --------------------------------------------------------------------------------

GENERAL

Under the terms of the Investment Advisory and Subadvisory Agreements, the
Subadviser provides an investment program for the Portfolios. The Subadvisers
make all determinations with respect to the purchase and sale of the portfolio
securities (subject to the terms and conditions of the investment objectives,
policies, and restrictions of the Portfolio and to the supervision of the Board
of Trustees and TAMIC) and places, in the name of the Portfolio, call orders for
execution of the portfolio transactions. In addition, only Fidelity Management
Resource, Inc. ("FMR") also executes the offers, while MFS, Lazard and Federated
only place the orders for TAMIC to execute.

For services rendered to the Portfolios, the Subadvisers charge a fee to TAMIC.
The Portfolios do not pay the Subadvisers' fee nor any part thereof, nor will
they have any obligation or responsibility to do so. The Subadvisory fees that
TAMIC pays to the various Subadvisers are not dependent on the particular
Portfolio's performance.

LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD ASSET MANAGEMENT

Lazard Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New York
10020, has entered into an investment Subadvisory agreement (the "Lazard
Subadvisory Agreement") on behalf of the Portfolio with TAMIC to provide
Subadvisory services to the Lazard International Stock Portfolio. Pursuant to
the Lazard Subadvisory Agreement, Lazard will regularly provide the Portfolio
with investment research, advice and supervision and furnish continuously an
investment program for the Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.

Lazard Asset Management is a division of Lazard & Co. LLC ("Lazard"), a New York
limited liability company, which is registered as an investment adviser with the
Commission and is a member of the New York, American and Midwest Stock
Exchanges. Lazard provides its clients with a wide variety of investment
banking, brokerage and related services in addition to asset management
services.

Under its Subadvisory Agreement with TAMIC, Lazard is paid an amount equivalent
on an annual basis of .475% of the average daily net assets of the Portfolio.
The fee is accrued daily and paid monthly.

MANAGEMENT OF LAZARD PORTFOLIO

Herbert Gullquist is primarily responsible for the day-to-day management of the
assets of the Portfolio. Mr. Gullquist is a Managing Director and Chief
Investment Officer of Lazard, and has been with the Subadviser since 1982. He
has been the President of The Lazard Funds, Inc., which includes several mutual
funds including the Lazard International Stock Portfolio, a publicly traded
mutual fund offered by Lazard since that fund's inception in 1991.

MFS PORTFOLIO
SUBADVISER: MFS

SERIES-25
<PAGE> 78

ary 28, 1997. As of such date, MFS managed approximately $28.9 billion of assets
invested in equity securities and approximately $19.9 billion of assets invested
in fixed income securities. Approximately $4.0 billion of the assets managed by
MFS are invested in securities of foreign issuers and non-U.S. dollar
denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life of
Canada (U.S.), which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada ("Sun Life").

Under its Subadvisory Agreement with TAMIC, MFS is paid an amount equivalent on
an annual basis to .375% of the average daily net assets of the Portfolio. The
fee is accrued daily and paid monthly.

MANAGEMENT OF MFS PORTFOLIO

John W. Ballen a Senior Vice President of MFS, serves as a co-manager of the MFS
Portfolio and in such capacity Mr. Ballen is charged with responsibility for the
day-to-day operations of the MFS Portfolio. Mr. Ballen has been employed as a
portfolio manager by MFS since 1984. Mr. Ballen is a graduate of Harvard
College, University of New South Wales, and Stanford University Graduate School
of Business Administration.

Also charged with management of the Fund is Toni Shimura, who joined MFS in 1987
as a member of the Research Department. A graduate of Wellesley College and the
Sloan School of Management at the Massachusetts Institute of Technology, she was
named Investment Officer in 1990, Assistant Vice President -- Investments in
1991, and Vice President -- Investments in 1992. She also manages MFS Emerging
Growth Series, Series of MFS Variable Insurance Trust, since November 1995.

FEDERATED HIGH YIELD PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING

Federated Investment Counseling ("Federated") a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the 1940
Act. It is a subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.

Federated and other subsidiaries of Federated Investors serve as investment
advisers to a number of investment companies and private accounts. Certain other
subsidiaries also provide administrative services to a number of investment
companies. With over $110 billion invested across more than 300 funds under
management and/or administration by its subsidiaries, as of December 31, 1996,
Federated Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to be led by
the management who founded the company in 1955. Federated funds are presently at
work in and through 4,500 financial institutions nationwide.

Pursuant to an agreement between TAMIC and Federated, Federated acts as the
Subadviser for the Federated High Yield Portfolio. In its capacity as
Subadviser, Federated continually conducts investment research and supervision
for the Federated Portfolio and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the investment
adviser.

Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to .40% of the average daily net assets of the
Portfolio. The fee is accrued daily and paid monthly.

MANAGEMENT OF THE FEDERATED HIGH YIELD PORTFOLIO

Mark E. Durbiano serves as the Federated High Yield Portfolio manager. Mr.
Durbiano joined Federated Investors in 1982 and has been a Senior Vice President
of an affiliate of the Portfolio's subadviser since January, 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of an affiliate of Federated.
Mr. Durbiano is a Chartered Financial Analyst and received his MBA in Finance
from the University of Pittsburgh.

SERIES-26
<PAGE> 79

FEDERATED STOCK PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING

Federated also serves as the Subadviser to the Federated Stock Portfolio. (See
"Federated High Yield Portfolio--Background" above for a discussion of
Federated.)

Federated serves as Subadviser to the Federated Stock Portfolio pursuant to an
agreement between itself and TAMIC. Pursuant to this agreement, Federated will
continually conduct investment research and supervision for the Portfolio and is
responsible for the purchase or sale of portfolio instruments.

Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to .375% of the average daily net assets of the
Portfolio. The fee is accrued daily and paid monthly.

MANAGEMENT OF FEDERATED STOCK PORTFOLIO

Peter R. Anderson serves as the Federated Stock Portfolio's co-manager. Anderson
joined Federated Investors in 1972 as, and is presently, a Senior Vice President
of an affiliate of the Subadviser. Mr. Anderson is a Chartered Financial Analyst
and received his M.B.A. in Finance from the University of Wisconsin.

Scott B. Schermerhorn serves as the Federated Stock Portfolio's co-manager. Mr.
Schermerhorn joined Federated Investors in 1996 as Vice President of an
affiliate of the Subadviser. From 1990 through 1996, Mr. Schermerhorn was a
Senior Vice President and Senior Investment Officer at J W Seligman & Co., Inc.
Mr. Schermerhorn received his M.B.A. in Finance and International Business from
Seton Hall University.

LARGE CAP PORTFOLIO
SUBADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY

Fidelity Management & Research Company ("FMR"), pursuant to a Subadvisory
Agreement with TAMIC, serves as the investment Subadviser to the Large Cap
Portfolio. FMR is an investment adviser registered as such with the SEC. Its
principal office is located at 82 Devonshire Street, Boston, MA 02109-3614.

All of the stock of FMR is owned by FMR Corp., its parent company organized in
1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3rd, Johnson family members,
and various trusts for the benefit of the Johnson family form a controlling
group with respect to FMR. Corp.

Under its Subadvisory Agreement with TAMIC, FMR is paid an amount equivalent on
an annualized basis to .45% of the average daily net assets of the Portfolio.
The fee is accrued daily and paid monthly.

FMR has sub-subadvisory agreements with FMR U.K. and FMR Far East. TAMIC is also
a party to these agreements in its capacity as Investment Adviser. These
sub-Subadvisers provide FMR with investment research and advice on issuers based
outside the United States. Under the sub-subadvisory agreements, FMR pays FMR
U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the costs of
providing such services.

The sub-Subadvisers may also provide investment management services. In return,
FMR pays FMR U.K. and FMR Far East a fee equal to 60% of its management fee rate
with respect to a Portfolio's investments that the sub-Subadviser manages on a
discretionary basis.

MANAGEMENT OF LARGE CAP PORTFOLIO

Thomas B. Sprague is the manager of Large Cap Portfolio. Mr. Sprague is also the
manager of Fidelity Adviser Large Cap Fund and Fidelity Large Cap Stock Fund
which are publicly offered retail mutual funds. He joined Fidelity in 1985. Mr.
Sprague is a graduate of Cornell University and Wharton School of Business.

SERIES-27
<PAGE> 80

EQUITY INCOME PORTFOLIO
SUBADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY

FMR, pursuant to a Subadvisory Agreement with TAMIC, also serves as the
Subadviser to the Equity Income Portfolio. See "Large Cap
Portfolio -- Subadviser: Fidelity Resource Management" above for a discussion of
FMR.

Under its Subadvisory Agreement with TAMIC, FMR is paid an amount equivalent on
an annual basis to .45% of the average daily net assets of the Portfolio. The
fee is accrued daily and paid monthly.

Stephen Petersen is manager of Equity Income Portfolio. He also manages Fidelity
Equity Income Fund, a publicly traded mutual fund. Mr. Petersen is also Senior
Vice President of Fidelity Management Trust Co. Previously, he was vice
president and manager of several trust accounts. Mr. Petersen joined Fidelity in
October 1980.

MID CAP DISCIPLINED EQUITY FUND
SUBADVISER: TRAVELERS INVESTMENT MANAGEMENT COMPANY (TIMCO)

The subadviser to the Portfolio is Travelers Investment Management Company
(TIMCO), a registered investment adviser that has provided investment advisory
services since its incorporation in 1967. Its principal offices are located at
One Tower Square, Hartford, Connecticut, and it is a wholly owned subsidiary of
Smith Barney Holdings Inc., which is a wholly owned subsidiary of Travelers
Group Inc. TIMCO also acts as investment adviser or subadviser for other
investment companies used to fund variable products, as well as for individual
and pooled pension and profit-sharing accounts, and for affiliated companies of
The Travelers Insurance Company. For its investment subadvisory services, TIMCO
receives a fee from TAMIC equal, on an annual basis, to 0.35% of the Portfolio's
average daily net assets.

MANAGEMENT OF MID CAP DISCIPLINED EQUITY FUND

The investment professionals responsible for the daily operations of the Fund
are Kent A. Kelley, Sandip A. Bhagat and Jake E. Hurwitz. Mr. Kelley is Chief
Executive Officer, and a director of TIMCO. He has been with Travelers since
1976. In addition to earning a Bachelors degree from New York University and a
Masters degree from Yale University, Mr. Kelley is also a Chartered Financial
Analyst.

Mr. Bhagat is President and a director of TIMCO. He has been with Travelers
since 1987. In addition to a Bachelors of Science degree from the University of
Bombay, he also earned two Masters degrees (in Chemical Engineering and in
Finance) from the University of Connecticut. Mr. Bhagat was designated a
Chartered Financial Analyst in 1991.

Mr. Hurwitz is a senior portfolio manager for TIMCO. He has been with Travelers
since 1986. Mr. Hurwitz earned a Bachelors of Arts degree from Vanderbilt
University and two Masters degrees; one from the University of California
(History) and one from New York University (Business Administration: Finance and
International Business). Mr. Hurwitz received his Chartered Financial Analyst
designation in 1984.

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

The Series Trust, on behalf of MFS Emerging Growth Portfolio, Federated High
Yield Portfolio, Federated Stock Portfolio, Lazard International Stock
Portfolio, Travelers Quality Bond Portfolio and Mid Cap Disciplined Equity Fund
entered into an Administrative Services Agreement, whereby Travelers Insurance
will be responsible for the pricing and bookkeeping services for the portfolios
at an annualized rate of .06% of the daily net assets of the Portfolios. The
Travelers Insurance Company at its expense may appoint a sub-administrator to
perform these services. The sub-administrator may be affiliated with The
Travelers Insurance Company.

The Series Trust, on behalf of the Large Cap Portfolio and Equity Income
Portfolio entered into a Service Agent Agreement with Fidelity Service Company
to provide pricing and bookkeeping services

SERIES-28
<PAGE> 81

to the two Portfolios at an annualized rate of .06% of the daily net assets of
the Portfolios under $500 million, and .03% over $500 million. There is a
minimum total annual fee of $60,000 per Portfolio.

The Series Trust has entered into a sub-contract with Fidelity Investments
Institutional Operations Company ("FIIOC"), an affiliate of FMR, under the terms
of which FIIOC performs certain transfer and dividend-disbursing services for
Large Cap and Equity Income Portfolios.

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

Under policies established by the Board of Trustees, the Subadvisers select
broker-dealers to execute transactions subject to the receipt of best execution.
When selecting broker-dealers to execute portfolio transactions for the
Portfolios, the Subadvisers may follow a policy of considering as a factor the
number of shares of a Portfolio sold by such broker-dealers. In addition,
broker-dealers may from time to time be affiliated with the Series Trust, the
investment advisers or their affiliates.

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

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

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

Pursuant to a Management Agreement dated May 1, 1993, between the Series Trust
and the Company, the Company agreed to reimburse the Series Trust for the amount
by which each Portfolio's aggregate annual expenses, including investment
advisory fees but excluding brokerage commissions, interest charges and taxes,
exceed a certain maximum percentage of each Portfolio's average net assets for
any fiscal year. For Lazard International Stock Portfolio the maximum amount is
1.25%, Travelers Quality Bond Portfolio is 0.75%. For all other Portfolios
described herein, the amount is 0.95%. This agreement will remain in effect
until terminated by either party upon sixty days' notice.

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

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

SERIES-29
<PAGE> 82

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

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

NET ASSET VALUE

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

The Portfolios value short-term money market instruments with maturities of
sixty days or less at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market. All other investments are valued at
market value, or where market quotations are not readily available, at fair
value as determined in good faith by the Series Trust's Board of Trustees or by
a committee appointed by the Trustees. The procedure set forth above need not be
used to determine the value of the securities owned by a portfolio if, in the
opinion of the Trustees or the committee appointed by the Trustees, some other
method (e.g., closing over-the-counter bid prices in the case of debt
instruments traded off an exchange) would more accurately reflect the fair
market value of such securities.

Full and fractional shares of the Portfolios may be redeemed on any business
day. Redemptions are effected at the per share net asset value next determined
after receipt by the Portfolio of a proper redemption request. The redemption
value is the net asset value adjusted for fractions of a cent and may be more or
less than the shareholder's cost depending upon changes in the value of the
Portfolio's securities between purchase and redemption.

SERIES-30
<PAGE> 83

TAX STATUS

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

DIVIDENDS AND DISTRBUTIONS

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

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

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

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

SERIES-31
<PAGE> 84

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, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may at any time
invest funds awaiting investment or held as reserves for the purposes of
satisfying redemption requests, payment of dividends or making other
distributions to shareholders, in cash and short-term money market instruments;
provided, however, that, for the Lazard International Stock Portfolio only, such
investments will not ordinarily exceed 5% of the total assets of the Portfolio.
Short-term money market instruments in which the Portfolio may invest include
(i) short-term U.S. Government Securities and, short-term obligations of foreign
sovereign governments and their agencies and instrumentalities, (ii) interest
bearing savings deposits on, and certificates of deposit and bankers'
acceptances of, United States and foreign banks, (iii) commercial paper of U.S.
or of foreign issuers rated A-1 or higher by S&P or Prime-1 by Moody's, issued
by companies which have an outstanding debt issue rated AA or higher by S&P or
Aa or higher by Moody's or, if not rated, determined by the Investment
Subadviser to be of comparable quality to those rated obligations which may be
purchased by the Portfolio and, for Lazard International Stock, Portfolios.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES

Certain of the Portfolios, including the Federated High Yield, Large Cap, Equity
Income, Mid Cap Disciplined Equity and the Lazard Stock International Portfolio
may purchase certificates of deposit. Certificates of deposit are receipts
issued by a bank in exchange for the deposit of funds. The issuer agrees to pay
the amount deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate can usually be traded in the
secondary market prior to maturity.

Bankers' Acceptances are short-term credit arrangements designed to enable
business to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted " by a bank that, in effect, unconditionally guarantees to pay
the face value of the instrument on its maturity date. The acceptance may then
be held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. The MFS
Portfolio may use this investment technique.

SERIES-32
<PAGE> 85

U.S. GOVERNMENT OBLIGATIONS

All of the Portfolios may invest in direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These securities
are backed by the full faith and credit of the U.S. Treasury.

The Federated, Large Cap, and Equity Income Portfolios may also invest in U.S.
Government obligations which may not always receive financial support from the
U.S. government including obligations of the:

- Federal Land Banks;
- Central Bank for Cooperatives;
- Federal Intermediate Credit Banks;
- Federal Home Loan Banks;
- Farmers Home Administration; and
- Federal National Mortgage Association.

EQUITY SECURITIES

Certain of the Portfolios, including MFS, Large Cap, Equity Income and Mid Cap
Disciplined Equity, may invest in equity securities. By definition, equity
securities include common stocks, convertible securities, and warrants. Common
stocks, the most familiar type, represent an equity (ownership) interest in a
corporation. Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's financial
condition and on overall market and economic conditions. Smaller companies are
especially sensitive to these factors. The Federated High Yield, Large Cap, and
Equity Income Portfolios may invest in debt obligations which involve equity
features such as conversion or exchange rights, warrants for the acquisition of
common stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered as a
unit).

DEBT SECURITIES

Additionally, the Portfolios' investments may be made in bonds and other debt
instruments used by issuers to borrow money from investors. Debt instruments
involve the promise, by the issuer of the instrument to pay the investor a fixed
or variable rate of interest. Such repayment will occur at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. In general, bond prices rise
when interest rates fall, and vice versa. Debt securities have varying degrees
of quality and varying levels of sensitivity to changes in interest rates.
Longer-term bonds are generally more sensitive to interest rate changes than
short-term bonds.

Investment-grade debt securities are medium- and high-quality securities. Some,
however, may possess speculative characteristics and may be more sensitive to
economic changes and to changes in the financial condition of issuers.

Lower-quality debt securities (sometimes called "junk bonds") are considered to
have speculative characteristics and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty. Certain of the Portfolios may be permitted to invest in
such lower-quality debt securities.

If market quotations are unavailable, lower-quality debt securities are valued
in accordance with procedures established by the Board of Trustees, including
the use of outside pricing services. Adverse publicity and changing investor
perceptions may effect the ability of outside pricing services to value
lower-quality debt securities, and the Portfolios' ability to dispose of those
securities.

FLOATING AND VARIABLE RATE INSTRUMENTS

The Lazard International Stock Portfolio, Large Cap, Equity Income, Federated
High Yield and Mid Cap Disciplined Equity Portfolios may purchase obligations
that have a floating or variable rate of

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interest. Such obligations bear interest at rates that are not fixed, but vary
with changes in specified market rates or indices, such as the prime rate, and
at specified intervals. Certain of these obligations may carry a demand feature
that would permit the holder to tender them back to the issuer at par value
prior to maturity. Each Portfolio limits its purchases of floating and variable
rate obligations to those of the same quality as it otherwise is allowed to
purchase. The Investment Subadviser monitors on an ongoing basis the ability of
an issuer of a demand instrument to pay principal and interest on demand. Each
Portfolio's right to obtain payment at par on a demand instrument can be
affected by events occurring between the date the Portfolio elects to demand
payment and the date payment is due, such events may affect the ability of the
issuer of the instrument to make payment when due, except when such demand
instruments permit same-day settlement. To facilitate settlement, these same-day
demand instruments may be held in book entry form at a bank other than the
Portfolio's custodian, subject to a subcustodian agreement approved by the
Portfolio between that bank and the Portfolio's custodian.

The floating and variable rate obligations that the Portfolio may purchase
include certificates of participation in obligations purchased from banks. A
certificate of participation gives the Portfolio an undivided interest in the
underlying obligations in the proportion that the Portfolio's interest bears to
the total principal amount of such obligations. Certain of such certificates of
participation may carry a demand feature that would permit the holder to tender
them back to the issuer prior to maturity.

VARIABLE AMOUNT MASTER DEMAND NOTES

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

REPURCHASE AGREEMENTS

The Travelers Quality Bond, Lazard International Stock, MFS, Federated High
Yield, Federated Stock, Large Cap, Equity Income and Mid Cap Disciplined Equity
Portfolios each may enter into repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities and or other securities to a
Portfolio and each agrees at the time of the sale to repurchase the securities
at a mutually agreed upon time and price. Interim cash balances may be invested
from time to time in repurchase agreements with approved counterparties (e.g.,
banks or broker-dealers meeting the investment advisor's credit quality
standards as presenting minimal risk of default). Repurchase transactions
generally mature the next business day but, in the event of a transaction of
longer maturity, collateral will be marked to market daily and, when required,
additional cash or qualifying collateral will be required from the counterparty.

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In any repurchase agreement, the risk that the original seller does not
repurchase the securities as called for in the repurchase agreement exists. A
Portfolio could receive less than the repurchase price on any sale of such
securities. Additionally, if the seller becomes subject to a proceeding under
the bankruptcy laws or its assets are otherwise subject to a stay order, a
Portfolio's right to liquidate the securities may be restricted (during which
time the value of the securities could decline). The Investment Adviser and
Subadviser, however, each believe that under the regular procedures normally in
effect for custody of the Portfolio's securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Portfolio and allow retention or disposition of such securities.

Each of the Portfolios may adopt rules concerning the collateralization of
repurchase agreements so long as the repurchase agreement is collateralized
fully.

The Portfolios will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers that are found by the
particular Portfolio's adviser to be creditworthy pursuant to guidelines
established for the Portfolio.

The Portfolio or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.

REVERSE REPURCHASE AGREEMENTS

The Federated High Yield, Federated Stock, Large Cap, Lazard International
Stock, Equity Income, and Mid Cap Disciplined Equity Portfolios may enter into
reverse repurchase agreements. This transaction is similar to borrowing cash. In
a reverse repurchase agreement the Portfolio transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Portfolio will repurchase the
portfolio instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable the
Portfolio to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Portfolio will be able to avoid selling
portfolio instruments at a disadvantageous time.

The Large Cap and Equity Income Portfolios will enter into reverse repurchase
agreements only with parties whose creditworthiness has been found satisfactory
to the Subadviser. Such transactions may increase fluctuations in the
Portfolio's yield or in the market value of its assets.

When effecting reverse repurchase agreements, liquid assets of the Portfolio, in
a dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled. During the period any
reverse repurchase agreement are outstanding, but only to the extent necessary
to assure completion of the reverse repurchase agreements, the Portfolio will
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.
The foregoing sentence does not apply to the Large Cap or Equity Income
Portfolios.

WHEN-ISSUED SECURITIES

Each of the Portfolios may purchase securities on a when-issued or delayed
delivery basis. Transactions of this type are arrangements in which the
particular Portfolio purchases securities with payment and delivery scheduled
for a future time. Their purpose is to help to ensure the availability of
suitable securities.

The prices of such securities will be fixed at the time the commitment to
purchase is made, and may be expressed in either dollar price or yield
maintenance terms. Such commitment to purchase may be viewed as a senior
security, and generally will be marked to market and reflected in the
Portfolio's

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Accumulation Unit Value daily from the commitment date. Delivery and payment may
be at a future date beyond customary settlement time.

It is the customary practice of Travelers Quality Bond Portfolio to make
when-issued purchases for settlement no more than 90 days beyond the commitment
date. The Travelers Quality Bond Portfolio may only purchase when issued
securities of new issue government or agency securities.

While it is the intention of each Portfolio to take physical delivery of these
securities, offsetting transactions may be made prior to settlement, if it is
advantageous to do so. For example, Travelers Quality Bond Portfolio does not
make payment or begin to accrue interest on these securities until settlement
date. In order to invest its assets pending settlement, Travelers Quality Bond
Portfolio will normally invest in short-term money market instruments and other
securities maturing no later than the scheduled settlement date.

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

The Investment Adviser and Subadvisers engaged in trades of when issued
securities each believes that purchasing securities in this manner will be
advantageous. This practice, however does include certain risks, namely the
default of the counterparty on its obligation to deliver the security as
scheduled. In this event, an affected Portfolio would endure a loss (or gain)
equal to the price appreciation (or depreciation) in value from the commitment
date. Further, such failure to complete a transaction may cause the affected
Portfolio to miss other opportunities.

To guard against such risks, the Investment Adviser and Subadviser employ a
rigorous credit quality procedure in determining the counterparties with which
it will deal in when-issued securities and, in some circumstances, will require
the counterparty to post cash or some other form of security as margin to
protect the value of its delivery obligation pending settlement.

It is expected that, under normal circumstances, the Portfolios will take
delivery of such securities. In general, the Portfolios do not pay for the
securities until received and the Portfolios do not start earning interest on
the obligations until the contractual settlement date. While awaiting delivery
of the obligations purchased on such bases, the Portfolios will establish a
segregated account consisting of cash, short-term money market instruments or
high quality debt securities equal to the amount of the commitments to purchase
when-issued securities.

The MFS Portfolio may engage in trades of when-issued securities. The value of
this Portfolio's securities, together with the value of all securities of the
issuer of the "when-issued security" may not exceed 5% of the value of the
Portfolio's total assets at the time that the initial commitment to purchase
such securities is made. An increase in the percentage of the Portfolio's assets
committed to the purchase of securities on a when-issued basis may increase the
volatility of its net asset value.

A Portfolio may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Portfolio may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. A Portfolio may realize short-term profits or losses upon the sale of
such commitments.

FUTURES CONTRACTS

Certain of the Portfolios including Large Cap, Equity Income, MFS, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may use
exchange-traded financial futures for various purposes including contracts as a
hedge to protect against changes in interest rates or stock prices. Financial
futures contracts consist of stock index futures contracts and futures contracts
on debt securities. An interest rate futures contract is a contract to buy or
sell specified debt securities at a future time for a fixed price. A stock index
futures contract is a contractual obligation to buy or sell a specified index of
stocks at a future date for a fixed price.

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

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

All interest rate and stock index futures contracts will be traded on exchanges
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC"). To ensure that its futures transactions meet CFTC standards, the
Portfolios will enter into futures contracts for hedging purposes only, i.e.,
for the purposes or with the intent specified in CFTC regulations and
interpretations, subject to the requirements of the SEC. The Portfolios will
further seek to assure that fluctuations in the price of any futures contracts
that they use for hedging purposes will be substantially related to fluctuations
in the price of the securities which they hold or which they expect to purchase,
or for other risk reduction strategies, though there can be no assurance the
expected result will always be achieved.

TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS: Several of the
Portfolios, including the Large Cap, Equity Income, Lazard International Stock,
MFS and Mid Cap Disciplined Equity may enter into transactions in options,
futures and forward contracts on a variety of instruments and indices, in order
to protect against declines in the value of portfolio securities or increases in
the cost of securities or other assets to be acquired and, subject to applicable
law, to increase MFS Portfolio's gross income or in the case of Large Cap and
Equity Income Portfolios to adjust investment exposure.

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

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

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

WRITING COVERED CALL OPTIONS

The Federated High Yield, Large Cap, Equity Income, Lazard International Stock,
MFS and Mid Cap Disciplined Equity Portfolios may write (i.e., sell) covered
call options. By writing a call option, a Portfolio becomes obligated during the
term of the option to deliver the securities underlying the option upon payment
of the exercise price.

The principal reason for writing call options is to obtain, through a receipt of
premiums, a greater current return than would be realized on the underlying
securities alone. Purchases of puts or sales of calls are intended to protect
against price movements in particular securities in a Portfolio's portfolio.
Sales of calls may also generate income. The Portfolios receive a premium from
writing a call option which they retain whether or not the option is exercised.

Certain risks exist in this practice. By writing a call option, a Portfolio
might lose the potential for gain on the underlying security while the option is
open. Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange for call or put options which may or may not
exist for any particular call or put option at any specific time. The absence of
a liquid secondary market also may limit the Portfolio's ability to dispose of
the securities underlying an option. The inability to close options also could
have an adverse impact on the Portfolio's ability to effectively hedge.

BUYING PUT AND CALL OPTIONS

The Large Cap, Equity Income, Federated High Yield, Lazard International Stock,
MFS and Mid Cap Disciplined Equity Portfolios may purchase put options on
securities held, or on futures contracts whose price volatility is expected to
closely match that of securities held, as a defensive measure to preserve
shareholders' capital when market conditions warrant. The Portfolios may
purchase call options on specific securities, or on futures contracts whose
price volatility is expected to closely match that of securities eligible for
purchase by the Portfolios, in anticipation of or as a substitute for the
purchase of the securities themselves. These options may (must, in the case of
the Federated Portfolios) be listed on a national exchange or executed
"over-the-counter" with a broker-dealer as

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the counterparty. While the investment advisers anticipate that the majority of
option purchases and sales will be executed on a national exchange, put or call
options on specific securities or for non-standard terms are likely to be
executed directly with a broker-dealer when it is advantageous to do so. Option
contracts will be short-term in nature, generally less than nine months in
duration.

The Portfolios will pay a premium in exchange for the right to purchase (call)
or sell (put) a specific par value of a fixed income or equity security or
futures contract at a specified price (the strike price) on or before the
expiration date of the option contract. In either case, a Portfolio's risk is
limited to the option premium paid and the risk of depreciation in value of
securities on which it has written call options. By writing a call option on a
security, however, a Portfolio limits its opportunity to profit from any
increase in the market value of the underlying security, since the holder will
usually exercise the call option when the market value of the underlying
security exceeds the exercise price of the call.

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

If a Portfolio writes an option which expires unexercised or is closed out by
the Portfolio at a profit, it will retain the premium paid for the option which
will increase its gross income and will offset in part the reduced value of the
portfolio security underlying the option, or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the underlying
security moves adversely to the Portfolio's position, the option may be
exercised and the Portfolio will be required to purchase or sell the underlying
security at a disadvantageous price, which may only be partially offset by the
amount of the premium. MFS Portfolio may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.

The Portfolios that engage in buying put and call options may also purchase put
or call options in anticipation of market fluctuations which may adversely
affect the value of its portfolio or the prices of securities that such
Portfolio wants to purchase at a later date. In the event that the expected
market fluctuations occur, the Portfolio may be able to offset the resulting
adverse effect on its portfolio, in whole or in part, through the options
purchased. The premium paid for a put or call option plus any transaction costs
will reduce the benefit, if any, realized by such Portfolio upon exercise or
liquidation of the option, and, unless the price of the underlying security
changes sufficiently, the option may expire without value to the Portfolio.

In certain instances, the Portfolio may enter into options on Treasury
securities which may be referred to as "reset" options or "adjustable strike"
options. These options provide for periodic adjustment of the strike price and
may also provide for the periodic adjustment of the premium during the term of
the option.

OPTIONS ON STOCK INDICES -- MFS, Large Cap, Equity Income, Lazard International
Stock and Mid Cap Disciplined Equity Portfolios may write (sell) covered call
and put options and purchase call and put options on stock indices. These
Portfolios may write options on stock indices for the purpose of increasing its
gross income and to protect its portfolio against declines in the value of
securities it owns or increases in the value of securities to be acquired. When
such Portfolios write an option on a stock index, and the value of the index
moves adversely to the holder's position, the option will not be exercised, and
the Portfolio will either close out the option at a profit or allow it to expire
unexercised. The Portfolio writing the covered call or put option will thereby
retain the amount of the premium, less related transaction costs, which will
increase its gross income and offset part of the reduced value of portfolio
securities or the increased cost of securities to be acquired. Such

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transactions, however, will constitute only partial hedges against adverse price
fluctuations, since any such fluctuations will be offset only to the extent of
the premium received by the Portfolio for the writing of the option, less
related transaction costs. In addition if the value of an underlying index moves
adversely to the Portfolios' option position, the option may be exercised, and
the Portfolios will experience a loss which may only be partially offset by the
amount of the premium received.

The MFS, Lazard International Stock, Large Cap, Equity Income Portfolios may
also purchase put or call options on stock indices in order, respectively, to
hedge its investments against a decline in value or to attempt to reduce the
risk of missing a market or industry segment advance.

INDEX FUTURES CONTRACTS

FUTURES CONTRACTS -- MFS Portfolio, Large Cap Portfolio, Equity Income
Portfolio, Lazard International Stock Portfolio and Mid Cap Disciplined Equity
Portfolio may enter into stock index futures contracts (Index Futures). The
Portfolios will utilize Index Futures for hedging and non-hedging purposes,
subject to applicable law. Purchases or sales of stock index futures contracts
for hedging purposes are used to attempt to protect the Portfolios' current or
intended stock investments from broad fluctuations in stock prices. In the event
that an anticipated decrease in the value of portfolio securities occurs as a
result of a general stock market decline, a general increase in interest rates
or a decline in the dollar value of foreign currencies in which portfolio
securities are denominated, the adverse effects of such changes may be offset,
in whole or part, by gains on the sale of futures contracts. Conversely, the
increased cost of portfolio securities to be acquired, caused by a general rise
in the stock market, a general decline in interest rates or a rise in the dollar
value of foreign currencies, may be offset, in whole or part, by gains on Index
Futures contracts purchased by the Portfolios. A Portfolio will incur brokerage
fees when it purchases and sells Index Futures contracts, and it will be
required to make and maintain margin deposits.

OPTIONS ON INDEX FUTURES CONTRACTS -- MFS, Large Cap, Equity Income, Lazard
International Stock and Mid Cap Disciplined Equity Portfolios may purchase and
write options on stock index futures contracts. Such investment strategies will
be used for hedging and non-hedging purposes, subject to applicable law. Put and
call options on futures contracts may be traded by the Portfolios in order to
protect against declines in the values of portfolio securities or against
increases in the cost of securities to be acquired. Purchases of options on
futures contracts may present less risk in hedging the portfolios of the
Portfolios than the purchase or sale of the underlying futures contracts since
the potential loss is limited to the amount of the premium plus related
transaction costs. The writing of such options, however, does not present less
risk than the trading of futures contracts and will constitute only a partial
hedge, up to the amount of the premium received. In addition, if an option is
exercised, the Portfolios may suffer a loss on the transaction.

FORWARD CONTRACTS ON FOREIGN CURRENCY -- MFS Portfolio, Large Cap Portfolio,
Equity Income Portfolio, and Lazard International Stock Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date at a
price set at the time of the contract (a "Forward Contract"). The Portfolios
will enter into Forward Contracts for hedging and non-hedging purposes,
including transactions entered into for the purpose of profiting from
anticipated changes in foreign currency exchange rates. Transactions in Forward
Contracts entered into for hedging purposes may include forward purchases or
sales of foreign currencies for the purpose of protecting the dollar value of
securities denominated in a foreign currency or protecting the dollar equivalent
of interest or dividends to be paid on such securities. The Portfolios may also
enter into Forward Contracts for "cross hedging" purposes, e.g., the purchase or
sale of a Forward Contract on one type of currency as a hedge against adverse
fluctuations in the value of a second type of currency. By entering into such
transactions, however, the Portfolios may be required to forgo the benefits of
advantageous changes in exchange rates. The Portfolios may also enter into
transactions in Forward Contracts for other than hedging purposes. For example,
if the Subadviser believes that the value of a particular foreign currency will
increase or decrease relative to the value of the U.S. dollar, the Portfolios
may purchase or sell such currency, respectively, through a Forward Contract. If
the expected changes in the value of the currency occur, the Portfolios will
realize profits which will increase its gross income. Such

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transactions, however, may be considered speculative and could involve
significant risk of loss, as set forth below. the Portfolios have established
procedures consistent with statements of the SEC and its staff regarding the use
of Forward Contracts by registered investment companies, which requires use of
segregated assets or "cover" in connection with the purchase and sale of such
Contracts.

Forward Contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in the Futures and Options contracts
described above.

OPTIONS ON FOREIGN CURRENCIES -- MFS Portfolio, Large Cap Portfolio, Equity
Income Portfolio, and Lazard International Stock Portfolio may purchase and
write put and call options on foreign currencies for the purpose of protecting
against declines in the dollar value of portfolio securities, and against
increases in the dollar cost of securities to be acquired. As in the case of
other types of options, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium received,
and the Portfolios could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Portfolio's position, it may forfeit the entire amount of the premium
plus related transaction costs. As in the case of Forward Contracts, certain
options on foreign currencies are traded over-the-counter and involve risks
which may not be present in the case of exchange-traded instruments.

RESTRICTED AND ILLIQUID SECURITIES

Lazard International Stock, MFS, Federated High Yield, Federated Stock, Large
Cap, and Equity Income Portfolios may purchase and sell securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act")
("restricted securities"), including those that can be offered and sold to
"qualified institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). Sale of this type of security is typically restricted under the
federal securities laws. The above mentioned Portfolios may also purchase and
sell securities that are subject to transfer restrictions, and may therefore be
illiquid.

Some restricted securities may be "illiquid" because sale of these securities
may be difficult and the Portfolio engaging in trading of illiquid securities
may not be able to sell them (or sell them at fair market value) when the
investment adviser or Subadviser believes it is desirable to do so. Accordingly
such sales may be made at less than fair market value or may not be able to sell
them when the investment adviser believes it is desirable to do so.

The following Portfolios currently limit the amount of net assets that may be
invested in illiquid securities to 15% of their respective Portfolio's net
assets: Large Cap, Equity Income, MFS, Federated Stock, Federated High Yield,
Lazard International Stock and Mid Cap Disciplined Equity Portfolios.

Securities may be illiquid securities for different reasons including, among
others, (i)absence of a readily available market or legal or contractual
restrictions on resale; and (ii) repurchase agreements not terminable within
seven days. Securities eligible for resale under Rule 144A under the Securities
Act that have legal or contractual restrictions on resale but have a readily
available market are not deemed illiquid securities for this purpose.

Each Subadviser will monitor the liquidity of such restricted securities. This
monitoring process will involve a continuing review of the trading markets for
the specific Rule 144A security, whether such security is illiquid and thus
subject to the particular Portfolio's limitation on investing its net assets in
illiquid investments. In monitoring a restricted security, the Investment
adviser or Subadviser will review the current value of the security based on
currently available information. The Subadviser, however, will retain sufficient
oversight and be ultimately responsible for the determinations.

Subject to the limitation on investments in illiquid investments, the Portfolios
may also invest in restricted securities that may not be sold under Rule 144A,
which presents certain risks. As a result, a Portfolio might not be able to sell
these securities when the Subadviser wishes to do so, or might

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have to sell them at less than fair value. In addition, market quotations are
less readily available. Therefore, the judgment of the Subadviser may at times
play a greater role in valuing these securities than in the case of unrestricted
securities.

Additionally, the Equity Income, Large Cap and the Federated Portfolios may
engage in trading of commercial paper which is illiquid. The limitation for
illiquid securities are not applicable to commercial paper issued under Section
4(2) of the Securities Act of 1933. As a matter of investment practice, which
may be changed without shareholder approval, the Federated Portfolios will limit
investments in illiquid securities, including certain restricted securities not
determined by the Subadviser to be liquid, and repurchase agreements providing
for settlement in more than seven days after notice, to 15% of net assets.

The Equity Income, Large Cap and the Federated Portfolios may also invest in
commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as
to disposition under federal securities law and is generally sold to
institutional investors, such as the Portfolio, who agree that it is purchasing
the paper for investment purposes and not with a view to public distribution.
Any resale by the purchaser must be pursuant to an exempt transaction. Section
4(2) commercial paper is normally resold to other institutional investors like
the Portfolio through or with the assistance of the issuer or the investment
dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity. These Portfolios believe that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Portfolios' Subadviser are quite liquid. The
Portfolios may, therefore, treat the restricted securities which meet the
criteria for liquidity established by the Subadviser, including Section 4(2)
commercial paper, as determined by the Subadviser of the Portfolio, as liquid
and not subject to the investment limitation applicable to illiquid securities.

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

The MFS, Large Cap, Lazard International Stock, Federated High Yield, and Equity
Income Portfolios may each purchase foreign securities or American Depository
Receipts ("ADRs"). ADRs are U.S. dollar-denominated receipts issued generally by
domestic banks representing the deposit with the bank of a security of a foreign
issuer. ADRs are publicly traded on exchanges or over the counter in the United
States.

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

Certain restrictions may apply concerning the amount of a Portfolio's net assets
which may be invested in foreign securities. For example MFS Portfolio may
invest up to 25% of its net assets in such securities, although it generally
expects to invest between 0% and 10% of its total assets in foreign securities
(not including ADRs).

SERIES-42
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The Portfolios may hold foreign currency received in connection with investments
in foreign securities when, in the judgment of the Subadviser, it would be
beneficial to convert such currency into U.S. dollars at a later date, based on
anticipated changes in the relevant exchange rate. MFS Portfolio may also hold
foreign currency in anticipation of purchasing foreign securities.

AMERICAN DEPOSITORY RECEIPTS

As noted above, ADRs are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Because ADRs trade on
United States securities exchanges, the Subadviser does not treat them as
foreign securities. However, they are subject to many of the risks of foreign
securities described above.

EMERGING MARKET SECURITIES

The MFS, Large Cap, Federated High Yield, Lazard International Stock, and Equity
Income Portfolios may invest in countries or regions with relatively low gross
national product per capita compared to the world's major economies, and in
countries or regions with the potential for rapid economic growth (emerging
markets). Emerging markets will include any country: (i) having an "emerging
stock market" as defined by the International Finance Corporation; (ii) with
low-to-middle-income economies according to the International Bank for
Reconstruction and Development (the "World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by the Subadviser to be an
emerging market as defined above. Additionally, the Portfolios may invest in
securities of: (i) companies the principal securities trading market for which
is an emerging market country; (ii) companies organized under the laws of, and
with a principal office in, an emerging market country; (iii) companies whose
principal activities are located in emerging market countries; or (iv) companies
traded in any market that derives 50% or more of their total revenue from either
goods or services produced in an emerging market or sold in an emerging market.

The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions. Delays in settlement could result in temporary periods
when a portion of the assets of a Portfolio is uninvested and no return is
earned thereon. The inability of a Portfolio to make intended security purchases
due to settlement problems could cause the Portfolio to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result in losses to a Portfolio. Emerging nations may
suffer from extreme and volatile debt burdens or inflation rates. Securities of
issuers located in countries with emerging markets may have limited
marketability and may be subject to more abrupt or erratic price movements.

Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. A Portfolio could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to a Portfolio of any
restrictions on investments. Investments in certain foreign emerging market debt
obligations may be restricted or controlled to varying degrees. These
restrictions or controls may at times preclude investment in certain foreign
emerging market debt obligations and increase the expenses of a Portfolio.

SERIES-43
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LENDING PORTFOLIO SECURITIES

The Lazard International Stock, MFS, Federated High Yield, Federated Stock,
Large Cap, Equity Income and Mid Cap Disciplined Equity Portfolios are each
authorized to lend their portfolio securities to brokers, dealers and other
financial organizations. The Large Cap and Equity Income Portfolios may lend
portfolio securities to Fidelity. The purpose of this lending activity is to
generate additional income. The primary risk associated with lending portfolio
securities, as with other extensions of credit, consists of possible loss of
rights in the collateral should the borrower fail financially.

As with any securities lending, a risk exists that when the Portfolio lends
portfolio securities, the securities may not be available to the Portfolio on a
timely basis and the Portfolio may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities files for bankruptcy or becomes insolvent, disposition of the
securities may be delayed pending court action.

Each of the Portfolios engaging in securities lending will follow certain
guidelines in determining whether a particular potential securities borrower is
appropriate. For example, MFS will usually only make loans to member banks of
the Federal Reserve System and member firms (and subsidiaries thereof) of the
New York Stock Exchange (the "Exchange") and would be required to be secured
continuously by collateral in cash, cash equivalents or U. S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. MFS Portfolio would continue to collect
the equivalent of the interest on the securities loaned and would also receive
either interest (through investment of cash collateral) or a fee (if the
collateral is U. S. Government securities or a letter of credit). The Lazard
International Stock and Federated Portfolios may lend securities from its
portfolio to brokers, dealers and financial institutions if cash or cash
equivalent collateral, including letters of credit, marked-to-market daily and
equal to at least 100% of the current market value of the securities loaned
(including accrued interest and dividends thereon) plus the interest payable to
the Portfolio with respect to the loan is maintained by the borrower with the
Portfolio in a segregated account.

In determining whether to lend a security to a particular broker, dealer or
financial institution, the Investment Subadviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer or
financial institution. A Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that the Portfolio may receive as collateral will not become part of the
Portfolio's investment Portfolio at the time of the loan and, in the event of a
default by the borrower, the Portfolio will, if permitted by law, dispose of
such collateral except for such part thereof that is a security in which the
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Portfolio any accrued income on those securities and the
Portfolio may invest the cash collateral and earn additional income or receive
an agreed upon fee from a borrower that has delivered cash equivalent
collateral. The Portfolio will not lend securities having a value that exceeds
10% of the current value of its total assets. Loans of securities will be
subject to termination at the Portfolio's or the borrower's option. The
Portfolio may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.

TEMPORARY BANK BORROWING

All of the Portfolios may borrow from banks for temporary purposes, including
the meeting of redemption requests which might require the untimely disposition
of securities. The Federated Portfolios may borrow up to 33% of their respective
assets for such reasons as well.

Temporary or emergency borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not exceed 5%, of the
value of the Lazard International Stock Portfolio's total assets (including the
amount borrowed) less liabilities (including the amount borrowed) at the time
the borrowing is made. Securities may not be purchased by the Portfolio while
borrowings in excess of 5% of the value of the Lazard International Stock
Portfolio's

SERIES-44
<PAGE> 97

total assets are outstanding. The foregoing policies do not apply to MFS, Equity
Income, and Large Cap Portfolios, whose policies permit borrowing of up to
33 1/3% of total assets.

LETTERS OF CREDIT

The Lazard International Stock Portfolio and Mid Cap Disciplined Equity Fund may
also engage in trades of municipal obligations, certificates of participation
therein, commercial paper and other short-term obligations that are backed by
irrevocable letters of credit issued by banks which assume the obligation for
payment of principal and interest in the event of default by an issuer. Only
banks the securities of which, in the opinion of the Investment Subadviser, are
of investment quality comparable to other permitted investments of the Lazard
International Stock Portfolio may be used for letter of credit-backed
investment.

INVESTMENT IN UNSEASONED COMPANIES

The Lazard International Stock, Equity Income, and Large Cap Portfolios may also
invest Portfolio assets in securities of companies that have operated for less
than three years, including the operations of predecessors. The Lazard
International Stock Portfolio has undertaken that it will not make investments
that will result in more than 5% of its total assets being invested in the
securities of newly formed companies and equity securities that are not readily
marketable. Investing in securities of unseasoned companies may, under certain
circumstances, involve greater risk than is customarily associated with
investment in more established companies.

REAL ESTATE-RELATED INSTRUMENTS

The Large Cap and Equity Income Portfolios may engage in the purchase and sale
of real estate related instruments including real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such as
real estate values and property taxes, interest rates, cash flow of underlying
real estate assets, over building, and the management skill and creditworthiness
of the issuer. Real estate-related instruments may also be affected by tax and
regulatory requirements, such as those relating to the environment.

CORPORATE ASSET-BACKED SECURITIES

Federated High Yield, MFS Portfolio, Large Cap Portfolio and Equity Income
Portfolio may invest in corporate asset-backed securities. These securities,
issued by trusts and special purpose corporations, are backed by a pool of
assets, such as credit card or automobile loan receivables, representing the
obligations of a number of different parties. Corporate asset-backed securities
present certain risks. For instance, in the case of credit card receivables,
these securities may not have the benefit of any security interest in the
related collateral.

ASSET-BACKED MORTGAGE SECURITIES

Securities of this type include interests in pools of lower-rated debt
securities, or consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities. The
value of these securities may be significantly affected by changes in interest
rates, the market's perception of the issuers, and the creditworthiness of the
parties involved. Some securities may have a structure that makes their reaction
to interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.

LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS

MFS Portfolio, Federated High Yield, Large Cap and Equity Income Portfolios may
invest a portion of their assets in "loan participations" and other direct
indebtedness. By purchasing a loan participation, the Portfolios acquire some or
all of the interest of a bank or other lending institution in a loan to a
corporate borrower. Many such loans are secured, and most impose restrictive
covenants which must be met by the borrower. These loans are made generally to
finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. Such loans may be in default at the
time of purchase.

SERIES-45
<PAGE> 98

MFS, Large Cap and Equity Income Portfolios may also purchase other direct
indebtedness such as trade or other claims against companies, which generally
represent money owed by the company to a supplier of goods and services. These
claims may also be purchased at a time when the company is in default. Certain
of the loan participations and other direct indebtedness acquired by these
Portfolios may involve revolving credit facilities or other standby financing
commitments which obligate the Portfolios to pay additional cash on a certain
date or on demand.

The highly leveraged nature of many such loans and other direct indebtedness may
make such loans especially vulnerable to adverse changes in economic or market
conditions. Loan participations and other direct indebtedness may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may exist to resell such instruments. As a result, the
Portfolios may be unable to sell such investments at an opportune time or may
have to resell them at less than fair market value. For a further discussion of
loan participations, other direct indebtedness and the risks related to
transactions therein, please review the SAI.

INVESTMENT COMPANY SECURITIES

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
purchase and sell securities of closed-end investment companies.

AFFILIATED BANK TRANSACTIONS

The Large Cap and Equity Income Portfolios may engage in transactions with
financial institutions that are, or may be considered to be "affiliated persons"
of the fund under the Investment Company Act of 1940. These transactions may
include repurchase agreements with custodian banks; short-term obligations of,
and repurchase agreements with, the 50 largest U.S. banks (measured by
deposits): municipal securities, U. S. government securities with affiliated
financial institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. The Board of Trustees and the
Subadvisers of Portfolios engaged in affiliated bank transactions have
established and will periodically review procedures applicable to transactions
involving affiliated financial institutions.

INDEXED SECURITIES

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
purchase securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price of
gold, resulting, in a security whose price tends to rise and fall together with
gold prices. Currency-indexed securities typically are short-term to
intermediate-term debt securities whose maturity values or interest rates are
determined by reference to the values of one or more specified foreign
currencies, and may offer higher yields than U.S. dollar-denominated securities
of equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency,
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Recent
issuers of indexed securities have included banks, corporations, and certain
U.S. government agencies. Indexed securities may be more volatile than the
underlying instruments.

SERIES-46
<PAGE> 99

SHORT SALES "AGAINST THE BOX"

The Large Cap, Equity Income, and Lazard International Stock Portfolios may
enter into a short sale against the box. If a Portfolio decides to enter into
such transitions, it will be required to set aside securities equivalent in kind
and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such securities
while the short sale is outstanding.

SWAP AGREEMENTS

The Large Cap and Equity Income Portfolios may engage in swap agreements which
can be individually negotiated and structured to include exposure to a variety
of different types of investments or market factors. Depending on their
structure, swap agreements may increase or decrease a fund's exposure to long-
or short-term interest rates (in the United States or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. A Portfolio is not limited to any
particular form of swap agreement if the Subadviser determines it is consistent
with the fund's investment objective and policies.

In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

Swap agreements will tend to shift a Portfolio's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a fund's
investments and its share price.

The most significant factor in the performance of swap agreements is the change
in the specific interest rate, currency, or other factors that determine the
amounts of payments due to and from a fund. If a swap agreement calls for
payments by the fund, the fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declined, the value of a
swap agreement would be likely to decline, potentially resulting in losses. Each
Portfolio expects to be able to eliminate its exposure under swap agreements
either by assignment or other disposition, or by entering into an offsetting
swap agreement with the same party or a similarly creditworthy party.

Each Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a Portfolio
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the Portfolio's accrued
obligations under the swap agreement over the accrued amount the Portfolio is
entitled to receive under the agreement. If a Portfolio enters into a swap
agreement on other than a net basis, it will segregate assets with a value equal
to the full amount of the Portfolio's accrued obligations under the agreement.

SERIES-47
<PAGE> 100

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

A. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS

Aaa -- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds rated A possess many favorable investment attributes are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest susceptibility to impairment sometime in the future.

Baa -- Bonds rated Baa are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

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

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

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

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

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

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

B. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

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

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

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or

SERIES-48
<PAGE> 101

changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.

BB -- Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B -- Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest or repay principal.

CC -- Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.

SERIES-49
<PAGE> 102

THE TRAVELERS SERIES TRUST

L-11788-3NC 5/97

<PAGE> 103

PART B

INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 104

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
MID CAP DISCIPLINED EQUITY FUND

MAY 1, 1997

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 May 1, 1997. A copy of the prospectus
is available from the office of the Trust at The Travelers Insurance Company,
Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030 or by
calling 1-800-842-8573. This SAI should be read in conjunction with the
accompanying 1996 Annual Reports for the Portfolios.

<PAGE> 105
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. . . . . . . . . . . . . . . . . . . . . . . . 16
LARGE CAP PORTFOLIO. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . 17
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 18
EQUITY INCOME PORTFOLIO . . . . . . . . .. . . . . . . . . . . . . . . . . 19
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . 19
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 20
MID CAP DISCIPLINED EQUITY FUND. . . . . . . . . . . . . . . . . . . . . . 20
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . 20
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 21
VALUATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 22
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

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<PAGE> 106

<TABLE>
<S> <C>
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . 25
INVESTMENT ADVISORY SERVICES . . . . . . . . . . . . . . . . . . . . . . 25

INVESTMENT SUBADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Lazard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Federated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fidelity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SBMFM .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Securities Transactions. . . . . . . . . . . . . . . . . . . . . . . 30
The Advisory Agreements . . . . . . . . . . . . . . . . . . . . . . 31
REDEMPTIONS IN KIND. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FUND ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 34
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>

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<PAGE> 107
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 multiple 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

<PAGE> 108
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> 109
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 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.

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<PAGE> 110
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;

(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);

7
<PAGE> 111
(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.

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.

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<PAGE> 112

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 securities.

(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;

(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;

9
<PAGE> 113
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.

(10) will not purchase illiquid securities if more than 15% 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;
- - 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.

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<PAGE> 114

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 15% 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 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.

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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 offices in Paris, London and
Tokyo for information concerning current business trends, as well as for a
better understanding of the management of local businesses. The information
supplied by these affiliates will be limited to statistical and factual
information, advice regarding economic factors and trends or advice as to
occasional transactions in specific securities.

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

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 entry into options, forward contracts, futures
contracts, including those related to indexes shall not constitute
borrowing;

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- - 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 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 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;
- - 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;

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- - 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 investment restrictions apply,
including the following: The MFS Portfolio will not:

- - 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.

- - 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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<PAGE> 118

- - 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 and common stock and common stock equivalents such as
warrants, rights and options.

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.

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:

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<PAGE> 119

- - 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.

INVESTMENT RESTRICTIONS

The fundamental investment restrictions of the Federated Stock Portfolio are
set forth below. The Federated Stock Portfolio will not:

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<PAGE> 120

- - 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 repurchase agreements;
- - various futures and option-related techniques and instruments;
- - ADRs;
- - emerging market securities;
- - lending of portfolio securities;
- - real estate related instruments;
- - corporate asset-backed securities;
- - loan participations and other direct indebtedness;
- - indexed securities;
- - short sales "against the box";
- - cash instruments;
- - swap agreements; and
- - restricted securities.

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.

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<PAGE> 121

The Large Cap Portfolio may use various investment techniques to hedge a
portion of the fund's risks, but there is no guarantee that these strategies
will work as intended. The Portfolio seeks to spread investment risk by
diversifying its holdings among companies and industries.

The Portfolio may not buy all of these instruments or use all of these
techniques, and those described in the prospectus, to the full extent permitted
unless it believes that doing so will help achieve its goals. Current holdings
and recent investment strategies are described in the Portfolio's financial
reports which are sent to shareholders twice a year.

Purchase of a debt security is consistent with the Portfolio's debt quality
policy if it is rated at or above the stated level by Moody's Investor
Services, Inc., in the equivalent categories by Standard & Poor's Corporation,
or is unrated but judged to be of equivalent quality by the Portfolio's
Investment Adviser. The Portfolio currently intends to limit its investments in
lower-than-Baa-quality debt securities to less than 35% of its assets.

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 would hold more than
10% of the outstanding voting securities of that issuer;
- - Issue senior securities, except as permitted under the 1940 Act;
- - Borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
- - underwrite securities issued by others, except to the extent that the
Portfolio may be considered to be an underwriter within the meaning of
the 1933 Act in the disposition of restricted securities;
- - purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
- - purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by
real estate or securities or companies engaged in the real estate
business);
- - purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the Portfolio from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities);
- - lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to
repurchase agreements;
- - the Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all the assets in the securities of a
single open-end management investment company managed by the
Subadviser or any affiliate or successor with substantially the same
investment objective, policies, and limitations as the Portfolio.

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<PAGE> 122

The following investment limitations, along with all other policies or
limitations not specifically identified as fundamental, are not fundamental.

- - The Portfolio does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contnbracts 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."
- - The Portfolio does not currently intend to purchase the securites 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 ("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.

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<PAGE> 123

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.

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; (vi)
lending; and (vii) various money market instruments.

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 Portfolio
- --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.)

MID CAP DISCIPLINED EQUITY FUND ("MID CAP DISCIPLINED EQUITY FUND")
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Mid Cap Disciplined Equity Fund is to
seek growth of capital by investing primarily in a broadly diversified
portfolio of U.S. common stocks. In order to achieve consistent relative
performance, TIMCO manages the portfolio to mirror the overall risk, sector
weightings and style characteristics of the Standard & Poor's 400 stock index
("S&P 400 Index"). The S&P 400 Index is a value-weighted stock index consisting
of 400 mid-sized U.S. companies.

- - invest up to 5% of its assets in the securities of any one issuer;
- - borrow money from banks in amounts of up to 10% of its assets, but
only as a temporary measure for emergency or extraordinary purposes;
- - pledge up to 10% of its assets to secure borrowings;

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<PAGE> 124
- - invest up to 25% of its assets in the securities of issuers in the
same industry; and
- - invest up to 10% of its assets in repurchase agreements maturing in
more than seven days and securities for which market quotations are
not readily available.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental and may not be
changed without a vote of a majority of the outstanding voting securities of
the Mid Cap Disciplined Equity Fund, as defined in the 1940 Act. The Mid Cap
Disciplined Equity Fund may not:

- - invest more than 5% of its total assets, computed at market value, in
the securities of any one issuer;
- - invest in more than 10% of any class of securities of any one issuer;
- - invest more than 5% of the value of its total assets in companies
which have been in operation for less than three years;
- - borrow money, except to facilitate redemptions or for emergency or
extraordinary purposes and then only from banks and in amounts of up
to 33 1/3% of its gross assets computed at cost; while outstanding, a
borrowing may not exceed one-third of the value of its net assets,
including the amount borrowed; the Mid Cap Disciplined Equity Fund has
no intention of attempting to increase its net income by means of
borrowing and all borrowings will be repaid before additional
investments are made; assets pledged to secure borrowings shall be no
more than the lesser of the amount borrowed or 10% of the gross assets
of the Mid Cap Disciplined Equity Fund computed at cost;
- - underwrite securities, except that the Mid Cap Disciplined Equity Fund
may purchase securities from issuers thereof or others and dispose of
such securities in a manner consistent with its other investment
policies; in the disposition of restricted securities the Account may
be deemed to be an underwriter, as defined in the Securities Act of
1933 (the "1933 Act");
- - purchase real estate or interests in real estate, except through the
purchase of securities of a type commonly purchased by financial
institutions which do not include direct interest in real estate or
mortgages, or commodities or commodity contracts, except transactions
involving financial futures in order to limit transaction and
borrowing costs and for hedging purposes as described above;
- - invest for the primary purpose of control or management;
- - 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;
- - make loans, except that the Mid Cap Disciplined Equity Fund may
purchase money market securities, enter into repurchase agreements,
buy publicly and privately distributed debt securities and lend
limited amounts of its portfolio securities to broker-dealers; all
such investments must be consistent with the Account's investment
objective and policies;
- - invest more than 25% of its total assets in the securities of issuers
in any single industry;
- - purchase the securities of any other investment company, except in the
open market and at customary brokerage rates and in no event more than
3% of the voting securities of any investment company;
- - invest in interests in oil, gas or other mineral exploration or
development programs; or
- - invest more than 5% of its net assets in warrants, valued at the lower
of cost or market; warrants acquired by the Account in units or
attached to securities will be deemed to be without value with regard
to this restriction. The Mid Cap Disciplined Equity Fund is subject
to restrictions in the sale of portfolio securities to, and in its
purchase or retention of securities of, companies in which the
management personnel of TIMCO have a substantial interest.

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bear the expense of such registration. The Mid Cap Disciplined Equity Fund
intends to reach agreements with all such issuers whereby they will pay all
expenses of registration. In determining securities subject to the 15%
limitation, the Mid Cap Disciplined Equity Fund will include, in addition to
restricted securities, repurchase agreements maturing in more than seven days
and other securities not having readily available market quotations.

VALUATION OF SECURITIES

Current value for the Fund's portfolio securities is determined as
follows: Securities traded on national securities markets are valued at the
closing prices on such markets; securities for which no sales prices were
reported and U.S. Government and Agency obligations are valued at the mean
between the last reported bid and ask prices or on the basis of quotations
received from reputable brokers or other recognized sources; securities
maturing within 60 days are valued at cost plus accreted discount and, or minus
amortized premium, which approximates market value; and securities that have a
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity.

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.

22
<PAGE> 126
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 Inc. ("Smith Barney");
Chairman and Member Chairman (1993-present), Smith Barney Strategy Advisors, Inc.;
388 Greenwich Street President (1994-present), Smith Barney Mutual Funds Management Inc.;
New York, New York Chairman and Director of forty-one investment companies associated with
Age 63 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
Company++; prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers Inc.

Knight Edwards Of Counsel (1988-present), Edwards & Angell, Attorneys; Member,
Member Advisory Board (1973-1994), thirty-one mutual funds sponsored by
2700 Hospital Trust Tower Keystone Group, Inc.; Member, Board of Managers, seven Variable Annuity
Providence, Rhode Island Separate Accounts of The Travelers Insurance Company+; Trustee, five
Age 73 Mutual Funds sponsored by The Travelers Insurance Company.++

Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice
Member President (1989-1994) and Senior Vice President, Finance and
295 Hancock Street Administration (1983-1989), The Dexter Corporation (manufacturer of
Williamstown, Massachusetts specialty chemicals and materials); Director (1983-1995), Life
Age 65 Technologies, Inc. (life science/biotechnology products); Director,
(1994-present), The Connecticut Surety Corporation (insurance);
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 (1995-present), Marquette
Member University; Professor of Finance (1980-1995) and Associate Dean (1993-
606 N. 13th Street 1995), School of Business Administration, and Director, Center for
Milwaukee, WI 53233 Research and Development in Financial Services (1980-1995), University
Age 54 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 Company, Inc.
Member (investment management); Assistant Treasurer, Pensions and Benefits.
222 Berkeley Street Management (1989-1992), United Technologies Corporation (broad- based
Boston, Massachusetts designer and manufacturer of high technology products); Member, Board
Age 49 of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
</TABLE>

23
<PAGE> 127

<TABLE>
<S> <C>
Ernest J. Wright Assistant Secretary (1994-present), Counsel (1987-present), The
Secretary to the Board Travelers Insurance Company; Secretary, Board of Managers, seven
One Tower Square Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 56 Travelers Insurance Company.++

Kathleen A. McGah Assistant Secretary and Counsel (1995-present), The Travelers Insurance
Assistant Secretary to the Board Company; Assistant Secretary, Board of Managers, seven Variable Annuity
One Tower Square Separate Accounts of The Travelers Insurance Company+; Assistant
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 46 Travelers Insurance Company.++ Prior to January 1995, Counsel, ITT
Hartford Life Insurance Company.

Lewis E. Daidone Managing Director of Smith Barney, Senior Vice President and Treasurer
Treasurer of 41 investment companies associated with Smith Barney since January, 1996,
388 Greenwich Street and Director and Vice President of SBMFM and TIA; Treasurer, Board of Trustees,
New York, New York five Mutual Funds sponsored by The Travelers Insurance Company.++
Age 38

Irving David Vice President of Smith Barney, Asset Management Division (March 1994-
Controller present); Controller, Board of Trustees, five Mutual Funds sponsored by
388 Greenwich Street The Travelers Insurance Company.++
New York, NY Prior to March 1994, Director of Smith Barney, Controller and Assistant
Age 35 Treasurer of 41 investment companies associated with Smith Barney.

Thomas M. Reynolds Director of Smith Barney, Asset Management Division; Controller and
Controller Assistant Secretary of 35 investment companies associated with Smith
388 Greenwich Street Barney, (September 1991-present); Controller, Board of Trustees, five
New York, NY Mutual Funds sponsored by The Travelers Insurance Company.++
Age 36
</TABLE>

+ 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.

++ 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 $19,000 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. Once a Board Member retires, 50% of the retainer
amount will be paid annually. They also receive an aggregate fee of $2,500 for
each meeting of such Boards attended.

24
<PAGE> 128
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.

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,") and
Smith Barney Mutual Funds Management, Inc. ("SBMFM,") both referred to
throughout as the "Investment Adviser") provide investment supervision to
certain Portfolios described herein in accordance with each Portfolio's
investment objectives, policies and restrictions. The Investment Advisers'
responsibilities generally include the following:

<PAGE> 129

(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 the Investment Adviser 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 the Investment Adviser 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. For serving as investment adviser to the
Trust, TAMIC receives a fee, equal to the average daily net asset value of each
of the following Portfolios: Lazard International Stock Portfolio 0.35%; MFS
Emerging Growth 0.375%; Federated High Yield Portfolio 0.25%; Federated Stock
Portfolio 0.25%; Large Cap Portfolio 0.30%; Equity Income Portfolio 0.30%; and
Mid Cap Disciplined Equity Fund 0.70%. Investment advisory fees are computed
daily and are paid monthly. These fees do not reflect the Subadvisory fees
paid to the Subadvisers.

The total advisory fees paid to TAMIC for the year ended December 31, 1996 by
the Lazard International Stock Portfolio, $13,997; MFS Emerging Growth
Portfolio, $15,666; Federated High Yield Portfolio, $11,448; Federated Stock
Portfolio, $6,901and Equity Income Portfolio, $8,203. Because Mid Cap
Disciplined Equity Fund is a new fund, there were no investment advisory fees
paid for 1996. Additionally, TAMIC provides investment advisory services as
discussed below.

INVESTMENT ADVISER: TAMIC -- ZERO COUPON BOND PORTFOLIOS, QUALITY BOND AND
U.S. GOVERNMENT SECURITIES PORTFOLIOS

TAMIC 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,
1994, 1995 and 1996 were $82,937, $85,175, and $86,625, respectively. For the
Travelers Quality Bond Portfolio, the fee paid to TAMIC for the year ended
December 31, 1996 was $5,626. For the Zero Coupon Bond Fund Portfolios, the
fees paid for the year ended December, 31, 1996 for Series 1998, 2000 and 2005
were $1,175, $1,335 and $1,556, respectively.

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.

26
<PAGE> 130

LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD ASSET MANAGEMENT

Lazard Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New
York 10020, has entered into an investment Subadvisory agreement (the "Lazard
Subadvisory Agreement") on behalf of the Portfolio with TAMIC to provide
Subadvisory services to the Lazard International Stock Portfolio. Pursuant to
the Lazard Subadvisory Agreement, Lazard will regularly provide the Portfolio
with investment research, advice and supervision and furnish continuously an
investment program for the Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.

Lazard Asset Management is a division of Lazard, & Co. LLC a New
York limited liability company, which is registered as an investment adviser
with the SEC and is a member of the New York, American and Midwest Stock
Exchanges. Lazard provides its clients with a wide variety of
investment banking, brokerage and related services.

Lazard 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. For the year ended December 31, 1996, the fee
paid to TAMIC was $6,719.

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,
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 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 $52.8 billion on behalf of approximately 2.3 million investor
accounts as of February 28, 1997. As of such date, the MFS organization
managed approximately $28.9 billion of assets invested in equity securities
and approximately $19.9 billion of assets invested in fixed income securities.
Approximately $4.0 billion of the assets managed by MFS are invested in
securities of foreign issuers and non-U.S. dollar denominated securities of
U.S. issuers. MFS is a subsidiary of Sun Life of Canada (U.S.), which in turn
is a wholly owned subsidiary of Sun Life Assurance Company of Canada ("Sun
Life").

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. For the year ended December 31, 1996, the fee paid to TAMIC was
$7,833.

27
<PAGE> 131
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.

Also charged with management of the Fund is Toni Shimura, who joined MFS in
1987 as a member of the Research Team. Ms. Shimura was named Investment
Officer in 1990, Assistant Vice - Investments in 1991, and Vice President -
Investments in 1992. She also manages MFS Emerging Growth Series, a Series of
FS Variable Insurance Trust, since November, 1995.

FEDERATED HIGH YIELD PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING

Federated Investment Counseling. ("Federated") a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the 1940
Act. It is a subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.

Federated and other subsidiaries of Federated Investors serve as investment
advisers to a number of investment companies and private accounts. Certain
other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 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. For the year ended
December 31, 1996, the fee paid by TAMIC was $7,045.

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--Subadviser: Federated Investment Counseling"
above for a discussion of Federated.)

28
<PAGE> 132

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.

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. For the year ended
December 31, 1996, the fee paid to TAMIC was $4,141.

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.

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. For the year ended December 31,
1996, the fee paid by TAMIC was $4,927.

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.

29
<PAGE> 133
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. For the year ended December 31, 1996,
the fee paid by TAMIC was $4,923.

MANAGEMENT OF EQUITY INCOME PORTFOLIO

Stephen Petersen is manager of Equity Income Portfolio. Since 1983, he has
also managed Fidelity Equity Income Fund a publicly traded retail mutual fund.
Mr. Petersen is also Senior Vice President of Fidelity Management Trust Co.
Previously, he was Vice President and manager of several trust accounts. Mr.
Petersen joined Fidelity in October 1980.

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 year ended December 1994 and for the period January through
April 1995 were $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, and
was $58,250 for the year ended December 31, 1996.

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 years ended December 1995 and 1996
were $21,804, $67,791 and $113,601, respectively.

SECURITIES TRANSACTIONS

30
<PAGE> 134
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 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

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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,
valued for this purpose as they are valued in computing the Portfolios' NAV.
Shareholders receiving securities or other property on redemptoin may realize a
gain or loss for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences. 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.

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<PAGE> 136
Because the purchase and sale of bonds is a principal transaction there are no
brokerage commissions to report.

The total brokerage commissions paid by the Social Awareness Stock
Portfolio to TIMCO and SBMFM for the years ended December 31, 1994, 1995 and
1996 were $6,302, $14,657 and $5,203 respectively. (SBMFM became the investment
adviser on May 1, 1995.) For the year ended December 31, 1996, portfolio
transactions in the amount of $4,373,789 were placed with certain brokers
because of research services, of which $5,023 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 TAMIC during
1996.

The total brokerage commission paid by the Utilities Portfolio to
SBMFM for the period ended December 31, 1994 and the years ended December 31,
1995 and 1996 were $8,611, $20,686 and $26,559. For the year ended December
31, 1996, portfolio transactions in the amount of $12,025,457 were placed with
certain brokers because of research services, of which $23,039 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 1996.

The total brokerage commissions paid by the Zero Coupon Bond
Portfolios, Series 1998, 2000 and 2005 for the period ended December 31, 1995
were $2,064, $2,808 and $3,309, respectively. For the year ended December 31,
1996, no brokerage commissions were paid by the Zero Coupon Bond Portfolios,
and 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 1996.

The total brokerage commissions paid by the Travelers Quality Bond
Portfolio for the period ended December 31, 1996 was $8,148. For the year
ended December 31, 1996, 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 1996.

The total brokerage commissions paid by the Lazard International Stock
Portfolio for the period ended December 31, 1996 was $3,680. For the year
ended December 31, 1996, 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 1996.

The total brokerage commissions paid by the MFS Emerging Growth
Portfolio for the period ended December 31, 1996 was $10,326. For the year
ended December 31, 1996, 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 1996.

The total brokerage commissions paid by the Federated Stock Portfolio
for the period ended December 31, 1996 was $3,416. For the year ended December
31, 1996, 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 1996.

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The total brokerage commissions paid by the Large Cap Portfolio for
the period ended December 31, 1996 was $2,620. For the year ended December 31,
1996, portfolio transactions in the amount of $1,118,996 were placed with
certain brokers because of research services, of which $970 was paid in
commissions with respect to such 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 1996.

The total brokerage commissions paid by the Equity Income Portfolio
for the period ended December 31, 1996 was $1653. For the year ended December
31, 1996, portfolio transactions in the amount of $287,677 were directed to
certain brokers because of research services, of which $427 was paid in
commissions with respect to such 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
1996.

Because the Mid Cap Disciplined Equity Fund is new as of the date of
this SAI, no brokerage commissions were incurred or paid by it.

FUND ADMINISTRATION

The Series Trust, on behalf of MFS Emerging Growth, Federated High
Yield Portfolio, Federated Stock Portfolio, Lazard International Stock
Portfolio, and the Travelers Quality Bond Portfolio entered into an
Administrative Services Agreement, whereby Travelers Insurance will be
responsible for the pricing and bookkeeping services for the five portfolios at
an annualized rate of .06% of the daily net assets of the Portfolios. The
Travelers Insurance Company at its expense may appoint a sub-administrator to
perform these services. the sub-administrator may be affiliated with The
Travelers Insurance Company. Smith Barney Mutual Funds Management Inc., an
affiliate of Traveler Insurance, has been appointed to serve in this capacity.

The Series Trust, on behalf of the Large Cap Portfolio and Equity
Income Portfolio entered into a Service Agent Agreement with Fidelity Service
Company to provide pricing and bookkeeping services to the two Portfolios at an
annualized rate of .06% of the daily net assets of the Portfolios under $500
million, and .03% over $500 million. There is a minimum total annual fee of
$60,000 per Portfolio. For the period ended December 31, 1996, the fund
administration fee for Large Cap and Equity Income was $20,052 per portfolio,
for a total fund administration fee of $40,104.

ADDITIONAL INFORMATION

On May 1, 1997, the Travelers Insurance Company and its affiliates
owned 100% of the Series Trust's outstanding shares. 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 860-277-0111.

First Data Investor Services Group, Inc., 4400 Computer Drive,
Westboro, MA, 01581-5120 as transfer agent and dividend disbursing agent for
all of the Portfolios except Large Cap and Equity Income, for which Fidelity
Investment Institutional Operations Company ("FIIOC") acts as transfer agent
and dividend disbursing agent.

PNC Bank NA, 200 Stevens Drive, Lester, PA, 19113 and Barclay's Bank,
PLC, 75 Wall Street, New, serves as the custodians of all securities and cash
of the U.S. Government Bond, Social Awareness, Utilities, the three Zero Coupon
Bond Fund, Federated Stock, Federated High Yield, MFS Emerging Growth and
Travelers Quality Bond Portfolios. For the Large Cap and Equity Income
Portfolios, Brown Brothers Harriman and Co.

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<PAGE> 138

serves as the custodian. For Lazard International Stock Portfolio, the
custodian is Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New
York 11245.

Through December 31, 1996, Coopers & Lybrand L.L.P., independent
accountants, 100 Pearl Street, Hartford, Connecticut 06103, were the
independent auditors for the following portfolios of the Series Trust: U.S.
Government Bond, Social Awareness, Utilities, and the three Zero Coupon Bond
Funds. The services provided by Coopers & Lybrand L.L.P., included primarily
the audit of the applicable Series Trust's financial statements and financial
highlights. The financial statements for the year ended December 31, 1996 have
been audited by Coopers & Lybrand L.L.P., as indicated in their reports
thereon, and are included in the Fund's Annual Report which is incorporated
herein by reference, in reliance upon the authority of said firm as experts in
accounting and auditing.

The applicable portfolios of the Trust terminated their audit
relationship with their former principal accountant, Coopers & Lybrand L.L.P.
on January 31, 1997. On that same day, KPMG Peat Marwick; LLP, independent
certified public accountants, 345 Park Ave., New York, NY 10154, was engaged as
principal accountant for the Trust's Portfolios (except Large Cap and Equity
Income Portfolios). KPMG Peat Marwick LLP serves as the principal accountant
for several other affiliated mutual funds.

The reports by Coopers & Lybrand L.L.P. on the financial statements
for fiscal years ended December 31, 1996 and 1995, did not contain an adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.

The decision to change principal accountants was approved by the Board
of Trustees on January 31, 1997, where it was decided to engage KPMG Peat
Marwick LLP as the principal accountant to audit the Trust's financial
statements (except Large Cap and Equity Income Portfolios) since it would
promote consistency among affiliated mutual funds.

During the past two fiscal years and any subsequent interim period
preceding such termination, there were no disagreements with Coopers & Lybrand
L.L.P. on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of the former accountant would have caused it
to make reference to the subject matter of disagreement in connection with its
report.

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. The financial statements for those portfolios
have been audited by KPMG Peat Marwick LLP, as indicated in their reports
thereon, and are included in the Trust's Annual Report which is incorporated
herein by reference, in reliance upon the authority of said firm as experts in
accounting and auditing.

The services provided to the Fund by Coopers & Lybrand L.L.P. included
primarily the examination of the Fund's financial statements. The financial
statements for the year ended December 31, 1996 have been audited by Coopers &
Lybrand L.L.P., as indicated in their report thereon, and are included in the
Fund's Annual Report which is incorporated herein by reference, in reliance
upon the authority of said firm as experts in accounting and auditing.

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
are the auditors for Large Cap and Equity Income Portfolios. The financial
statements for those portfolios have been audited by Price Waterhouse LLP, as
indicated in their reports thereon, and are included in the Trust's Annual
Report which is incorporated herein by reference, in reliance upon the
authority of said firm as experts in accounting and auditing.

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.

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<PAGE> 139
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.

36
<PAGE> 140
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.

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<PAGE> 141

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

MID CAP DISCIPLINED EQUITY FUND

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<PAGE> 142
THE TRAVELERS VARIABLE

PRODUCTS FUNDS

ANNUAL REPORTS
December 31, 1996

MANAGED ASSETS TRUST
HIGH YIELD BOND TRUST
CAPITAL APPRECIATION FUND
CASH INCOME TRUST

THE TRAVELERS SERIES TRUST:

U.S. Government Securities Portfolio
Social Awareness Stock Portfolio
Utilities Portfolio

[TRAVELERSLIFE LOGO]

The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183

<PAGE> 143

ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- --------------------------------------------------------------------------------

ECONOMIC REVIEW AND OUTLOOK

As 1996 began, the federal government found itself paralyzed by a prolonged
budget dispute. In the financial markets, investors were focused on signs of a
slowing economy. With two-year Treasury notes priced to yield less than the
federal funds rate, the bond market clearly expected the Federal Reserve Board
(the "Fed") to cut interest rates significantly. The Fed lowered the federal
funds rate by 0.25% in January, but strong employment growth over the next
several months sent the bond market into a tailspin reminiscent of 1994.
Interest rates hit their highest levels for the year in the June to September
period as investors prepared for the Fed to raise interest rates at their
September meeting.

The policy makers at the Fed decided to hold interest rates steady at their
September meeting and interest rates declined through the autumn as economic
growth once again slowed. The financial markets also responded positively to the
Republicans' success in retaining control of Congress in the November election.
Going into December, the bond and stock markets reflected a "best of all worlds"
scenario of moderate economic growth with low inflation, low unemployment and a
benign to positive political landscape. Interest rates started to move back up
again in December as some economic indicators strengthened, but ended the year
well below the levels seen in the second and third quarters.

We expect real economic growth to average around 2% in 1997. The consumer
sector, which makes up two-thirds of Gross Domestic Product ("GDP"), should show
modest growth. The factors that would otherwise contribute to strong consumer
spending -- low unemployment, high consumer confidence, and the wealth effects
from the strong stock market -- should be muted by high consumer debt levels
(particularly at lower income levels) and lack of pent-up demand. The export
sector should continue to grow 5% to 10% in 1997, helped by the United States'
strong competitive position and continued robust growth in emerging markets.
Growth should improve slightly in Europe and Japan, helped by the recent
strengthening of the dollar against those currencies. The stronger dollar is
likely to be a mixed blessing, by making the prices of foreign imports more
attractive and thereby helping to dampen inflation. The capital goods sector has
slowed in recent quarters, but is still expected to grow faster than the overall
U.S. economy. The government sector should continue to be a drag on GDP growth.

Overall, we believe that the U.S. economy is likely to remain on a path of
moderate non-inflationary growth in 1997. However, because of the current low
level of unemployment, we also expect that the Fed will remain cautious and
biased towards a tighter monetary policy. Whether the Fed acts may depend in
part on market psychology. Upward shifts in long-term bond yields have served to
moderate economic growth in recent years and reduced the need for any major
changes in Fed policy.

FIXED INCOME COMMENTARY

The U.S. bond market had its best quarter of the year in the fourth quarter. The
Lehman Intermediate Government/Corporate Index returned 2.5% for the quarter and
4.1% for the full year. For the year, the Lehman Long Government/Corporate Index
provided a total return of only 0.1%. Treasury bonds with maturities longer than
10 years had negative total returns.

Within the fixed income market, all private issuer sectors outperformed Treasury
bonds as quality spreads continued to narrow. While Treasuries performed almost
as poorly in 1996 as in 1994, the effect on other sectors was relatively
neutral, unlike 1994 when there were problems with mortgage-backed derivatives,
Mexico, and Orange County. The yield curve was also remarkably stable in 1996,
unlike 1994 when short-term interest rates rose considerably. The
mortgage-backed, high yield, and municipal sectors were the best performing
areas in 1996 on a duration-adjusted basis. Within the corporate sector, lower
quality and foreign issues were the best performers based on both higher coupons
and spread tightening.

We expect interest rates to stay in the trading range established in 1996 (the
yield of the 30-year Treasury bond ranged between 6.0% and 7.2%). On one hand,
investors are concerned that low unemployment will eventually give rise to
inflationary wage growth. We believe this sets a floor for long-term bond yields
at about 6.0%. At the upper end of the range, the 7.2% level has proved to be
sufficient to generate increased demand for bonds and depress high risk asset
classes and interest sensitive sectors of the economy. We feel that central bank
vigilance against inflation, globalization, and productivity improvements will
keep inflation under control, preventing interest rates from rising much above
their 1996 high.

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ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- --------------------------------------------------------------------------------

Within the fixed income markets, demand for corporate, mortgage-backed and
asset-backed issue continues to be high. Yield spreads (relative to Treasury
issues) for lower and higher quality corporate bonds are quite narrow. The
mortgage-backed and asset-backed markets are similarly compressed, with
investors digging for yield. There is nothing in our economic outlook that is
likely to change the tight spread environment in the near future. We are being
careful, however, to weed out riskier credits and issues that do not offer
enough yield premium to offset their potential for negative surprises. The
foreign area continues to offer opportunities, particularly foreign corporate
bonds that sometimes have very strong balance sheets but are capped by the
rating of their home country. Foreign sovereign credits are also continuing to
improve based on solid global economic growth and increased acceptance of the
need for sound fiscal and monetary policy.

EQUITY COMMENTARY

During 1996, financial markets were repeatedly jolted by changes in sentiment
about the strength of the U.S. economy and the direction of Fed policy. When
investors gained confidence that the economy was continuing on a track of
moderate, non-inflationary growth, the stock market advanced strongly and posted
another year of outstanding performance. For the year ended December 31, 1996,
the Standard & Poor's 500 Stock Index ("S&P 500") (a capitalization-weighted
index of 500 widely held common stocks) provided a total return of 22.95%. Over
the same period, the Russell 2000 Stock Index, a measure of the performance of
the small company segment of the equity market, provided a total return of
16.5%.

After a weak start in January, the stock market moved broadly higher through the
first months of spring. Small company shares advanced strongly in April and May,
led by the technology sector. In late June and July, when long-term bond yields
moved back over 7%, the stock market traded back down to where it began the
year. Recent initial public offerings and more speculative issues were
particularly hard hit during the reversal. Large company stocks quickly
recovered their losses when the bond market stabilized at the end of July.
However, small company stocks continued to struggle. During the autumn, against
the backdrop of lower bond yields, low inflation and surprisingly resilient
corporate earnings, the stock market made its strongest advance of the year,
with large company issues leading the way.

As measured by the S&P 500, the U.S. stock market has provided a cumulative
total return of nearly 70% over the past two years, capping a six-year bull
market that began in October of 1990. Notwithstanding the strong overall
environment for equities, 1996 marked the third consecutive year of
underperformance by small and mid-sized company stocks relative to "blue chip"
indices. The underperformance of small company stocks can be explained in part
by the sharper falloff in earnings growth experienced by smaller companies in
the 1995-96 period. The performance lag also reflected a backing away by
investors from higher risk growth stocks, in an environment of rising interest
rates and market volatility.

Given the frequent alarms raised in 1996 about slowing earnings growth,
investors showed an understandable preference for industry sectors with visible
earnings momentum. In the energy sector, analysts' earnings estimates and share
prices moved sharply higher in response to firmer prices for oil and natural
gas. Stocks in the finance sector also performed exceptionally well despite
emerging credit quality concerns. In the consumer sector, specialty and
broad-line retail stocks were up strongly in response to higher than expected
levels of consumer spending. The technology sector provided superior returns for
investors last year, led by Intel and Microsoft. Within the technology sector,
software, semiconductor and computer product stocks had the strongest relative
performance. Industrial cyclical stocks underperformed, as soft domestic and
export demand led to declining commodity prices for paper, copper, aluminum,
steel and fertilizer products. The health care sector was mixed. Drug stocks
kept pace with the market due to strong earnings gains, while the HMO group
declined sharply on repeated earnings disappointments. Utilities were the
weakest overall sector during the year, held back by the relatively poor
performance of local telephone carriers and electrical companies.

We are taking a more cautious position toward the U.S. stock market at this
point. Over the past year, the price-to-earnings ratio of the S&P 500 on
12-month forward earnings has increased from 15 to 17 times earnings per share.
This level of valuation is consistent with earlier periods of moderate growth
and low inflation, but leaves no cushion for earnings or inflation
disappointments. After a prolonged period of underperformance, relative
valuations for small company stocks are becoming more attractive. However, we
believe that caution should still be exercised since the small capitalization
segment of the equity market has a relatively high exposure to cyclical
industries and would be vulnerable to any combination of higher interest rates
and slower profit growth.

2
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ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- --------------------------------------------------------------------------------

MANAGED ASSETS TRUST

The first nine months of 1996 were almost as bad as 1994 for bonds in general.
U.S. Treasuries performed poorly but there were much fewer problems in other
types of bonds. Stocks performed well through May of 1996, but suffered a slight
correction in June and July. Large capitalization stocks rebounded smartly from
the summer correction and reached new highs by November. Small capitalization
stocks, which clearly were doing well in May, recovered much more slowly and
still had not reached new highs by the end of 1996.

The fourth quarter of 1996 was the best quarter of the year for both the stock
and bond markets. Bonds rallied as the U.S. economy slowed down and the
Republicans maintained control of the U.S. Congress. Stocks benefited from the
decline in interest rates as well as ongoing expectations for high corporate
earnings growth.

Managed Assets Trust's total return was 13.78% gross for 1996, 0.23% behind the
60% S&P 500 and 40% Lehman Government/Corporate blended benchmark. However, for
the fourth quarter, Managed Assets Trust outperformed the blended benchmark by
0.05% (6.29% versus 6.24%). Managed Assets Trust was helped by its stock portion
outperforming the S&P 500 three out of four quarters and the biggest drag on its
performance was its underweighting in stocks during the first half of 1996.

Looking ahead at 1997, we expect interest rates to stay in the relatively narrow
trading range established in 1996. In our view, low unemployment is the biggest
risk of higher interest rates but a 7% yield has proven to be sufficient in
attracting more investors to bonds and has helped to cool interest-sensitive
sectors of the economy. In our opinion, the biggest risk ahead for stocks is if
interest rates go above 7%. While stock valuations are high, corporate earnings
growth is expected to be slightly faster in 1997. In addition, we also expect
the U.S. dollar to be strong in 1997 and that could pose a risk to future
earnings growth. We plan on increasing the duration of the bond portion of
Managed Assets Trust if rates get closer to their 1996 highs and reduce its
duration if rates go down. Moreover, we continue to hold convertible bonds to
provide some defensive characteristics and in keeping with our relatively
neutral stance regarding stocks.

HIGH YIELD BOND TRUST

High Yield Bond Trust closed out the year successfully, ending with a
particularly strong fourth quarter performance. For the year ended December 31,
1996, the High Yield Bond Trust generated a total return of 16.05%, exceeding
both the First Boston High-Yield Index and the Bear Stearns High-Yield Index,
both of which had a total return of approximately 12.40% for the same period.

Investor interest in high yield bonds remained strong for the first three
quarters of the year. As mutual fund inflows into high yield bond funds
continued at a brisk pace, we viewed the fixed-income market in general as
skittish. Lower interest rate expectations and investor uncertainty of
lower-quality bonds caused many investors to gravitate toward the higher-rated
issues. We remained especially cautious toward lower-quality issues and
telecommunications issues that we believed may have disappointing earnings
reports. Our cautious stance with respect to these sectors allowed us to avoid
the heavy losses incurred in the fourth quarter by many high-profile and
high-yield issues such as Marvel Entertainment, MobileMedia, and CAI Wireless.
Although we maintained a relatively high cash position of 23%, this position
proved to be prudent during this volatile period.

The Trust's biggest winners of the year include Renaissance Cosmetics and
Transamerican Refining bonds. Renaissance Cosmetics recently announced a very
attractive tender offer for bonds that we hold and Transamerican Refining
appears to be nearing completion of a successful refinancing effort. Among the
Trust's other significant winners during 1996 were U.S. Banknote, Fleming, Gulf
States Steel, and Sheffield Steel. In addition, we are pleased by the
performance of K mart, Great Dane bonds, and the FRD Acquisition notes, all of
which produced handsome returns by year's end.

Our biggest disappointments in the past year were Alliance Entertainment and
Trump Castle. Alliance Entertainment suffered a sharp decline following a
lower-than-expected earnings report in the third quarter. We were initially
attracted to the Trump Castle issues because of its proposed partnership with
Hard Rock Cafe to "re-theme" Trump Castle. With much new development coming to
the Atlantic City marina area, we were also attracted by Trump Castle's
underlying asset value. However, after the proposed partnership with Hard Rock
Cafe fell apart, the bonds experienced a loss. Nevertheless, despite our
disappointments, we remain confident in the Trump Castle high-yield bonds and
believe that they will make a strong contribution to the High Yield Bond Trust
going forward.

3
<PAGE> 146

ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- --------------------------------------------------------------------------------

We remain bullish on the prospects for high-yield bonds for 1997. In the year
ahead, we also believe that many investors will probably avoid the more
speculative issues. Given the lack of progress among wireless cable companies,
on-going capital expenditure concerns among paging companies, and the uncertain
prospect of lower-quality cable companies to fulfill their debt obligations, we
do, however, expect more higher volatility in the telecommunications sector. In
our view, although many high-yield sectors will continue to experience
volatility, our investment strategy of careful security selection should provide
investors with competitive total returns in the year ahead.

CAPITAL APPRECIATION FUND

Stocks moved ahead in the fourth quarter of 1996, ending the year near record
highs. The S&P 500 gained 8.34% for the fourth quarter. For the year ended
December 31, 1996, the Capital Appreciation Fund appreciated 28.21% versus a
22.95% gain for the S&P 500 over the same period.

While the Capital Appreciation Fund's fourth quarter performance was
respectable, we are especially proud of the Janus research team's performance
this past year. Of course, the powerful performance of the stock market deserves
some credit, as do nearly ideal economic conditions and record corporate
profits, all of which have lifted stock valuations. While moderate economic
growth, mild inflation and low interest rates have made business conditions
healthy, our research team's solid fundamental research have contributed to the
Capital Appreciation Fund's stock selection process.

In terms of individual holdings, the Capital Appreciation Fund has a substantial
weighting in financial services stocks. We believe companies such as Wells
Fargo, Citicorp and Chase Manhattan should continue to enjoy excellent lending
margins and should be able to extend their domination in select markets. Low
interest rates and a mild economic climate tend to boost profits at dominant
franchise competitors across a broad spectrum of industries.

The Capital Appreciation Fund holds a number of familiar technology names such
as International Business Machines, Microsoft, Cisco Systems and Intel to
established drug manufacturers such as Pfizer, Eli Lilly and Monsanto (an
organization that is transforming itself from an old-line chemical producer into
a far more dynamic life sciences company). These stocks performed well during
the fourth quarter. The Capital Appreciation Fund also benefited from the
excellent returns of UAL (parent company to United Airlines), which gained
roughly more than 30%. We believe the employee management at UAL has done a good
job. In our view, UAL (and the airline industry in general) have attractive
valuations. For example, UAL is currently selling at 6 1/2 times our 1998
earnings estimate. In general, the airlines industry has undergone huge changes
in the last few years, becoming more rational with fewer overlapping and
unprofitable competitors. Instead of adding capacity, many airline managements
have focused on pulling back from unprofitable routes and increasing loads in
existing routes. In addition, average airline ticket prices are up as well. In
our view, the only negative for the industry is rising fuel prices but most, if
not all, of the increase is probably already factored into their stock prices.

During the fourth quarter, we trimmed Microsoft and long-time holding Merrill
Lynch when both reached high valuations. Moreover, we sold sports apparel
manufacturer Fila at a profit due to valuation concerns and because its products
have begun to lose momentum in the branded sportswear industry. Lastly, Centocor
and Trans World Airlines were sold at losses. With respect to Centocor, we had
to revise our earnings and revenues estimates downward due to a
slower-than-anticipated sales upturn of Reopro, the company's new drug to fight
cardiovascular disease. As many of you know, Trans World Airlines was a far more
tragic situation. In addition to the crash of Flight 800 which may affect
bookings for some time to come, management turnover at TWA has also raised some
concerns. Although we expect greater stock market volatility in 1997, we
continue to be very excited about the stock market for all of the reasons
outlined at the beginning of this market commentary. We stayed the course in
1996 and, unless there is a radical change in the current economic and business
environment, we intend to do the same in 1997. We believe the Capital
Appreciation Fund's focus on primarily large, high-quality growth companies
should continue to serve our shareholders well in the days ahead.

4
<PAGE> 147

ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- --------------------------------------------------------------------------------

CASH INCOME TRUST

Cash Income Trust seeks to provide shareholders with high current income from
short-term money market investments while emphasizing preservation of capital
and maintaining a high degree of liquidity. Cash Income Trust pursues this
objective by investing in securities maturing in one year or less.

For the year ended December 31, 1996, Cash Income Trust generated an annual
effective yield of 4.20% and as of December 31, 1996 had an average maturity of
38.8 days. Cash Income Trust continues to invest primarily in U.S. Treasuries
and government agency securities. This investment strategy has provided Cash
Income Trust with safety, liquidity, and stability.

Sincerely,

/s/ HEATH B. MCLENDON

Heath B. McLendon
Chairman

January 15, 1997

5
<PAGE> 148

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF 12/31/96 (UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 13.78%
Five Years Ended 12/31/96 8.83%
Ten Years Ended 12/31/96 9.76%
</TABLE>

This chart assumes an initial investment of $10,000 made on December 31, 1986
assuming reinvestment of dividends through December 31, 1996. The Lehman
Government/Corporate Bond Index is a weighted composite of the Lehman
Government Bond Index, which is a broad-based index of all public debt
obligations of the U.S. Government and its agencies and has an average maturity
of nine years and the Lehman Corporate Bond Index, which is comprised of all
public fixed-rate non-convertible investment-grade domestic corporate debt,
excluding collateralized mortgage obligations. The Consumer Price Index is a
measure of the average change in prices over time in a fixed market basket of
goods and services. The Standard & Poor's 500 Index is an unmanaged index
composed of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and over-the-counter market.

<TABLE>
<CAPTION>
Lehman
Measurement Govern-
Period Managed ment/Corporate Consumer Standard
(Fiscal Year Assets Bond Price & Poor's
Covered) Trust Index Index 500 Index
<S> <C> <C> <C> <C>
12/86 10000 10000 10000 10000
12/87 11905 10229 10441 10525
12/88 12134 11004 10903 12269
12/89 13247 12570 11410 16150
12/90 16840 13612 12106 15648
12/91 17256 15807 12476 20406
12/92 21001 17006 12838 21960
12/93 22080 18883 13191 24167
12/94 24140 18218 13544 24485
12/95 23599 21725 13888 29853
12/96 26837 22354 14348 36704
</TABLE>

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

Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- HIGH YIELD BOND TRUST AS OF 12/31/96 (UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 16.05%
Five Years Ended 12/31/96 9.90%
Ten Years Ended 12/31/96 7.21%
</TABLE>

This chart assumes an initial investment of $10,000 made on
December 31, 1986 assuming reinvestment of dividends through
December 31, 1996. The Lehman Aggregate Bond Index, an unmanaged
index, is composed of the Lehman Intermediate Government/Corporate
Bond Index and the Mortgage Backed Securities Index and includes
treasury issues, agency issued, corporate bond issues and
mortgage-backed securities. The Consumer Price Index is a measure
of the average change in prices over time in a fixed market basket
of goods and services. The First Boston High Yield Index Top Tier
is a broad-based market measure of high yield bonds, commonly known
as "junk bonds."

<TABLE>
<CAPTION>
First
Boston
Measurement High Lehman High
Period Yield Aggre- Consumer Yield
(Fiscal Year Bond gate Bond Price Index Top
Covered) Trust Index Index Tier
<S> <C> <C> <C> <C>
12/86 10000 10000 10000 10000
12/87 10798 10276 10441 11254
12/88 10761 11086 10903 12630
12/89 12329 12698 11410 14296
12/90 12502 13835 12106 14429
12/91 11361 16050 12476 17731
12/92 14328 17236 12838 19279
12/93 16214 18918 13191 22290
12/94 18485 18365 13544 22248
12/95 18252 21758 13888 26403
12/96 21181 22548 14348 29234
</TABLE>

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

6
<PAGE> 149

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF 12/31/96 (UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 28.21%
Five Years Ended 12/31/96 16.18%
Ten Years Ended 12/31/96 11.44%
</TABLE>

This chart assumes an initial investment of $10,000 made on
December 31, 1986 assuming reinvestment of dividends through
December 31, 1996. The Standard & Poor's 500 Index is an unmanaged
index composed of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange and over-the-counter
market. The Russell 2000 Index is a capitalization weighted total
return index which is comprised of 2,000 of the smallest capitaled
U.S. domiciled companies with less than average growth orientation
whose common stock is traded in the United States of the New York
Stock Exchange, American Stock Exchange and NASDAQ. The Consumer
Price Index is a measure of the average change in prices over time
in a fixed market basket of goods and services.

Measurement
Period Capital Standard Russell Consumer
(Fiscal Year Apprecia- & Poor's 2000 Price
Covered) tion Fund 500 Index Index Index
<S> <C> <C> <C> <C>
12/86 10000 10000 10000 10000
12/87 11005 10525 9120 10441
12/88 10111 12269 11402 10903
12/89 11129 16150 13256 11410
12/90 12877 15648 10674 12106
12/91 12073 20406 15589 12476
12/92 16318 21960 18458 12838
12/93 19190 24167 21943 13191
12/94 22086 24485 9105 13544
12/95 21035 29853 11696 13888
12/96 26976 36704 13626 14348
</TABLE>

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

Average annual total returns are historical in nature and measure net investment
income and capital gains or losses from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.

7
<PAGE> 150

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 54.7%
- ---------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 7.6%
15,400 Accustaff Inc.+................................................................ $ 325,325
10,200 American Stores Co............................................................. 416,925
8,200 Borders Group, Inc.+........................................................... 294,175
10,400 Clear Channel Communications, Inc.+............................................ 375,700
2,700 Colgate-Palmolive Co........................................................... 249,075
10,000 Corrections Corp. of America+.................................................. 306,250
9,700 Dollar General................................................................. 310,400
5,200 Duracell International......................................................... 363,350
6,100 Eastman Kodak Co............................................................... 489,525
12,100 Federated Department Stores Inc.+.............................................. 412,913
6,500 Gannett Co..................................................................... 486,688
15,500 Gap Inc........................................................................ 466,938
12,700 Gillette Co.................................................................... 987,425
8,800 HFS Inc.+...................................................................... 525,800
13,800 Hilton Hotels Corp............................................................. 360,525
9,400 Home Depot Inc................................................................. 471,175
5,174 Kimberly-Clark Corp............................................................ 492,824
11,200 Lowes Co....................................................................... 397,600
11,600 McDonalds Corp................................................................. 524,900
10,100 New York Times Co., Class A Shares............................................. 383,800
10,700 Nike Inc., Class B Shares...................................................... 639,325
13,000 Procter & Gamble Co............................................................ 1,397,500
7,000 Sears Roebuck & Co............................................................. 322,875
1,250 TCI Satellite Entertainment Inc.+.............................................. 12,344
12,500 Tele-Communications Inc.+...................................................... 163,281
12,477 The Walt Disney Co............................................................. 868,711
8,700 Tiffany & Co................................................................... 318,638
10,000 Time Warner Inc................................................................ 375,000
2,600 Unilever N.V................................................................... 455,650
5,700 VF Corp........................................................................ 384,750
32,600 Wal-Mart Stores, Inc........................................................... 745,725
- ---------------------------------------------------------------------------------------------------------
14,325,112
- ---------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 4.5%
3,100 American Brands Inc............................................................ 153,838
9,200 Anheuser-Busch Co.............................................................. 368,000
1,900 Campbell Soup Co............................................................... 152,475
44,800 Coca-Cola Co................................................................... 2,357,600
13,900 Conagra Inc.................................................................... 691,525
6,500 CPC International Inc.......................................................... 503,750
11,700 Dean Foods..................................................................... 377,325
2,900 General Mills Inc.............................................................. 183,788
29,000 PepsiCo Inc.................................................................... 851,875
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

8
<PAGE> 151

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
CONSUMER STAPLES -- 4.5% (CONTINUED)
18,100 Philip Morris Cos. ............................................................ $ 2,038,513
6,800 Pioneer Hi-Bred International.................................................. 476,000
9,000 Sara Lee Corp. ................................................................ 335,250
- ---------------------------------------------------------------------------------------------------------
8,489,939
- ---------------------------------------------------------------------------------------------------------
ENERGY -- 0.7%
5,700 Chesapeake Energy Corp.+....................................................... 317,091
6,800 Halliburton Co................................................................. 409,700
6,400 Louisiana Land & Exploration Co................................................ 343,200
2,800 Schlumberger Ltd. ............................................................. 279,650
- ---------------------------------------------------------------------------------------------------------
1,349,641
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 8.2%
8,265 Allstate Corp. ................................................................ 478,337
8,200 Ambac Inc...................................................................... 544,275
9,200 American Express Co. .......................................................... 519,800
8,850 American International Group Inc. ............................................. 958,012
7,289 Banc One Corp. ................................................................ 313,427
7,300 Bank of Boston Corp............................................................ 469,025
10,400 BankAmerica Corp. ............................................................. 1,037,400
3,600 Barnett Banks Inc. ............................................................ 148,050
12,736 Chase Manhattan Corp. ......................................................... 1,136,688
7,000 Chubb Corp..................................................................... 376,250
3,600 Cigna Corp..................................................................... 491,850
13,700 Citicorp....................................................................... 1,411,100
3,500 Federal Home Loan Mortgage Corp................................................ 385,437
20,600 Federal National Mortgage Association.......................................... 767,350
2,600 First Bank System Inc.......................................................... 177,450
6,000 First Chicago NBD Corp......................................................... 322,500
1,500 General Reinsurance Corp. ..................................................... 236,625
4,700 Golden West Financial Corp..................................................... 296,687
4,900 Household International Inc.................................................... 452,025
7,200 ITT Hartford Group, Inc........................................................ 486,000
8,300 Mellon Bank Corp............................................................... 589,300
3,100 Merrill Lynch & Co............................................................. 252,650
3,000 Morgan Stanley Group Inc. ..................................................... 171,375
6,000 NationsBank Corp............................................................... 586,500
8,400 Northern Trust Corp. .......................................................... 304,500
16,200 Norwest Corp................................................................... 704,700
3,500 Student Loan Marketing Association............................................. 325,938
6,900 SunAmerica Inc................................................................. 306,188
4,100 SunTrust Banks Inc............................................................. 201,925
5,400 Transatlantic Holdings Inc..................................................... 434,700
1,800 Wells Fargo & Co............................................................... 485,550
- ---------------------------------------------------------------------------------------------------------
15,371,614
- ---------------------------------------------------------------------------------------------------------
HEALTHCARE -- 6.0%
9,100 Abbott Laboratories............................................................ 461,825
7,000 American Home Products Corp.................................................... 410,375
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

9
<PAGE> 152

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
HEALTHCARE -- 6.0% (CONTINUED)
10,000 Amgen Inc.+.................................................................... $ 543,750
13,100 Bristol-Meyers Squibb Co....................................................... 1,424,625
12,300 Columbia/HCA Healthcare Corp................................................... 501,225
6,400 Eli Lilly & Co................................................................. 467,200
6,800 Guidant Corp................................................................... 387,600
7,900 HBO & Co....................................................................... 469,063
29,600 Johnson & Johnson.............................................................. 1,472,600
12,600 Medpartners, Inc.+............................................................. 264,600
4,500 Medtronic Inc.................................................................. 306,000
25,900 Merck & Co..................................................................... 2,052,575
11,700 Pfizer Inc. ................................................................... 969,637
11,400 Schering-Plough Corp........................................................... 738,150
9,600 Vencor Inc.+ .................................................................. 303,600
5,000 Warner-Lambert Co.............................................................. 375,000
- ---------------------------------------------------------------------------------------------------------
11,147,825
- ---------------------------------------------------------------------------------------------------------
MATERIALS & PROCESSING -- 3.1%
5,000 Aluminum Co. of America........................................................ 318,750
5,000 Armstrong World Industries Inc................................................. 347,500
13,100 Black & Decker Corp............................................................ 394,638
8,800 Cytec Industries Inc.+......................................................... 357,500
10,200 E.I. du Pont de Nemours & Co. ................................................. 962,625
13,900 Freeport-McMoRan Copper........................................................ 415,262
4,900 Georgia-Pacific Corp. ......................................................... 352,800
18,100 Homestake Mining Co............................................................ 257,925
18,000 Monsanto Co.................................................................... 699,750
9,700 Morton International Inc....................................................... 395,275
1,600 Nucor Corp..................................................................... 81,600
10,400 Union Carbide Corp............................................................. 425,100
5,100 USX-US Steel Group............................................................. 160,012
3,700 Weyerhauser Co................................................................. 175,287
5,900 Willamette Industries Inc. .................................................... 414,475
- ---------------------------------------------------------------------------------------------------------
5,758,499
- ---------------------------------------------------------------------------------------------------------
PRODUCER DURABLES -- 5.2%
5,200 Allied Signal Inc.............................................................. 348,400
9,900 Boeing Co. .................................................................... 1,053,113
3,700 Caterpillar Inc. .............................................................. 278,425
13,950 Crane Co....................................................................... 404,550
11,400 Deere & Co..................................................................... 463,125
4,100 Emerson Electric Co............................................................ 396,675
6,200 Fluor Corp..................................................................... 389,050
31,200 General Electric Co............................................................ 3,084,900
6,700 Honeywell Inc. ................................................................ 440,525
6,400 Illinois Tool Works............................................................ 511,200
3,680 Lockheed Martin Corp. ......................................................... 336,720
7,800 Minnesota Mining & Manufacturing Co. .......................................... 646,425
4,700 Raychem Corp................................................................... 376,587
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

10
<PAGE> 153

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
PRODUCER DURABLES -- 5.2% (CONTINUED)
10,800 United Technologies Corp....................................................... $ 712,800
5,000 W.W. Grainger Inc. ............................................................ 401,250
- ---------------------------------------------------------------------------------------------------------
9,843,745
- ---------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 7.2%
6,150 Andrew Corp.+.................................................................. 326,334
11,100 Atmel Corp.+................................................................... 367,687
5,700 Automatic Data Processing Inc.................................................. 244,388
18,800 Cisco Systems Inc.+............................................................ 1,196,150
5,400 Compaq Computer Corp.+......................................................... 400,950
11,575 Computer Associates International Inc.......................................... 575,856
8,200 First Data Corp. .............................................................. 299,300
5,600 Gateway 2000 Inc.+............................................................. 299,950
18,600 Hewlett Packard Co............................................................. 934,650
17,400 Intel Corp..................................................................... 2,278,312
9,500 International Business Machines Corp........................................... 1,434,500
11,569 Lucent Technologies Inc........................................................ 534,974
22,200 Microsoft Corp.+............................................................... 1,834,275
10,600 Motorola Inc. ................................................................. 650,575
12,000 Oracle Corp.+.................................................................. 501,000
19,600 Sun Microsystems Inc.+......................................................... 503,475
3,200 Texas Instruments Inc.......................................................... 204,000
3,200 3Com Corp.+ ................................................................... 234,800
4,900 U.S. Robotics Corp.+........................................................... 352,800
6,000 Xerox Corp. ................................................................... 315,750
- ---------------------------------------------------------------------------------------------------------
13,489,726
- ---------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.9%
6,300 Burlington Northern Sante Fe................................................... 544,163
17,600 Chrysler Corp.................................................................. 580,800
1,448 Conrail Inc.................................................................... 144,257
11,200 Continental Airlines, Inc., Class B Shares+.................................... 316,400
21,100 Ford Motor Co.................................................................. 672,562
12,900 General Motors Corp............................................................ 719,175
7,800 Lear Corp.+.................................................................... 266,175
4,000 Union Pacific Corp. ........................................................... 240,500
- ---------------------------------------------------------------------------------------------------------
3,484,032
- ---------------------------------------------------------------------------------------------------------
OIL -- 4.5%
7,100 Amerada Hess Corp.............................................................. 410,913
9,000 Amoco Corp..................................................................... 724,500
8,100 Ashland Inc. .................................................................. 355,388
2,100 Atlantic Richfield Co.......................................................... 278,250
12,000 Chevron Corp................................................................... 780,000
19,400 Exxon Corp. ................................................................... 1,901,200
9,800 Mobil Corp..................................................................... 1,198,050
7,900 Royal Dutch Petroleum Co....................................................... 1,348,925
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

11
<PAGE> 154

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
OIL -- 4.5% (CONTINUED)
10,200 Texaco Inc. ................................................................... $ 1,000,875
11,100 Unocal Corp.................................................................... 450,937
- ---------------------------------------------------------------------------------------------------------
8,449,038
- ---------------------------------------------------------------------------------------------------------
UTILITIES -- 5.8%
8,400 AES Corp.+..................................................................... 390,600
9,700 Allegheny Power System, Inc.................................................... 294,638
22,000 American Telephone & Telegraph Corp............................................ 957,000
10,500 Ameritech Corp................................................................. 636,562
9,900 Baltimore Gas & Electric Co.................................................... 264,825
8,200 Bell Atlantic Corp............................................................. 530,950
19,000 BellSouth Corp................................................................. 767,125
10,100 CalEnergy Inc.+................................................................ 337,088
6,500 CMS Energy Corp................................................................ 218,563
5,900 Columbia Gas System............................................................ 375,387
7,300 Consolidated Natural Gas....................................................... 403,325
3,800 Duke Power Co.................................................................. 175,750
4,700 Enron Corp..................................................................... 202,688
3,200 FPL Group Inc.................................................................. 147,200
15,600 GTE Corp. ..................................................................... 709,800
4,900 Houston Industries Inc......................................................... 110,862
22,700 MCI Communications Corp. ...................................................... 742,006
8,300 Nynex Corp. ................................................................... 399,438
4,100 Pacific Enterprises............................................................ 124,537
6,600 Pacific Telesis Group.......................................................... 242,550
15,400 SBC Communications Inc......................................................... 796,950
7,900 Sonat Inc. .................................................................... 406,850
20,300 Southern Co.................................................................... 459,287
6,300 Sprint Corp.................................................................... 251,213
11,400 Texas Utilities Co. ........................................................... 464,550
3,400 U.S. West Communications Group................................................. 109,650
15,100 Worldcom Inc.+................................................................. 393,542
- ---------------------------------------------------------------------------------------------------------
10,912,936
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $78,744,955)...................................... 102,622,107
- ---------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 2.1%
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.5%
2,000 FINOVA Group, Convertible 5.500%............................................... 105,000
4 Fuji Finance, Convertible 0.250%............................................... 105,140
8,000 Merry Land & Investment, Inc., Convertible 2.150%.............................. 211,000
4,000 St. Paul Capital, Convertible 6.000%........................................... 221,500
5,000 Tosco Financial Trust, Convertible 5.750%...................................... 258,750
- ---------------------------------------------------------------------------------------------------------
901,390
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 155

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
INDUSTRIAL -- 1.6%
4,000 Amcor Ltd., Convertible 7.250%................................................. $ 204,000
10,000 Corning Delaware L.P........................................................... 636,250
12,000 International Paper............................................................ 552,000
10,990 News Corp Ltd., Convertible 5.000%............................................. 1,050,919
9,000 Occidental Petroleum Corp...................................................... 510,750
- ---------------------------------------------------------------------------------------------------------
2,953,919
- ---------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost -- $3,510,971).................................... 3,855,309
- ---------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS -- 22.9%
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.5%
$ 2,500,000 American Express Co., zero coupon due 12/12/00............................. 1,971,875
500,000 Great Western Financial Corp., Notes, 6.375% due 7/1/00.................... 497,500
5,000,000 New Plan Reality, 5.950% due 11/2/26....................................... 4,993,750
1,000,000 Signet Credit Card, Master Trust 1993-4B, 5.800% due 3/15/98............... 991,620
- ---------------------------------------------------------------------------------------------------------
8,454,745
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT, NATIONAL -- 2.1%
2,000,000 Canada - Global Bond, 6.750% due 8/28/06................................... 2,010,000
2,000,000 Poland, 6.438% due 10/27/24................................................ 1,945,000
- ---------------------------------------------------------------------------------------------------------
3,955,000
- ---------------------------------------------------------------------------------------------------------
INDUSTRIAL -- 3.4%
2,000,000 Becton Dickinson & Co., 8.800% due 3/1/01.................................. 2,160,000
2,000,000 Cox Communications Inc., 6.875% due 6/15/05................................ 1,982,500
2,020,000 Tele-Communications Inc. 9.650% due 10/1/03................................ 2,191,700
- ---------------------------------------------------------------------------------------------------------
6,334,200
- ---------------------------------------------------------------------------------------------------------
MATERIALS & PROCESSING -- 5.7%
9,000,000 Weyerhauser Mortgage Co., 8.500% due 1/15/25............................... 10,794,330
- ---------------------------------------------------------------------------------------------------------
OIL -- 1.9%
500,000 Apache Corp., 6.000% due 1/15/02........................................... 640,000
3,000,000 Texaco Capital Inc., 7.750% due 2/15/33.................................... 3,052,500
- ---------------------------------------------------------------------------------------------------------
3,692,500
- ---------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
929,255 Delta Airlines, Inc., 9.250% due 1/2/07.................................... 960,376
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

13
<PAGE> 156

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
UTILITY - ELECTRIC -- 0.6%
$ 1,100,000 Niagara Mohawk Power Corp., 8.000% due 6/1/04.............................. $ 1,050,500
- ---------------------------------------------------------------------------------------------------------
UTILITY - TELEPHONE -- 4.2%
5,000,000 BellSouth Cap Funding, 6.040% due 11/15/26................................. 4,956,250
3,000,000 BellSouth Telecommunications, 7.000% due 12/1/2095......................... 2,887,500
- ---------------------------------------------------------------------------------------------------------
7,843,750
- ---------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $41,691,641)................................ 43,085,401
- ---------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 5.1%
- ---------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 0.6%
580,000 Hilton Hotels Corp., 5.000% due 5/15/06.................................... 608,275
500,000 Home Depot Inc., 3.250% due 10/1/01........................................ 492,500
- ---------------------------------------------------------------------------------------------------------
1,100,775
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.7%
500,000 Equitable Cos., 6.125% due 12/15/24........................................ 580,625
500,000 Sappi BVI Finance Ltd., 7.500% due 8/1/02.................................. 460,000
500,000 USF&G Corp., zero coupon due 3/3/09........................................ 316,250
- ---------------------------------------------------------------------------------------------------------
1,356,875
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT - NATIONAL -- 0.3%
500,000 Republic of Italy, 5.000% due 6/28/01...................................... 492,500
- ---------------------------------------------------------------------------------------------------------
INDUSTRIAL -- 3.2%
1,400,000 Alza Corp., zero coupon due 7/14/14........................................ 588,000
300,000 Berkshire Hathaway Inc., 1.000% due 12/3/01................................ 280,125
1,000,000 Comcast Corp., 1.125% due 4/15/07.......................................... 512,500
877,000 Cooper Industries Inc., 7.050% due 1/1/15.................................. 940,582
300,000 Inco Ltd., 7.750% due 3/15/16.............................................. 317,250
1,000,000 Marriott International Inc., zero coupon due 3/25/11....................... 561,250
500,000 McKesson Corp., 4.500% due 3/1/04.......................................... 443,125
100,000 Omnicom Group, Inc., zero coupon due 1/3/07................................ 100,000
500,000 Pennzoil Co., 4.750% due 10/1/03........................................... 571,250
400,000 Rouse Co., 5.750% due 7/23/02.............................................. 438,000
300,000 RPM Inc., zero coupon due 9/30/12.......................................... 134,625
200,000 Scholastic Corp., 5.000% due 8/15/05....................................... 208,750
200,000 Tenet Healthcare Corp., 6.000% due 12/1/05................................. 212,250
200,000 The Sports Authority Inc., 5.250% due 9/15/01.............................. 187,750
500,000 Trinova Corp., 6.000% due 10/15/02......................................... 496,875
- ---------------------------------------------------------------------------------------------------------
5,992,332
- ---------------------------------------------------------------------------------------------------------
UTILITY - ELECTRIC -- 0.3%
600,000 Potomac Electric Power Co., 5.000% due 9/1/02.............................. 558,000
- ---------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS (Cost -- $9,194,761)..................... 9,500,482
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

14
<PAGE> 157

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MANAGED ASSETS TRUST

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT SECTOR -- 7.9%
- ---------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 7.9%
$ 75,000 U.S. Treasury Notes, 6.900% due 8/21/97*................................... $ 72,519
3,000,000 U.S. Treasury Strip, zero coupon due 5/15/07............................... 1,530,000
11,000,000 U.S. Treasury Strip, zero coupon due 5/15/09............................... 4,868,160
493,534 FHLMC, 8.500% due 9/1/02................................................... 508,958
2,000,000 FNMA Principal Strips, 7.890% due 3/9/97................................... 1,976,420
184,841 FNMA, 8.500% due 3/1/05.................................................... 192,408
3,333,217 FNMA, 7.500% due 10/1/25................................................... 3,333,217
318,618 GNMA, 7.500% due 3/15/07................................................... 318,914
60,555 GNMA, 7.500% due 6/15/07................................................... 60,612
209,632 GNMA, 9.000% due 12/15/16.................................................. 220,900
255,165 GNMA, 9.000% due 11/15/19.................................................. 268,881
379,737 GNMA, 9.500% due 1/15/20................................................... 410,473
209,395 GNMA, 9.500% due 3/15/20................................................... 226,342
194,535 GNMA, 7.500% due 5/15/23................................................... 194,717
745,284 GNMA, 7.500% due 12/15/25.................................................. 745,976
- ---------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost -- $15,170,051)......................... 14,928,497
- ---------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.6%
3,000,000 GE Capital Corp, 5.532% due 2/20/97 (Cost -- $2,977,583)................... 2,975,160
- ---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.7%
10,715,000 Citibank, 6.900% due 1/2/97; Proceeds at maturity -- $10,719,107;
(Fully collateralized by U.S. Treasury Notes, 5.750% due 12/31/98;
Market value -- $10,936,313) (Cost -- $10,715,000)......................... 10,715,000
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $162,004,962**)......................... $187,681,956
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Segregated security for futures contracts commitments.
** Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

15
<PAGE> 158

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

HIGH YIELD BOND TRUST

<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- 77.0%
- ----------------------------------------------------------------------------------------------------------
AMUSEMENTS -- 5.9%
$500,000 NR Live Entertainment Inc., Sr. Sub. Notes, 12.000% due 3/23/99........... $ 485,000
500,000 B- Plitt Theaters Inc., Sr. Sub. Notes, 10.875% due 6/15/04............... 510,000
- ----------------------------------------------------------------------------------------------------------
995,000
- ----------------------------------------------------------------------------------------------------------
CHEMICALS, PHARMACEUTICALS AND ALLIED PRODUCTS -- 3.5%
500,000 NR Renaissance Cosmetics Inc., Sr. Notes, Series B, 13.750% due 8/15/01... 585,000
- ----------------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 10.2%
500,000 B3* Commodore Media Inc., Sr. Sub. Notes, 7.500% due 5/1/03................ 526,250
400,000 B- Paxson Communications Corp., Sr. Sub. Notes, 11.625% due 10/1/02+...... 417,000
400,000 B- Pegasus Media Communications Inc., Notes 12.500% due 7/1/05+........... 433,000
500,000 BB Telewest Communications PLC, Sr. Discount Debentures,
step bond to yield 10.751% due 10/1/07................................. 348,750
- ----------------------------------------------------------------------------------------------------------
1,725,000
- ----------------------------------------------------------------------------------------------------------
CONSTRUCTION -- 3.7%
250,000 B Greystone Homes Inc., Sr. Notes, 10.750% due 3/1/04.................... 250,313
400,000 B Johnston America Industries, Inc., Sr. Sub. Notes, 11.750% due 383,000
8/15/05................................................................
- ----------------------------------------------------------------------------------------------------------
633,313
- ----------------------------------------------------------------------------------------------------------
ELECTRICAL -- 3.0%
500,000 NR Emcor Group Inc., Notes, 11.000% due 12/15/01.......................... 504,375
- ----------------------------------------------------------------------------------------------------------
FINANCE -- 5.4%
400,000 B- B.F. Saul Real Estate Investment Trust, Sr. Secured Notes, 11.625% due 431,000
4/1/02+................................................................
36,896 B3* FRD Acquisition Co., Sr. Notes, Series B, 12.500% due 7/15/04.......... 37,634
500,000 Caa* Trump Castle Funding, 1st Mortgage, 11.750% due 11/15/03............... 442,500
- ----------------------------------------------------------------------------------------------------------
911,134
- ----------------------------------------------------------------------------------------------------------
INSURANCE -- 2.9%
500,000 NR I.C.H. Corp., Sr. Sub. Notes, 11.250% due 12/1/03++.................... 490,000
- ----------------------------------------------------------------------------------------------------------
MANUFACTURING -- 2.9%
500,000 NR Great Dane Holdings, Inc., Sr. Sub. Notes, 12.750% due 8/1/01.......... 503,750
- ----------------------------------------------------------------------------------------------------------
METAL PRODUCTS/MINING -- 8.7%
500,000 B Gulf States Steel Alabama Inc., 1st Mortgage,
13.500% due 4/15/03++.................................................. 473,750
500,000 NR Parker Drilling Co., Guaranteed Notes, 9.750% due 11/15/06+............ 527,500
500,000 B- Sheffield Steel Corp., 1st Mortgage Notes, 12.000% due 11/1/01......... 475,000
- ----------------------------------------------------------------------------------------------------------
1,476,250
- ----------------------------------------------------------------------------------------------------------
PAPER AND ALLIED PRODUCTS -- 2.4%
400,000 B Mail-Well Corp., Sr. Sub. Notes, 10.500% due 2/15/04+.................. 398,500
- ----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

16
<PAGE> 159

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

HIGH YIELD BOND TRUST

<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
PETROLEUM REFINING AND RELATED INDUSTRIES -- 3.0%
$500,000 CCC+ Transamerican Refining Corp., Guaranteed 1st Mortgage Notes,
16.500% due 2/15/02................................................... $ 505,000
- ----------------------------------------------------------------------------------------------------------
PRINTING, PUBLISHING AND ALLIED INDUSTRIES -- 5.8%
500,000 Caa* Sullivan Graphics Inc., Sr. Sub. Notes, 12.750% due 8/1/05+........... 490,000
500,000 B- U.S. Banknote Corp., Sr. Notes, 11.625% due 8/1/02+................... 482,500
- ----------------------------------------------------------------------------------------------------------
972,500
- ----------------------------------------------------------------------------------------------------------
RETAIL -- 4.2%
250,000 B Flagstar Corp., Sr. Notes, 10.750% due 9/15/01........................ 230,000
500,000 B+ K mart Corp., Notes, 7.900% due 12/14/00.............................. 481,250
- ----------------------------------------------------------------------------------------------------------
711,250
- ----------------------------------------------------------------------------------------------------------
SERVICES -- 8.5%
500,000 B+ Americold Corp., 1st Mortgage Series B, 11.500% due 3/1/05............ 524,375
500,000 B- Florists Transworld Delivery Inc., Sr. Sub. Notes,
Series B, 14.000% due 12/15/01........................................ 506,250
400,000 B- Regency Health Services Inc., Sr. Sub. Notes, 9.875% due 10/15/02..... 406,000
- ----------------------------------------------------------------------------------------------------------
1,436,625
- ----------------------------------------------------------------------------------------------------------
TEXTILE MILL PRODUCTS -- 2.8%
500,000 B CMI Industries Inc., Sr. Sub. Notes, 9.500% due 10/1/03............... 466,250
- ----------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 2.6%
400,000 B- Terex Corp., Sr. Secured Notes, 13.250% due 5/15/02+++................ 432,000
- ----------------------------------------------------------------------------------------------------------
WHOLESALE TRADE -- 1.5%
250,000 B+ Fleming Co. Inc., Sr. Notes, 10.625% due 12/15/01..................... 254,375
- ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $12,350,130)................................................. 13,000,322
- ----------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 0.0%
- ----------------------------------------------------------------------------------------------------------
UTILITIES -- 0.0%
264 Great Bay Power Co.+ (Cost -- $0)..................................... 2,210
- ----------------------------------------------------------------------------------------------------------
WARRANTS -- 0.0%
- ----------------------------------------------------------------------------------------------------------
METAL PRODUCTS/MINING -- 0.0%
500 Gulf State Steel Alabama Inc., Expire 4/15/03+........................ 2,500
- ----------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.0%
1,600 Terex Corp., Expire 5/15/02++......................................... 3,200
- ----------------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $0).......................................................... 5,700
- ----------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS
(Cost -- $12,350,130)................................................. 13,008,232
- ----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

17
<PAGE> 160

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

HIGH YIELD BOND TRUST

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS -- 23.0%
- ---------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.5%
$ 600,000 Bankers Trust N.Y. Corp., 5.400% due 2/19/97............................ $ 595,590
- ---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 19.5%
3,298,000 Chase Manhattan Bank, 6.550% due 1/2/97; Proceeds at
maturity -- $3,299,200; (Fully collateralized by U.S. Treasury Bill due
10/31/98; Market value -- $3,363,993)................................... 3,298,000
- ---------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $3,893,590).................................................... 3,893,590
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $16,243,720**)................................................. $16,901,822
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Security is exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt that are from
registration, normally to qualified institutional buyers.
++ Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.

See page 19 for definition of bond ratings.

SUMMARY OF BONDS BY COMBINED RATINGS

<TABLE>
<CAPTION>
% OF TOTAL CORPORATE
STANDARD & POOR'S BONDS & NOTES
- ------------------------------------------
<S> <C>
BB 2.7%
B 58.8
CCC 7.8
NR 30.7
- ------------------------------------------
100.0%
- ------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

18
<PAGE> 161

- --------------------------------------------------------------------------------
BOND RATINGS

All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moodys"). The definitions of the applicable rating symbols are
set forth below:

Standard & Poor's -- Rating from "AA" to "C" may be modified by the addition of
a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.

<TABLE>
<S> <C> <C>
AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's. 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 highest rated issue only in a 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 than debt in higher rated categories.
BBB -- Debt rated "BBB" are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
BB, B and CCC -- Debt rated "BB" and "B" are regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" represents a lower degree of speculation than "B",
and "CCC" the highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
C -- The rating "C" is reserved for income bonds on which no interest is being paid.
D -- Debt rated "D" are in default, and payment of interest and/or repayment of
principal is in arrears.
</TABLE>

Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "C", where 1 is the highest and 3 the lowest rating within its
generic category.

<TABLE>
<S> <C> <C>
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment fisk 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 that are rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or 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 that are rated "A" possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered to be medium grade obligations; that is,
they are neither highly protected nor poorly secured. Interest payment 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. These bonds lack outstanding investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B -- Bonds that are rated "B" generally lack characteristics of desirable investments.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa -- Bonds that are rated "Caa" are of poor standing. These issues may be in default, or
present elements of danger may exist with respect to principal or interest.
Ca -- Bonds that are rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds that are rated "C" are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>

19
<PAGE> 162

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

CAPITAL APPRECIATION FUND

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 89.5%
- ----------------------------------------------------------------------------------------------------------
AIRCRAFT & AEROSPACE -- 4.8%
68,375 Boeing Co................................................................ $ 7,273,391
13,875 Gulfstream Aerospace Corp.+.............................................. 336,469
33,025 Textron Inc.............................................................. 3,112,606
- ----------------------------------------------------------------------------------------------------------
10,722,466
- ----------------------------------------------------------------------------------------------------------
AIRLINES -- 3.9%
138,650 UAL Corp.+............................................................... 8,665,625
- ----------------------------------------------------------------------------------------------------------
AUTO RELATED -- 0.1%
7,925 Cross-Continent Auto Retailers+.......................................... 165,434
- ----------------------------------------------------------------------------------------------------------
BANKING -- 11.7%
10,000 Catskill Financial Corp.+................................................ 140,000
90,475 Chase Manhattan Corp. ................................................... 8,074,894
63,190 Citicorp................................................................. 6,508,570
10,000 Community Federal Bancorp................................................ 170,000
10,000 First Bergen Bancorp..................................................... 115,000
10,000 GA Financial Inc......................................................... 151,250
28,550 Mercantile Bancorp Inc................................................... 1,466,756
10,000 PFF Bancorp Inc.+........................................................ 148,750
47,000 R & G Financial Corp..................................................... 1,116,250
30,666 Wells Fargo & Co......................................................... 8,272,154
- ----------------------------------------------------------------------------------------------------------
26,163,624
- ----------------------------------------------------------------------------------------------------------
BEVERAGES -- 5.9%
93,250 Coca-Cola Co............................................................. 4,907,281
15,650 Coca-Cola Enterprises.................................................... 759,025
257,750 PepsiCo, Inc. ........................................................... 7,571,406
- ----------------------------------------------------------------------------------------------------------
13,237,712
- ----------------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 4.5%
7,800 Alco Standard Corp....................................................... 402,675
75,675 Danka Business Systems PLC ADR........................................... 2,677,003
20,725 Diebold Inc.............................................................. 1,303,084
117,100 First Data Corp. ........................................................ 4,274,150
40,850 First USA Paymentech Inc.+............................................... 1,383,794
- ----------------------------------------------------------------------------------------------------------
10,040,706
- ----------------------------------------------------------------------------------------------------------
CAPITAL GOODS -- 0.1%
3,175 Raychem Corp............................................................. 254,397
- ----------------------------------------------------------------------------------------------------------
CHEMICAL -- 6.3%
175,575 Cytec Industries Inc.+................................................... 7,132,734
177,775 Monsanto Co.............................................................. 6,911,003
- ----------------------------------------------------------------------------------------------------------
14,043,737
- ----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

20
<PAGE> 163

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

CAPITAL APPRECIATION FUND

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
COMMUNICATIONS -- 0.8%
29,200 Ascend Communications, Inc.+............................................. $ 1,814,050
- ----------------------------------------------------------------------------------------------------------
COMPUTERS -- 10.9%
92,875 Clarify Inc.+............................................................ 4,458,000
67,375 Dell Computer Corp.+..................................................... 3,579,297
40,625 Electronics For Imaging+................................................. 3,341,406
15,200 HBO & Co................................................................. 902,500
13,850 Intel Corp............................................................... 1,813,484
60,325 International Business Machines Corp..................................... 9,109,075
21,525 Oracle Systems Corp.+.................................................... 898,669
5,750 Parametric Technology+................................................... 295,406
3,075 Transaction Systems Architects -- Class A Shares+........................ 102,244
- ----------------------------------------------------------------------------------------------------------
24,500,081
- ----------------------------------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS -- 1.8%
41,750 General Electric Co...................................................... 4,128,031
- ----------------------------------------------------------------------------------------------------------
DRUGS AND HEALTHCARE -- 8.6%
15,000 American Home Products Corp. ............................................ 879,375
1,650 Bristol-Myers Squibb Co. ................................................ 179,438
78,825 Eli Lilly & Co........................................................... 5,754,225
39,550 Merck & Co., Inc. ....................................................... 3,134,338
63,475 Pfizer, Inc.............................................................. 5,260,491
52,225 Warner-Lambert Co........................................................ 3,916,875
- ----------------------------------------------------------------------------------------------------------
19,124,742
- ----------------------------------------------------------------------------------------------------------
ENERGY -- 0.4%
36,100 Peco Energy Co........................................................... 911,525
- ----------------------------------------------------------------------------------------------------------
ENTERTAINMENT AND LEISURE TIME -- 4.1%
98,100 G-TECH Holdings Corp.+................................................... 3,139,200
113,075 Hilton Hotels Corp....................................................... 2,954,084
146,250 Mirage Resorts Inc.+..................................................... 3,162,656
- ----------------------------------------------------------------------------------------------------------
9,255,940
- ----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.0%
8,825 Chester Bancorp Inc. .................................................... 115,828
4,375 Federal Home Loan Mortgage Corp. ........................................ 481,797
101,630 Federal National Mortgage Association.................................... 3,823,829
10,000 First Defiance Financial Corp............................................ 123,750
80,465 Merrill Lynch & Co., Inc. ............................................... 6,557,898
10,000 South Street Financial Co.+.............................................. 140,000
- ----------------------------------------------------------------------------------------------------------
11,243,102
- ----------------------------------------------------------------------------------------------------------
HOSPITAL RELATED -- 0.5%
43,275 Fresenius Medical Care ADR+.............................................. 1,217,109
- ----------------------------------------------------------------------------------------------------------
INSURANCE -- 0.4%
26,600 CMAC Investment Corp. ................................................... 977,550
- ----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

21
<PAGE> 164

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

CAPITAL APPRECIATION FUND

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
NATURAL GAS -- 1.6%
75,500 Praxair Inc.............................................................. $ 3,482,438
- ----------------------------------------------------------------------------------------------------------
NETWORKING -- 3.4%
119,375 Cisco Systems Inc.+...................................................... 7,595,234
- ----------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 2.3%
133,350 Gartner Group+........................................................... 5,192,316
- ----------------------------------------------------------------------------------------------------------
RETAIL -- 5.2%
50,400 Gucci Group N.V.......................................................... 3,219,300
115,975 Nike Inc., Class B Shares................................................ 6,929,506
18,600 The Finish Line, Class A Shares+......................................... 392,925
17,800 Vons Companies Inc.+..................................................... 1,065,775
- ----------------------------------------------------------------------------------------------------------
11,607,506
- ----------------------------------------------------------------------------------------------------------
SOFTWARE -- 2.9%
77,975 Microsoft Corp.+......................................................... 6,442,684
- ----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.3%
14,225 Cincinnati Bell, Inc..................................................... 876,616
186,900 Lucent Technologies Inc.................................................. 8,644,125
- ----------------------------------------------------------------------------------------------------------
9,520,741
- ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $154,608,059)............................... 200,306,750
- ----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 10.5%
$23,489,000 Citibank, 6.898% due 1/2/97; Proceeds at maturity -- $23,579,002; (Fully
collateralized by U.S. Treasury Notes, 5.750% due 12/13/98; Market
value -- $23,970,000) (Cost -- $23,489,000).............................. 23,489,000
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $178,097,059*)........................ $223,795,750
- ----------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

22
<PAGE> 165

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

CASH INCOME TRUST

<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 19.6%
$ 275,000 Federal Home Loan Mortgage Corp. matures 2/18/97............... 5.28% to 5.41% $ 273,068
425,000 Federal National Mortgage Association mature 1/3/97 to 5.28 to 5.31
3/3/97....................................................... 422,648
- ------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES AND OBLIGATIONS
(Cost -- $695,716)............................................. 695,716
- ------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS -- 38.7%
1,385,000 U.S. Treasury Bills mature 1/9/97 to 4/17/97 5.07 to 5.11
(Cost -- $1,374,750)......................................... 1,374,750
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 41.7%
150,000 Associates Corp. of North America matures 2/4/97............... 5.36 149,251
150,000 Chevron Oil Finance matures 2/4/97............................. 5.34 149,253
150,000 CIT Group Holdings, Inc. matures 1/16/97....................... 5.37 149,668
150,000 Ford Motor Credit Corp. matures 1/16/97........................ 5.36 149,669
150,000 General Electric Capital Corp. matures 1/9/97.................. 5.48 149,820
150,000 H.J. Heinz Co. matures 1/23/97................................. 5.45 149,507
150,000 Household Finance Corp. matures 2/13/97........................ 5.48 149,032
135,000 Potomac Electric Power Co. matures 1/15/97..................... 5.83 134,698
150,000 Prudential Funding Co. matures 1/16/97......................... 5.34 149,671
150,000 Xerox Corp. matures 1/16/97.................................... 5.45 149,664
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost -- $1,480,233).................... 1,480,233
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $3,550,699*)................ $3,550,699
- ------------------------------------------------------------------------------------------------------------
</TABLE>

* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

23
<PAGE> 166

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996

<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments -- Cost............................... $162,004,962 $12,350,130 $154,608,059 $3,550,699
Short-term investments -- Cost.................... -- 3,893,590 23,489,000 --
- ------------------------------------------------------------------------------------------------------------
Investments, at value............................. $187,681,956 $13,008,232 $200,306,750 $3,550,699
Short-term investments, at value.................. -- 3,893,590 23,489,000 --
Cash.............................................. 518 -- 855 4,509
Receivable for securities sold.................... 409,824 -- -- --
Dividends and interest receivable................. 1,128,214 360,137 147,193 --
Receivable for Fund shares sold................... -- 52,645 454,681 --
Receivable from affiliate......................... -- -- -- 15,843
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS...................................... 189,220,512 17,314,604 224,398,479 3,571,051
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased.................. 519,223 -- 109,975 --
Investment advisory fees payable.................. 77,599 7,420 141,259 1,147
Payable for Fund shares purchased................. 3,504 -- -- --
Dividends payable................................. -- -- -- 5,696
Accrued expenses.................................. 9,705 16,141 15,494 21,553
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES................................. 610,031 23,561 266,728 28,396
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................... $188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital................................... $158,673,246 $21,746,024 $179,434,374 $3,542,655
Undistributed (overdistributed) net investment
income......................................... 689,249 (172,955) 219,605 --
Accumulated net realized gain (loss) from security
transactions and futures contracts............. 3,570,992 (4,940,128) (1,220,919) --
Net unrealized appreciation of investments........ 25,676,994 658,102 45,698,691 --
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................... $188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING.................................. 12,594,215 2,036,482 6,103,983 3,542,673
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE.......................... $14.98 $8.49 $36.72 $1.00
- ------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

24
<PAGE> 167

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................... $ 5,087,435 $1,774,958 $ 853,439 $114,317
Dividends.............................................. 2,160,122 -- 1,687,610 --
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................ 7,247,557 1,774,958 2,541,049 114,317
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)...................... 891,042 72,800 1,261,284 19,000
Custody................................................ 49,323 12,866 65,089 --
Administration fees (Note 3)........................... 48,885 24,332 25,243 6,622
Shareholder communications............................. 22,028 16,446 17,563 16,446
Trustees' fees......................................... 6,544 6,544 6,544 6,544
Audit and legal........................................ 5,918 6,440 9,521 13,330
Registration fees...................................... 1,267 1,267 1,267 1,267
Shareholder and system servicing fees.................. 1,000 1,000 2,000 --
Other.................................................. 104 1,569 3,083 --
- -------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES......................................... 1,026,111 143,264 1,391,594 63,209
Less: Expense reimbursement (Note 3)................... -- -- -- (43,376)
- -------------------------------------------------------------------------------------------------------------
NET EXPENSES........................................... 1,026,111 143,264 1,391,594 19,833
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 6,221,446 1,631,694 1,149,455 94,484
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS (NOTES 4 & 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities)....................................... 14,175,095 (304,388) 13,938,060 --
Futures contracts................................... (744,302) -- -- --
- -------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)............................... 13,430,793 (304,388) 13,938,060 --
- -------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year................................... 22,303,922 (199,726) 21,220,176 --
End of year......................................... 25,676,994 658,102 45,698,691 --
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION................ 3,373,072 857,828 24,478,515 --
- -------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FUTURES CONTRACTS............ 16,803,865 553,440 38,416,575 --
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS................... $23,025,311 $2,185,134 $ 39,566,030 $ 94,484
- -------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

25
<PAGE> 168

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 6,221,446 $ 1,631,694 $ 1,149,455 $ 94,484
Net realized gain (loss).......................... 13,430,793 (304,388) 13,938,060 --
Increase in net unrealized appreciation........... 3,373,072 857,828 24,478,515 --
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 23,025,311 2,185,134 39,566,030 94,484
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income............................. (10,914,123) (2,978,125) (1,741,271) (94,502)
Net realized gains................................ (17,258,729) -- (23,015,510) --
- ------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS.................. (28,172,852) (2,978,125) (24,756,781) (94,502)
- ------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares.................. 7,067,309 5,233,862 72,301,317 9,941,686
Net asset value of shares issued for
reinvestment of dividends...................... 28,172,852 2,978,125 24,756,781 94,502
Cost of shares reacquired......................... (12,757,653) (3,030,251) (9,891,028) (7,910,199)
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS................................... 22,482,508 5,181,736 87,167,070 2,125,989
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS.............................. 17,334,967 4,388,745 101,976,319 2,125,971
NET ASSETS:
Beginning of year................................. 171,275,514 12,902,298 122,155,432 1,416,684
- ------------------------------------------------------------------------------------------------------------
END OF YEAR*...................................... $188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net
investment income of: ............................ $689,249 $(172,955) $219,605 --
- ------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

26
<PAGE> 169

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 5,381,926 $ 1,173,476 $ 811,421 $ 51,414
Net realized gain................................. 7,915,343 395,891 12,852,764 --
Increase in net unrealized appreciation........... 23,599,777 221,759 16,423,842 --
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 36,897,046 1,791,126 30,088,027 51,414
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income............................. (5,441,569) (960,192) (540,784) (51,414)
Net realized gains................................ (1,783,880) -- -- --
- -------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS.................. (7,225,449) (960,192) (540,784) (51,414)
- -------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares.................. 5,376,731 1,749,523 26,600,150 3,284,741
Net asset value of shares issued for
reinvestment of dividends...................... 7,225,449 960,192 540,784 52,033
Cost of shares reacquired......................... (11,885,171) (2,354,757) (13,026,347) (3,122,783)
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS................................... 717,009 354,958 14,114,587 213,991
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS.............................. 30,388,606 1,185,892 43,661,830 213,991
NET ASSETS:
Beginning of year................................. 140,886,908 11,716,406 78,493,602 1,202,693
- -------------------------------------------------------------------------------------------------------------
END OF YEAR*...................................... $171,275,514 $12,902,298 $122,155,432 $ 1,416,684
- -------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income
of:............................................... $5,381,926 $1,173,476 $811,421 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

27
<PAGE> 170

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund
and Cash Income Trust (collectively, "Fund(s)") are each a Massachusetts
business trust registered under the Investment Company Act of 1940, as amended,
as diversified, open-end management investment companies. Shares of the Funds
are offered only to insurance company separate accounts that fund certain
variable annuity and variable life insurance contracts.

The significant accounting policies consistently followed by the Funds are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities for which no sales price were reported and U.S. Government and Agency
obligations are valued at the mean between the last reported bid and ask prices
or on the basis of quotations received from reputable brokers or other
recognized sources; (c) securities maturing within 60 days are valued at cost
plus accreted discount and, or minus amortized premium, which approximates
market value; (d) securities that have a maturity of 60 days or more are valued
at prices based on market quotations for securities of similar type, yield and
maturity; (e) interest income, adjusted for amortization of premium and
accretion of discount, is recorded on the accrual basis and dividend income is
recorded on the ex-dividend date; (f) gains or losses on the sale of securities
are calculated by using the specific identification method; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At December 31, 1996, reclassifications were made to the capital
accounts of the High Yield Bond Trust, Capital Appreciation Fund and Cash Income
Trust to reflect permanent book/tax differences and income and gains available
for distributions under income tax regulations. Accordingly, for the High Yield
Bond Trust a portion of accumulated net realized loss amounting to $1,893,310
was reclassified to paid-in capital. Net investment income, net realized gains
and net assets were not affected by this change; (i) the Funds intend to comply
with the requirements of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; and (j) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.

In addition, for the year ended December 31, 1996, distributions from
realized gains include both net realized short-term and long-term capital gains.
Previous to 1996 net realized short-term capital gains were included in
distributions from net investment income.

2. DIVIDENDS

Cash Income Trust declares and records a dividend of substantially all of
its net investment income on each business day. Such dividends are paid or
reinvested on the payable date.

3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS

Travelers Asset Management International Corporation ("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as investment manager and
advisor to the Managed Assets Trust ("MAT"), High Yield Bond Trust ("HYBT") and
Cash Income Trust ("CIT"). MAT and CIT pay TAMIC an investment management and
advisory fee calculated at the annual rate of 0.50% and 0.3233%, respectively of
its average daily net assets. HYBT pays TAMIC an investment management and
advisory fee calculated at an annual rate of: 0.50% on the first $50,000,000,
0.40% on the next $100,000,000, 0.30% on the next $100,000,000 and 0.25% on the
amount over $250,000,000 of its average daily net assets. This fee is calculated
daily and paid monthly.

TAMIC has a sub-advisory agreement with The Travelers Investment Management
Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary of Travelers Group
Inc. Pursuant to the sub-advisory agreement, TIMCO is responsible for the
day-to-day portfolio operations and investment decisions for MAT. As a result,
TAMIC pays TIMCO, as sub-advisor, 0.25% of the average daily net assets of MAT.

In addition, TIMCO acts as investment manager and advisor to the Capital
Appreciation Fund ("CAF"). CAF pays TIMCO an investment management and advisory
fee calculated at an annual rate of 0.75% of the average daily net assets. This
fee is calculated daily and paid monthly.

28
<PAGE> 171

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

TIMCO also has a sub-advisory agreement with Janus Capital Corporation
("Janus"). Pursuant to the sub-advisory agreement, Janus is responsible for the
day-to-day portfolio operations and investment decisions for CAF. As a result,
TIMCO pays Janus, as sub-advisor, 0.55% of the average daily net assets of CAF.

Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Funds. The Funds pay Travelers Insurance an administration fee calculated
at an annual rate of 0.06% of its average daily net assets. Travelers Insurance
has entered into a sub-administrative services agreement with Smith Barney
Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith Barney Holdings
Inc. ("SBH"). Travelers Insurance pays SBMFM, as sub-administrator, a fee
calculated at an annual rate of 0.06% for the average daily net assets of each
Fund. This fee is calculated daily and paid monthly.

MAT received brokerage commissions of $1,380 from affiliated brokers.

One Trustee and all officers of the Funds are employees of Travelers Group
Inc., or its subsidiaries.

4. INVESTMENTS

During the year ended December 31, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:

<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases.................................................... $177,030,601 $10,021,937 $180,570,344
- -----------------------------------------------------------------------------------------------------------
Sales........................................................ 189,051,386 9,367,054 126,712,795
- -----------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:

<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation*............................... $26,911,202 $779,745 $47,569,236
Gross unrealized depreciation*............................... (1,234,208) (121,643) (1,870,545)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation*................................. $25,676,994 $658,102 $45,698,691
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Substantially the same for Federal income tax purposes.

5. REPURCHASE AGREEMENTS

The Funds purchase (and its custodian takes possession of) U.S. Government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Funds require continual maintenance
of the market value of the collateral in amounts at least equal to 102% of the
repurchase price.

6. FUTURES CONTRACTS

Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Funds record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Funds' basis in the contract. The Funds bear the market risk that arises
from changes in the value of the financial instruments and securities indices
(futures contracts) and the credit risk should a counterparty fail to perform
under such contracts.

At December 31, 1996, the Funds had no open futures contracts.

29
<PAGE> 172

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. OPTIONS CONTRACTS

Premiums paid when put or call options are purchased by the Funds,
represent investments, which are "marked-to-market" daily. When a purchased
option expires, the Funds realize a loss in the amount of the premium paid. When
the Funds enter into closing sales transactions, the Funds realize a gain or
loss depending on whether the proceeds from the closing sales transaction are
greater or less than the premium paid for the option. When the Funds exercise a
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When the Funds exercise a call option, the cost of the security
which the Funds purchase upon exercise will be increased by the premium
originally paid.

As of December 31, 1996, the Funds had no open purchased call or put
options contracts.

8. CAPITAL LOSS CARRYFORWARD

At December 31, 1996, HYBT had, for Federal income tax purposes,
approximately $4,751,000 of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses can be used
to offset realized capital gains, it is probable that such gains will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on December 31 of the year indicated:

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 2004
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carryforward
Amounts............ $530,000 $1,094,000 $1,970,000 $748,000 $48,000 $135,000 $38,000 $188,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

9. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Fund were as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
MANAGED ASSETS TRUST
Shares sold.................................................... 469,580 375,304
Shares issued on reinvestment.................................. 1,926,518 581,291
Shares redeemed................................................ (847,611) (871,567)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 1,548,487 85,028
- --------------------------------------------------------------------------------------------------------
HIGH YIELD BOND TRUST
Shares sold.................................................... 591,013 206,291
Shares issued on reinvestment.................................. 356,007 122,473
Shares redeemed................................................ (343,196) (276,334)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 603,824 52,430
- --------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
Shares sold.................................................... 1,994,300 900,317
Shares issued on reinvestment.................................. 716,103 22,109
Shares redeemed................................................ (287,644) (445,510)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 2,422,759 476,916
- --------------------------------------------------------------------------------------------------------
CASH INCOME TRUST
Shares sold.................................................... 9,941,686 3,284,741
Shares issued on reinvestment.................................. 94,502 52,033
Shares redeemed................................................ (7,910,199) (3,122,783)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 2,125,989 213,991
- --------------------------------------------------------------------------------------------------------
</TABLE>

30
<PAGE> 173

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

For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
MANAGED ASSETS TRUST 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR................. $15.50 $12.85 $14.21 $14.02 $14.78
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income............................ 0.46 0.49 0.46 0.51 0.64
Net realized and unrealized gain (loss).......... 1.50 2.83 (0.73) 0.72 0.01
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations................ 1.96 3.32 (0.27) 1.23 0.65
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM (1):
Net investment income............................ (0.89) (0.50) (0.67) (0.85) (1.04)
Net realized gains............................... (1.59) (0.17) (0.42) (0.19) (0.37)
- --------------------------------------------------------------------------------------------------------------
Total Distributions................................ (2.48) (0.67) (1.09) (1.04) (1.41)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR....................... $14.98 $15.50 $12.85 $14.21 $14.02
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN....................................... 13.78% 27.12% (2.24)% 9.33% 5.14%
- --------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S).................... $188,610 $171,276 $140,887 $156,767 $148,971
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)..................................... 0.58% 0.58% 0.61% 0.56% 0.56%
Net investment income............................ 3.51 3.49 3.59 3.65 4.97
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............................ 108% 110% 97% 86% 112%
- --------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARES PAID ON EQUITY
TRANSACTIONS (3)................................. $0.06 -- -- -- --
- --------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
HIGH YIELD BOND TRUST 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR................. $9.00 $8.49 $9.25 $8.91 $8.75
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income............................ 0.91 0.80 0.66 0.68 0.88
Net realized and unrealized gain (loss).......... 0.41 0.41 (0.76) 0.47 0.18
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations................ 1.32 1.21 (0.10) 1.15 1.06
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM (1):
Net investment income............................ (1.83) (0.70) (0.66) (0.81) (0.90)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR....................... $8.49 $9.00 $8.49 $9.25 $8.91
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN....................................... 16.05% 15.47% (1.26)% 14.01% 13.16%
- --------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S).................... $17,291 $12,902 $11,716 $12,765 $10,289
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (4)..................................... 0.97% 1.25% 1.25% 0.99% 0.56%
Net investment income............................ 11.01 9.37 7.71 7.69 10.24
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............................ 84% 222% 146.% 19% 52%
- --------------------------------------------------------------------------------------------------------------
</TABLE>

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

(2) The ratios of expenses to average net assets for the years 1993 and 1992
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 0.60% and 0.63%, for the
years ended December 31, 1993 and 1992, respectively.

(3) For the fiscal years beginning after 1995, the SEC instituted new guidelines
requiring the disclosure of average commissions per share on Funds which
held more than 10% of their assets in commissionable equity securities.

(4) The ratio of expenses to average net assets reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the ratios of expenses to
average net assets would have been 1.28%, 1.33%, 1.31% and 1.28%, for the
years ended December 31, 1995, 1994, 1993 and 1992, respectively.

31
<PAGE> 174

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)

For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND 1996 1995 1994 1993(1) 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............ $33.18 $24.50 $25.87 $22.72 $19.63
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income....................... 0.23 0.24 0.19 0.19 0.28
Net realized and unrealized gain (loss)..... 8.49 8.61 (1.41) 3.21 3.13
- -------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........... 8.72 8.85 (1.22) 3.40 3.41
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM (2):
Net investment income....................... (0.41) (0.17) (0.15) (0.25) (0.32)
Net realized gains.......................... (4.77) -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Total Distributions........................... (5.18) (0.17) (0.15) (0.25) (0.32)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................. $36.72 $33.18 $24.50 $25.87 $22.72
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN.................................. 28.21% 36.37% (4.76)% 15.09% 17.60%
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)............... $224,132 $122,155 $78,494 $62,414 $29,506
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)................................ 0.83% 0.85% 0.89% 0.87% 0.56%
Net investment income....................... 0.69 0.84 0.79 0.81 1.39
- -------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE....................... 84% 124% 106% 155% 126%
- -------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (4).................. $0.06 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CASH INCOME TRUST 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............ $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income (5)................... 0.0412 0.0417 0.0278 0.0214 0.0322
Distributions from net investment income.... (0.0412) (0.0417) (0.0278) (0.0214) (0.0322)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................. $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN.................................. 4.20% 4.17% 2.78% 2.14% 3.22%
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)............... $3,543 $1,417 $1,203 $647 $697
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (5)(6)............................. 0.78% 1.25% 1.25% 0.94% 0.38%
Net investment income....................... 3.72 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Effective May 1, 1993, Janus Capital Corporation became sub-adviser for
Capital Appreciation Fund.

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

(3) The ratio of expenses to average net assets for 1993 and 1992 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 0.96% and 0.91%, for the years ended
December 31, 1993 and 1992, respectively.

(4) For the fiscal years beginning after 1995, the SEC instituted new guidelines
requiring the disclosure of average commissions per share on Funds which
held more than 10% of their assets in commissionable equity securities.

(5) For the year ended December 31, 1996, The Travelers reimbursed CIT for
$43,376 in expenses. If such fees were not waived and expenses not
reimbursed, the per share decrease of net investment income would have been
$0.002 and the expense ratio would have been 1.71%.

(6) The ratio of expenses to average net assets for 1995-1992 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 7.37%, 6.40%, 8.47% and 7.70% for the
years ended December 31, 1995, 1994, 1993 and 1992, respectively.

- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)

The amount of long-term capital gains paid for the fiscal year ended
December 31, 1996, are $13,912,800 for the Managed Assets Trust and $19,412,512
for the Capital Appreciation Portfolio.

32
<PAGE> 175

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders of
Managed Assets Trust:

We have audited the accompanying statement of assets and liabilities of Managed
Assets Trust including the schedule of investments as of December 31, 1996, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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, 1996, by correspondence with the custodian and brokers. 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
Managed Assets Trust as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997

33
<PAGE> 176

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders of
High Yield Bond Trust:

We have audited the accompanying statement of assets and liabilities of High
Yield Bond Trust including the schedule of investments as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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, 1996, 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 High
Yield Bond Trust as of December 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997

34
<PAGE> 177

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders of
Capital Appreciation Fund:

We have audited the accompanying statement of assets and liabilities of Capital
Appreciation Fund including the schedule of investments as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Appreciation Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997

35
<PAGE> 178

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders of
Cash Income Trust:

We have audited the accompanying statement of assets and liabilities of Cash
Income Trust including the schedule of investments as of December 31, 1996, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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, 1996, 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 Cash
Income Trust as of December 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997

36
<PAGE> 179

ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
- --------------------------------------------------------------------------------

U.S. GOVERNMENT SECURITIES PORTFOLIO

For the year ended December 31, 1996, the U.S. Government Securities Portfolio
generated a total return of 1.46%. As of December 31, 1996 the composition of
assets contained in the Portfolio was 47% in mortgage-backed securities, 31% in
U.S. Treasuries, 12% in U.S. agency securities and 10% in cash.

Prospects for bond investors appeared promising as the year began. In
Washington, D.C., there were talks of federal deficit reduction through a
balanced budget amendment while the outlook for inflation was tame. Long-term
U.S. Treasuries were yielding less than 6% and the expectation of a Federal
Reserve easing of monetary policy drove down yields on 2 year U.S. Treasuries to
under 5%. However, as the year progressed, bullish sentiments were shattered as
balanced budget talks stalled, energy prices began to rise and U.S. economic
growth resumed. Heightened investor concerns over rising inflation drove up the
yield on long-term U.S. Treasuries to over 7%. Toward the end of the year, these
inflation fears proved to be unfounded and the long-term U.S. Treasury dropped
to a range of around 6.6%.

Against this backdrop of volatile interest rates, the Portfolio lagged behind
the Lehman Government Bond Index for the first three quarters of the year. By
shortening the maturity and through careful selection of securities, we were
able to recoup lost ground to finish the year in line with the Portfolio's
benchmark. Specifically, we added securities from Financing Corporation ("FICO")
and Tennessee Valley Authority ("TVA"). In our view, FICO securities were very
attractively priced due to concerns about the solvency of the Savings
Association Insurance Fund, the agency responsible for making interest payments
on the FICO securities. The U.S. Congress subsequently passed a bill that would
shore up funds required to ensure payment of interest which resulted in the FICO
bond's rise in price. In the case of TVA bonds, we utilized a hedging strategy
to boost the yield as well as to provide investors with an additional cushion
against interest rate volatility.

Looking ahead to 1997, we expect a continuation of higher interest rate
volatility. Therefore, we have reduced the Portfolio's weighting in
mortgage-backed securities while increasing the exposure to other U.S. agency
bonds. In addition, we believe the recently introduced inflation-indexed
securities by the U.S. Treasury may represent a good investment opportunity for
the Portfolio.

SOCIAL AWARENESS STOCK PORTFOLIO

Social Awareness Stock Portfolio finished 1996 with a competitive total return
of 19.98%. Our exposure to the financial and technology sectors were major
contributors to the Portfolio's positive results. As of December 31, 1996, the
Portfolio consisted of about 15% cash reserves and 71 stock holdings, with some
75% of those considered to be "core" investments. The weighted market
capitalization of the stocks owned by the Portfolio averages about $24.5
billion, approximating a 50/50 mix of large and mid-capitalization companies. As
the year ended, the Portfolio was overweighted in the consumer cyclical,
financial, and technology industries while underweighted in capital goods,
communications services, energy, and utilities industries. This composition
proved to be an advantage for the Portfolio during the period. While the
Portfolio's beta ( the comparative movement of a security's price relative to
the overall market) was approximately 10% more than the rest of the stock
market, the slightly increased risk taken was generally well rewarded. The
stocks in the Portfolio generated more earnings and more growth potential
compared to their cost than that offered by the overall market.

Our investment strategy for 1997 continues to focus on owning quality companies.
The overall Portfolio's quality remains strong with a Standard & Poor's average
rating of A minus (a ranking of common stocks from A+ through C on the basis of
growth and stability). We remain cautiously optimistic about the stock market's
1997 potential, but hold some cash reserves to take advantage of buying
opportunities from normal market volatility following two years of very strong
performance.

UTILITIES PORTFOLIO

Utilities Portfolio seeks to provide current income and as a secondary goal,
capital appreciation, by investing at least 25% of its assets in the utilities
industry. For the year ended December 31, 1996, the Utilities Portfolio had a
total return of 7.47%.

The past year was frustrating for electric utility investors. As a group,
utilities underperformed the broad based equity market. A strong stock market
combined with a relatively weak bond market caused attention to move away from
defensive sectors such as utilities. Nevertheless, we believe the electric
utility sector should continue to benefit from industry restructuring and the
rapid pace of mergers and acquisitions. For example, several state restructuring
proposals have focused on the need to

37
<PAGE> 180

ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
- --------------------------------------------------------------------------------

lower customer rates and creating opportunities for electric utilities to
recover their capital investments. In our opinion, these proposals should create
a more positive environment for investors by removing some of the uncertainty
that has plagued utilities over the past few years. The consolidation of
electric utility and natural gas companies dominated merger activity during 1996
as management teams attempted to enlarge their customer base and become full
service energy providers in a more competitive industry. Furthermore, several
electric utility companies continue to diversify by aggressively expanding into
foreign markets.

We remain positive for electric utilities in 1997 based on continued
clarification of the impact of deregulation and competition in the industry and
its favorable defensive characteristics. In addition, we expect more individual
state initiatives regarding electric utility industry restructuring.
Consolidation should continue involving electric sector and electric companies
with natural gas companies. In this dynamic and rapidly changing environment,
individual stock selection will continue to be extremely important in achieving
competitive total returns. We expect performance among individual companies to
vary significantly. In our view, special situation companies, with above average
dividend growth, favorable regulatory rulings or positive deregulatory proposals
are exciting new investment opportunities. We continue to focus on higher
quality companies with strong earnings and dividend growth, superior management
teams and favorable environments. Moreover, we favor lower-cost companies in
this more competitive environment. We believe investors should view utility
investing from a total return perspective and not simply evaluate the sector's
current yield.

The economic outlook for 1997 calls for a continuance of slow to moderate U.S.
economic growth without renewed inflation and the long-term U.S. Treasury bond
is expected to trade in a range of 6.25% to 7%. These conditions should be
generally favorable for fixed-income markets and interest rate-sensitive sectors
such as electric utilities. However, higher overall market volatility may
increase if there is a surprise regarding the economy or corporate earnings.

Our portfolio strategy continues to focus on income and long-term growth. We
have increased our natural gas holdings and gradually reduced telecommunications
holdings awaiting a clearer competitive picture or more favorable valuations in
that industry. After two years of above historical returns, an increase in stock
market volatility could enhance the appeal of electric utilities as a stable
long-term investment vehicle.

In closing, we thank you for your investment in The Travelers Series Trust
Portfolios. We look forward to continuing to help you achieve your financial
goals.

Sincerely,

/s/ HEATH B. MCLENDON

Heath B. McLendon
Chairman

January 15, 1997

38
<PAGE> 181

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES PORTFOLIO AS OF 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 1.46%
1/24/92* through 12/31/96 5.84%

<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
1/24/92* through 12/31/96 32.33%
* Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on January
24, 1992 and assuming reinvestment of dividends through December
31, 1996. The Lehman Government Bond Index is a broad-based Index
of all public debt obligations of the U.S. Government and its
agencies and has an average maturity of nine years. The Consumer
Price Index is a measure of the average change in prices over time
in a fixed market basket of goods and services.

<TABLE>
<CAPTION>
U.S. Gov-
ernment Lehman
Measurement Period Securities Government Consumer
(Fiscal Year Covered) Portfolio Bond Index Price Index
<S> <C> <C> <C>
1/24/92 10000 10000 10000
12/92 10290 10920 10275
12/93 11813 12125 10557
12/94 11147 11699 10840
12/95 13869 13950 11115
12/31/96 14077 14354 11484
</TABLE>

- --------------------------------------------------------------------------------
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- SOCIAL AWARENESS STOCK PORTFOLIO AS OF 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 19.98%
5/1/92* through 12/31/96 12.62%

<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
5/1/92* through 12/31/96 73.33%
* Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on May 1,
1992 assuming reinvestment of dividends through December 31, 1996.
The Standard & Poor's 500 Index is an unmanaged index composed of
500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the over-the-counter market.
The Consumer Price Index is a measure of the average change in
prices over time in a fixed market basket of goods and services.

<TABLE>
<CAPTION>
Social
Awareness Standard &
Measurement Period Stock Poor's 500 Consumer
(Fiscal Year Covered) Portfolio Index Price Index
<S> <C> <C> <C>
5/1/92 10000 10000 10000
12/92 10850 10673 10157
12/93 11777 11745 10436
12/94 11461 11900 10716
12/95 16285 14509 10988
12/31/96 18340 17838 11353
</TABLE>

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

39
<PAGE> 182

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF 12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 7.47%
2/4/94* through 12/31/96 11.24%

<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
2/4/94* through 12/31/96 36.26%
* Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on
February 4, 1994 assuming reinvestment of dividends through
December 31, 1996. Standard & Poor's 500 Index is an unmanaged
index composed of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange and over-the-counter
market. The Consumer Price Index is a measure of the average change
in prices over time in a fixed market basket of goods and services.

<TABLE>
<CAPTION>
Standard &
Measurement Period Utilities Poor's 500 Consumer
(Fiscal Year Covered) Portfolio Index Price Index
<S> <C> <C> <C>
2/4/94 10000 10000 10000
12/94 10170 10072 10205
12/95 13149 13852 10464
12/31/96 14139 17031 10811
</TABLE>

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

40
<PAGE> 183

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS DECEMBER 31, 1996
U.S. GOVERNMENT SECURITIES PORTFOLIO

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 89.8%
$ 1,000,000 U.S. Treasury Bond, 9.250% due 2/15/16...................................... $ 1,269,950
700,000 U.S. Treasury Bond, 8.125% due 5/15/21...................................... 813,281
3,000,000 U.S. Treasury Bond, 6.875% due 8/15/25...................................... 3,058,440
10,000,000 U.S. Treasury Strip, zero coupon due 2/15/15................................ 2,940,700
2,955,466 FHLMC, 6.000% due 3/1/26.................................................... 2,749,500
988,365 FHLMC, 8.000% due 5/1/26.................................................... 1,008,131
2,019,999 FNMA, 7.000% due 6/1/24..................................................... 1,977,075
2,964,852 FNMA, 7.500% due 11/1/26@................................................... 2,964,850
392,192 GNMA, 8.500% due 3/15/18.................................................... 406,530
595,113 GNMA, 8.500% due 5/15/18.................................................... 616,871
251,104 GNMA, 8.500% due 6/15/18.................................................... 260,285
177,531 GNMA, 8.500% due 7/15/18.................................................... 184,022
1,974,160 GNMA, 7.000% due 6/15/24.................................................... 1,931,578
3,000,000 Tennessee Valley Authority Debenture, 5.980% due 4/1/36..................... 3,041,250
- ---------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost -- $23,037,806).......... 23,222,463
- ---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.2%
2,626,000 Citibank, 6.900% due 1/2/97; Proceeds at maturity -- $2,627,007;
(Fully collateralized by U.S. Treasury Notes, 5.750% due 12/31/98;
Market value -- $2,686,638) (Cost -- $2,626,000)............................ 2,626,000
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $25,663,806*)............................ $25,848,463
- ---------------------------------------------------------------------------------------------------------
</TABLE>

@ Date shown represents the last in range of maturity dates of mortgage
certificates owned.

* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

41
<PAGE> 184

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

SOCIAL AWARENESS STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 83.7%
- ---------------------------------------------------------------------------------------------------------
BASIC MATERIALS -- 3.8%
2,000 Air Products & Chemicals, Inc..................................................... $ 138,250
5,000 Engelhard Corp.................................................................... 95,625
4,000 Praxair, Inc...................................................................... 184,500
- ---------------------------------------------------------------------------------------------------------
418,375
- ---------------------------------------------------------------------------------------------------------
CAPITAL GOODS -- 2.9%
1,500 AMP, Inc.......................................................................... 57,562
2,000 Pitney Bowes, Inc................................................................. 109,000
2,800 York International, Inc........................................................... 156,450
- ---------------------------------------------------------------------------------------------------------
323,012
- ---------------------------------------------------------------------------------------------------------
COMMUNICATION -- 1.1%
800 Bell Atlantic Corp................................................................ 51,800
2,300 MCI Communications Corp........................................................... 75,181
- ---------------------------------------------------------------------------------------------------------
126,981
- ---------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 11.6%
2,900 Fleetwood Enterprises, Inc........................................................ 79,750
2,900 Home Depot, Inc................................................................... 145,363
3,500 Kaufman & Broad Home Corp......................................................... 45,063
1,864 Lucas Variety PLC+................................................................ 70,832
3,000 May Department Stores............................................................. 140,250
2,000 Nine West Group, Inc.+............................................................ 92,750
6,000 Olsten Corp....................................................................... 90,750
4,000 Pep Boys -- Manny, Moe & Jack..................................................... 123,000
4,000 Toys "R" Us, Inc.+................................................................ 120,000
1,900 Tribune Co........................................................................ 149,862
3,500 Wal-Mart Stores, Inc.............................................................. 80,062
3,000 Xerox Corp........................................................................ 157,875
- ---------------------------------------------------------------------------------------------------------
1,295,557
- ---------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 10.5%
2,000 Coca-Cola Co...................................................................... 105,250
2,000 Gillette Co....................................................................... 155,500
3,000 Kroger Co.+....................................................................... 139,500
2,000 McDonald's Corp................................................................... 90,500
5,000 Newell Co......................................................................... 157,500
4,800 PepsiCo, Inc...................................................................... 141,000
2,800 Sysco Corp........................................................................ 91,350
1,000 Unilever N.V...................................................................... 175,250
1,600 Walt Disney Co.................................................................... 111,400
- ---------------------------------------------------------------------------------------------------------
1,167,250
- ---------------------------------------------------------------------------------------------------------
ENERGY -- 1.6%
2,800 Anadarko Petroleum Corp........................................................... 181,300
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

42
<PAGE> 185

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

SOCIAL AWARENESS STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
FINANCE -- 17.8%
1,600 Aetna Inc......................................................................... $ 128,000
3,500 American Express Co............................................................... 197,750
1,250 American International Group Inc.................................................. 135,313
3,000 Associates 1st Capital Corp....................................................... 132,375
2,700 Bank of Boston Corp............................................................... 173,475
3,000 Barnett Banks, Inc................................................................ 123,375
1,800 Citicorp.......................................................................... 185,400
1,200 Federal Home Loan Mortgage Corp................................................... 132,150
3,000 H. F. Ahmanson & Co............................................................... 97,500
2,500 Lincoln National Corp............................................................. 131,250
2,200 NationsBank Corp.................................................................. 215,050
3,400 State Street Boston Corp.......................................................... 219,300
1,500 Transamerica Corp................................................................. 118,500
- ---------------------------------------------------------------------------------------------------------
1,989,438
- ---------------------------------------------------------------------------------------------------------
HEALTH CARE -- 10.3%
2,200 Amgen Inc.+....................................................................... 119,625
3,750 Columbia/HCA Healthcare Corp...................................................... 152,813
3,300 DENTSPLY International, Inc....................................................... 156,750
3,600 Johnson & Johnson................................................................. 179,100
2,300 Merck & Co., Inc.................................................................. 182,275
1,200 Pfizer, Inc....................................................................... 99,450
1,200 Schering-Plough Corp.............................................................. 77,700
6,200 Stryker Corp...................................................................... 185,225
- ---------------------------------------------------------------------------------------------------------
1,152,938
- ---------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 20.5%
4,500 Belden, Inc....................................................................... 166,500
4,400 Cabletron Systems, Inc.+.......................................................... 146,300
2,000 Compaq Computer Corp.+............................................................ 148,500
3,000 Computer Associates International................................................. 149,250
3,000 DSC Communications, Inc.+......................................................... 53,625
2,500 Electronic Data Systems Corp...................................................... 108,125
7,000 EMC Corp.+........................................................................ 231,875
2,000 Intel Corp........................................................................ 261,875
700 International Business Machines Corp.............................................. 105,700
3,600 Lucent Technologies Corp.......................................................... 166,500
2,000 Madge Networks N.V.+.............................................................. 19,750
3,300 Marshall Industries+.............................................................. 101,062
2,800 Microsoft Corp.+.................................................................. 231,350
3,500 Oracle Corp.+..................................................................... 146,125
2,500 Perkin-Elmer Corp................................................................. 147,187
4,000 Sun Microsystems Inc.+............................................................ 102,750
- ---------------------------------------------------------------------------------------------------------
2,286,474
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

43
<PAGE> 186

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

SOCIAL AWARENESS STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
TRANSPORTATION -- 2.0%
4,500 Mesaba Holdings, Inc.+............................................................ $ 66,938
1,400 Norfolk Southern Corp. ........................................................... 122,500
1,300 Southwest Airlines................................................................ 28,763
- ---------------------------------------------------------------------------------------------------------
218,201
- ---------------------------------------------------------------------------------------------------------
UTILITIES -- 1.6%
4,000 Enron Corp........................................................................ 172,500
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $6,883,357).......................................... 9,332,026
- ---------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT -- 16.3%
$1,822,000 CS First Boston, 6.48% due 1/2/97; Proceeds at maturity -- $1,822,658; $ 1,822,000
(Fully collateralized by U.S. Treasury Notes, 7.25% due 2/15/98;
Market value -- $1,861,755) (Cost -- $1,822,000)............................
- ---------------------------------------------------------------------------------------------------------
$11,154,026
TOTAL INVESTMENTS -- 100% (Cost -- $8,705,357*).............................
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

44
<PAGE> 187

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

UTILITIES PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 82.9%
- ---------------------------------------------------------------------------------------------------------
ELECTRIC - UTILITY -- 65.5%
15,000 Allegheny Power System, Inc.................................................... $ 455,625
11,000 American Electric Power Co..................................................... 452,375
7,500 Baltimore Gas & Electric Co.................................................... 200,625
15,000 Carolina Power & Light......................................................... 547,500
9,000 Central & Southwest Corp. ..................................................... 230,625
15,000 CINergy Corp................................................................... 500,625
5,000 CIPSCO, Inc. .................................................................. 180,625
15,000 CMS Energy Corp................................................................ 504,375
10,000 Dominion Resources, Inc. ...................................................... 385,000
10,000 DPL Inc........................................................................ 245,000
12,750 DQE Inc........................................................................ 369,750
20,000 Edison International........................................................... 397,500
15,000 Entergy Corp. ................................................................. 416,250
10,000 Florida Progress Corp.......................................................... 322,500
12,000 FPL Group Inc.................................................................. 552,000
12,000 GPU Inc........................................................................ 403,500
11,000 Houston Industries............................................................. 248,875
12,000 Illinova Corp. ................................................................ 330,000
15,000 Long Island Lighting........................................................... 331,875
10,000 NIPSCO Industries, Inc......................................................... 396,250
18,000 PacifiCorp. ................................................................... 369,000
15,000 Pinnacle West Capital.......................................................... 476,250
7,500 Public Service Co. of Colorado................................................. 291,563
15,000 Public Service Co. of New Mexico............................................... 294,375
15,000 SCANA Corp..................................................................... 401,250
15,000 Sierra Pacific Resources....................................................... 431,250
12,500 Southern Co.................................................................... 282,813
15,000 Texas Utilities Co. ........................................................... 611,250
10,000 Unicom Corp.................................................................... 271,250
12,000 UtiliCorp. United, Inc......................................................... 324,000
13,000 Wisconsin Energy Corp.......................................................... 349,375
- ---------------------------------------------------------------------------------------------------------
11,573,251
- ---------------------------------------------------------------------------------------------------------
NATURAL GAS -- 11.0%
10,000 Coastal Corp. ................................................................. 488,750
10,000 Enron Corp. ................................................................... 431,250
5,000 Equitable Resources Inc. ...................................................... 148,750
10,000 Pacific Enterprises............................................................ 303,750
15,000 Southwest Gas Corp. ........................................................... 288,750
7,500 Williams Cos................................................................... 281,250
- ---------------------------------------------------------------------------------------------------------
1,942,500
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

45
<PAGE> 188

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

UTILITIES PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
TELEPHONE -- 6.4%
15,000 Frontier Corp.................................................................. $ 339,375
7,500 GTE Corp....................................................................... 341,250
2,000 MCI Communications............................................................. 65,375
10,000 Teleport Communications+....................................................... 305,000
5,000 US West Media Group+........................................................... 92,500
- ---------------------------------------------------------------------------------------------------------
1,143,500
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $12,839,147)...................................... 14,659,251
- ---------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS -- 3.6%
- ---------------------------------------------------------------------------------------------------------
TELEPHONE -- 1.3%
$ 230,000 MCI Communication Corp., 7.75% due 3/23/25................................... 232,875
- ---------------------------------------------------------------------------------------------------------
UTILITY - ELECTRIC -- 2.3%
200,000 Arizona Public Service Co., 7.25% due 8/1/23................................. 188,750
200,000 Philadelphia Electric, 8.75% due 4/1/22...................................... 212,250
- ---------------------------------------------------------------------------------------------------------
401,000
- ---------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $605,853)..................................... 633,875
- ---------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 3.0%
500,000 U.S. Treasury Notes, 7.75% due 11/30/99 (Cost -- $499,802)................... 522,605
- ---------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $13,944,802).................................. 15,815,731
- ---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.5%
1,859,000 CS First Boston Corp., 6.50% due 1/2/97; Proceeds at maturity -- $1,859,671;
(Fully collateralized by U.S. Treasury Note, 7.25% due 2/15/98; Market
value -- $1,898,260) (Cost -- $1,859,000).................................... 1,859,000
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $15,803,802*)............................. $17,674,731
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

46
<PAGE> 189

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996

<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments -- Cost.................................... $23,037,806 $ 6,883,357 $13,944,802
Repurchase agreements -- Cost.......................... 2,626,000 1,822,000 1,859,000
- ------------------------------------------------------------------------------------------------------------
Investments, at value.................................. $23,222,463 $ 9,332,026 $15,815,731
Repurchase agreements, at value........................ 2,626,000 1,822,000 1,859,000
Cash................................................... 268 697 519,418
Receivable from affiliate.............................. -- 25,093 --
Dividends and interest receivable...................... 239,298 8,769 60,046
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS........................................... 26,088,029 11,188,585 18,254,195
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased...................... 35,299 30,508 13,724
Investment advisory fees payable....................... 9,932 -- 9,697
Payable for securities purchased....................... -- 77,340 --
Accrued expenses....................................... 34,264 40,742 16,548
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES...................................... 79,495 148,590 39,969
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS......................................... $26,008,534 $11,039,995 $18,214,226
- ------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital........................................ $26,527,392 $ 8,594,239 $16,338,333
Undistributed (overdistributed) net investment
income.............................................. (2,726) -- 4,964
Accumulated net realized loss on security
transactions........................................ (700,789) (2,913) --
Net unrealized appreciation of investments............. 184,657 2,448,669 1,870,929
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS......................................... $26,008,534 $11,039,995 $18,214,226
- ------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING....................................... 2,393,878 700,357 1,490,143
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE............................... $10.86 $15.76 $12.22
- ------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

47
<PAGE> 190

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................... $ 1,705,367 $ 42,150 $ 209,151
Dividends.................................................. -- 107,312 647,584
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME.................................... 1,705,367 149,462 856,735
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2).......................... 86,625 58,250 113,601
Administration fees (Note 2)............................... 24,429 23,155 23,970
Audit and legal............................................ 24,309 24,075 18,415
Shareholder communications................................. 11,714 15,063 11,714
Custody.................................................... 8,711 18,907 7,335
Trustees' fees............................................. 6,544 6,544 6,544
Shareholder and system servicing fees...................... 1,000 1,000 1,000
Registration fees.......................................... 212 212 212
Other...................................................... 1,436 1,500 2,998
- -----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES............................................. 164,980 148,706 185,789
Less: Expense reimbursement (Note 2)....................... -- (36,367) --
- -----------------------------------------------------------------------------------------------------------
NET EXPENSES............................................... 164,980 112,339 185,789
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................ 1,540,387 37,123 670,946
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain (Loss) From Security Transactions (excluding
short-term securities):
Proceeds from sales..................................... 125,294,879 2,106,414 6,065,073
Cost of securities sold................................. 125,999,485 1,705,595 5,235,457
- -----------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)................................... (704,606) 400,819 829,616
- -----------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year....................................... 797,061 1,289,613 2,093,137
End of year............................................. 184,657 2,448,669 1,870,929
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED APPRECIATION......... (612,404) 1,159,056 (222,208)
- -----------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS............................... (1,317,010) 1,559,875 607,408
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS....................... $ 223,377 $1,596,998 $1,278,354
- -----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

48
<PAGE> 191

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 1,540,387 $ 37,123 $ 670,946
Net realized gain (loss)................................... (704,606) 400,819 829,616
Increase (decrease) in net unrealized appreciation......... (612,404) 1,159,056 (222,208)
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS..................... 223,377 1,596,998 1,278,354
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................... (3,539,054) (233,199) (1,107,181)
Net realized gains......................................... (423,418) (525,148) (974,527)
- -----------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (3,962,472) (758,347) (2,081,708)
- -----------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares........................... 6,750,676 4,848,116 7,458,285
Net asset value of shares issued for reinvestment of
dividends............................................... 3,962,472 758,347 2,081,708
Cost of shares reacquired.................................. (9,157,807) (2,459,930) (5,862,088)
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS........ 1,555,341 3,146,533 3,677,905
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS............................ (2,183,754) 3,985,184 2,874,551
NET ASSETS:
Beginning of year.......................................... 28,192,288 7,054,811 15,339,675
- -----------------------------------------------------------------------------------------------------------
END OF YEAR*............................................... $26,008,534 $11,039,995 $18,214,226
- -----------------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment
income of:................................................. $(2,726) -- $4,964
- -----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

49
<PAGE> 192

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................................... $ 1,520,848 $ 55,079 $ 441,157
Net realized gain........................................... 1,110,792 265,239 144,953
Increase in net unrealized appreciation..................... 3,171,708 1,316,045 2,170,686
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................... 5,803,348 1,636,363 2,756,796
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (1,404,917) (51,494) (150,491)
Net realized gains.......................................... -- (68,327) --
- ------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS... (1,404,917) (119,821) (150,491)
- ------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares............................ 5,439,282 2,552,645 9,178,587
Net asset value of shares issued for reinvestment of
dividends................................................ 1,404,917 119,821 150,491
Cost of shares reacquired................................... (7,572,507) (1,013,468) (2,352,367)
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS............................................. (728,308) 1,658,998 6,976,711
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS........................................ 3,670,123 3,175,540 9,583,016
NET ASSETS:
Beginning of year........................................... 24,522,165 3,879,271 5,756,659
- ------------------------------------------------------------------------------------------------------------
END OF YEAR*................................................ $28,192,288 $7,054,811 $15,339,675
- ------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:............ $1,520,848 $55,079 $441,157
- ------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

50
<PAGE> 193

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The U.S. Government Securities, Social Awareness Stock and Utilities
Portfolios (collectively, "Portfolio(s)") are separate investment portfolios of
The Travelers Series Trust ("Trust"). The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company and consists of these
portfolios and ten other separate investment portfolios: Travelers Quality Bond,
Lazard International Stock, MFS Emerging Growth, Federated High Yield, Federated
Stock, Large Cap, Equity Income, Zero Coupon Bond Fund Portfolio Series 1998,
Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio
Series 2005 Portfolios. Shares of the Trust are offered only to insurance
company separate accounts that fund certain variable annuity and variable life
insurance contracts. The financial statements and financial highlights for the
other portfolios are presented in separate annual reports.

The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets; securities for which no sales prices were reported and U.S. Government
and Agency obligations are valued at the mean between the last reported bid and
ask prices or on the basis of quotations received from reputable brokers or
other recognized sources; (c) securities maturing within 60 days are valued at
cost plus accreted discount and, or minus amortized premium, which approximates
market value; (d) securities that have a maturity of 60 days or more are valued
at prices based on market quotations for securities of similar type, yield and
maturity; (e) interest income, adjusted for amortization of premium and
accretion of discount, is recorded on the accrual basis and dividend income is
recorded on the ex-dividend date; (f) gains or losses on the sale of securities
are calculated by using the specific identification method; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the
Portfolios intend to comply with the requirements of the Internal Revenue Code
of 1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At December 31, 1996,
reclassifications were made to the Portfolio capital accounts to reflect
permanent book/tax differences and income and gains available for distribution
under income tax regulations. Accordingly, a portion of overdistributed net
investment income and accumulated net realized loss amounting to $6,915 and
$9,045, respectively, were reclassified to paid-in capital for Social Awareness
Stock Portfolio. Net investment income, net realized gains and net assets for
each Portfolio were not affected by these changes; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS

Travelers Asset Management International Corporation ("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as investment manager and
advisor to the U.S. Government Securities Portfolio ("USGS"). USGS pays TAMIC an
investment management and advisory fee calculated at the annual rate of 0.3233%
of its average daily net assets. This fee is calculated daily and paid monthly.

Greenwich Street Advisors ("GSA"), a division of Smith Barney Mutual Funds
Management Inc. ("SBMFM") which is a subsidiary of Smith Barney Holdings Inc.
("SBH") and an indirect wholly owned subsidiary of Travelers Group Inc., acts as
investment manager and advisor to the Social Awareness Stock ("SAS") and
Utilities ("Utilities") Portfolios. SAS pays GSA an investment management and
advisory fee calculated at an annual rate of : 0.65% on the first $50 million,
0.55% on the next $50 million, 0.45% on the next $100 million and 0.40% on
amounts over $200 million of the average daily net assets. Utilities pays GSA an
investment management and advisory fees calculated at an annual rate of 0.65% of
the average daily net assets. These fees are calculated daily and paid monthly.
For the year ended December 31, 1996, GSA waived $11,274 of investment advisory
fee and has agreed to reimburse expenses in the amount of $25,093 for SAS.

51
<PAGE> 194

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Portfolios. The Portfolios pay Travelers Insurance an administration fee
calculated at an annual rate of 0.06% of the average daily net assets. Travelers
Insurance has entered into a sub-administrative services agreement with SBMFM.
Travelers Insurance pays SBMFM, as sub-administrator, a fee calculated at an
annual rate of 0.06% of the average daily net assets of each Portfolio. This fee
is calculated daily and paid monthly.

One Trustee and all officers of the Trust are employees of Travelers Group
Inc., or its subsidiaries.

3. INVESTMENTS

During the year ended December 31, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:

<TABLE>
<CAPTION>
USGS SAS UTILITIES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases....................................................... $123,349,711 $3,047,308 $8,414,809
- -----------------------------------------------------------------------------------------------------------
Sales........................................................... 125,294,879 2,106,414 6,065,073
- -----------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1996, aggregate gross unrealized appreciation and
depreciation of investments were as follows:

<TABLE>
<CAPTION>
USGS SAS UTILITIES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation*...................................... $239,436 $2,624,768 $2,025,482
Gross unrealized depreciation*...................................... (54,779) (176,099) (154,553)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation*........................................ $184,657 $2,448,669 $1,870,929
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Substantially the same for Federal income tax purposes.

4. REPURCHASE AGREEMENTS

The Portfolios purchase (and their custodian takes possession of) U.S.
Government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to 102% of the repurchase price.

5. FUTURES CONTRACTS

Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolio's basis in the contract. The Portfolios bear the market risk that
arises from changes in the value of the financial instruments and securities
indices (futures contracts) and the credit risk should a counterparty fail to
perform under such contracts.

At December 31, 1996, the Portfolios had no open futures contracts.

52
<PAGE> 195

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. OPTIONS CONTRACTS

Premiums paid when put or call options are purchased by the Portfolios,
represent investments, which are "marked-to-market" daily. When a purchased
option expires, the Portfolios will realize a loss in the amount of the premium
paid. When the Portfolios enter into closing sales transactions, the Portfolios
will realize a gain or loss depending on whether the proceeds from the closing
sales transactions are greater or less than the premium paid for the option.
When the Portfolios exercise a put option, they will realize a gain or loss from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Portfolios exercise a call
option, the cost of the security which the Portfolios purchase upon exercise
will be increased by the premium originally paid.

As of December 31, 1996, the Portfolios had no open purchased call or put
options contracts.

7. CAPITAL LOSS CARRYFORWARD

At December 31, 1996, U.S. Government Securities Portfolio had, for Federal
income tax purposes, approximately $715,000 of capital loss carryforwards
available to offset future capital gains through 2004. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed.

8. 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Shares sold.................................................... 606,114 484,178
Shares issued on reinvestment.................................. 355,511 138,279
Shares redeemed................................................ (834,803) (672,686)
- --------------------------------------------------------------------------------------------------------
Net Increase (Decrease)........................................ 126,822 (50,229)
- --------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO
Shares sold.................................................... 323,694 205,312
Shares issued on reinvestment.................................. 51,251 10,913
Shares redeemed................................................ (167,210) (74,604)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 207,735 141,621
- --------------------------------------------------------------------------------------------------------
UTILITIES PORTFOLIO
Shares sold.................................................... 590,496 822,640
Shares issued on reinvestment.................................. 169,391 14,594
Shares redeemed................................................ (463,451) (209,288)
- --------------------------------------------------------------------------------------------------------
Net Increase................................................... 296,436 627,946
- --------------------------------------------------------------------------------------------------------
</TABLE>

53
<PAGE> 196

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

For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO 1996 1995 1994 1993 1992(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR..................... $12.43 $10.58 $11.63 $10.79 $10.00
- ------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................................ 0.68 0.65 0.60 0.57 0.53
Net realized and unrealized gain (loss).............. (0.52) 1.80 (1.23) 0.44 0.26
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.................... 0.16 2.45 (0.63) 1.01 0.79
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment income................................ (1.55) (0.60) (0.39) (0.17) --
Net realized gains................................... (0.18) -- (0.03) -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions.................................... (1.73) (0.60) (0.42) (0.17) --
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR........................... $10.86 $12.43 $10.58 $11.63 $10.79
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................................... 1.46% 24.42% (5.64)% 9.48% 7.90%++
- ------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)........................ $26,009 $28,192 $24,522 $25,520 $9,017
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)......................................... 0.62% 0.56% 0.71% 0.58% 0.38%+
Net investment income................................ 5.68 5.80 5.56 5.04 4.72+
- ------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................................ 501% 214% 16% 51% 25%
- ------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK PORTFOLIO 1996 1995 1994 1993 1992(4)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR..................... $14.32 $11.05 $11.64 $10.95 $10.00
- ------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (5)............................ 0.31 0.12 0.16 0.17 0.16
Net realized and unrealized gain (loss).............. 2.42 3.47 (0.45) 0.65 0.79
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.................... 2.73 3.59 (0.29) 0.82 0.95
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment income................................ (0.43) (0.14) (0.24) (0.13) --
Net realized gains................................... (0.86) (0.18) (0.06) -- --
- ------------------------------------------------------------------------------------------------------------
Total Distributions.................................... (1.29) (0.32) (0.30) (0.13) --
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR........................... $15.76 $14.32 $11.05 $11.64 $10.95
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................................... 19.98% 33.37% (2.69)% 7.55% 9.50%++
- ------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S)........................ $11,040 $7,055 $3,879 $3,361 $1,394
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (5)(6)...................................... 1.25% 1.25% 1.25% 1.05% 0.71%+
Net investment income................................ 0.43 0.99 1.43 1.50 2.22+
- ------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................................ 26% 73% 137% 60% 56%
- ------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS(7)............................ $0.06 -- -- -- --
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from January 24, 1992 (commencement of operations) to
December 31, 1992.

(3) The expense ratios for the year ended December 31, 1993 and the period ended
December 31, 1992 reflect expense reimbursement by The Travelers in
connection with voluntary expense limitations. Without the expense
reimbursement, the expense ratios would have been 0.77% and 0.72%
(annualized), respectively.

(4) For the period from May 1, 1992 (inception date) to December 31, 1992.

(5) For the year ended December 31, 1996, The Travelers reimbursed the Portfolio
for $25,093 in expenses. If such fees were not waived and expenses not
reimbursed, the per share decrease of net investment income would have been
$0.06 and the expense ratio would have been 1.69%.

(6) The expense ratios for the years ended December 31, 1995, 1994, 1993 and the
period ended December 31, 1992 reflect expense reimbursement by The
Travelers in connection with voluntary expense limitations. Without the
expense reimbursement, the expense ratios would have been 1.75%, 3.34%,
3.73% and 2.19% (annualized), respectively.

(7) For the fiscal years beginning after 1995, the SEC instituted new guidelines
requiring the disclosure of average commissions per share on Funds which
held more than 10% of their assets in commissionable equity securities.

++ Total return is not annualized, as it may not be representative of the total
return for the year.

+ Annualized.

54
<PAGE> 197

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)

For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
UTILITIES PORTFOLIO 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................................... $12.85 $10.17 $10.00
- --------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income.................................................. 0.47 0.48 0.35
Net realized and unrealized gain (loss)................................ 0.47 2.44 (0.18)
- --------------------------------------------------------------------------------------------------------
Total Income From Operations............................................. 0.94 2.92 0.17
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment income.................................................. (0.84) (0.24) --
Net realized gains..................................................... (0.73) -- --
- --------------------------------------------------------------------------------------------------------
Total Distributions...................................................... (1.57) (0.24) --
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR............................................. $12.22 $12.85 $10.17
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN............................................................. 7.47% 29.29% 1.70%++
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S).......................................... $18,214 $15,340 $5,757
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)........................................................... 1.07% 1.25% 1.25%+
Net investment income.................................................. 3.88 4.29 3.86+
- --------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................................................. 39% 25% 32%
- --------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON EQUITY TRANSACTIONS (4)............ $0.06 -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from February 4, 1994 (commencement of operations) to
December 31, 1994.

(3) The ratios of expenses to average net assets for the year ended December 31,
1995 and the period ended December 31, 1994 reflect expense reimbursements
by The Travelers in connection with voluntary expense limitations. Without
the expense reimbursements, the ratios of expenses to average net assets
would have been 1.27% and 3.49% (annualized), respectively.

++ Total return is not annualized, as it may not be representative of the total
return for the year.

+ Annualized

- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)

The amount of long-term capital gains paid for the fiscal year ended
December 31, 1996, are $479,773 for the Social Awareness Stock Portfolio and
$638,099 for Utilities Portfolio.

55
<PAGE> 198

- --------------------------------------------------------------------------------
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 schedules of
investments as of December 31, 1996, and the related statements of operations
for the year then ended, the statements of changes in net assets for the periods
ended December 31, 1996 and 1995, and the financial highlights for each of the
applicable periods ended December 31, 1996, 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, 1996, by correspondence with the custodian and also with brokers
for the Social Awareness Stock 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, 1996, the
results of their operations for the year then ended, the changes in their net
assets for the periods ended December 31, 1996 and 1995, and the financial
highlights for each of the applicable periods ended December 31, 1996, 1995,
1994, 1993 and 1992, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997

56
<PAGE> 199

Investment Advisers
--------------------

CAPITAL APPRECIATION FUND

THE TRAVELERS INVESTMENT MANAGEMENT COMPANY

Hartford, Connecticut

MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CASH INCOME TRUST AND
THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT SECURITIES PORTFOLIO

TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION

Hartford, Connecticut

THE TRAVELERS SERIES TRUST: SOCIAL AWARENESS STOCK PORTFOLIO AND UTILITIES
PORTFOLIO

SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.

New York, New York

Independent Accountants
-------------------------

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut

Custodian
----------

PNC BANK, N.A.

This report is prepared for the general information of contract owners and is
not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital
Appreciation Fund, Cash Income Trust, The Travelers Series Trust: U.S.
Government Securities Portfolio, Social Awareness Stock Portfolio or Utilities
Portfolio. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Annuity and 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-181 (Annual)(12-96) Printed in U.S.A.
<PAGE> 200
THE TRAVELERS VARIABLE
PRODUCTS FUND

ANNUAL REPORTS
DECEMBER 31, 1996

THE TRAVELERS SERIES TRUST:

LARGE CAP PORTFOLIO
EQUITY INCOME PORTFOLIO

[TRAVELERSLIFE LOGO]

The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 201
CONTENTS

MARKET ENVIRONMENT 3 A review of what happened in
world markets during the past
year.

EQUITY INCOME PORTFOLIO

PERFORMANCE 4 How the fund has done over time.

FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.

INVESTMENTS 6 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 9 Statements of assets and
liabilities, operations, and
changes in net assets, as well
as financial highlights.

LARGE CAP PORTFOLIO

PERFORMANCE 11 How the fund has done over time.

FUND TALK 12 The manager's review of fund
performance, strategy and
outlook.

INVESTMENTS 13 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 16 Statements of assets and
liabilities, operations, and
changes in net assets, as well
as financial highlights.

NOTES 18 Notes to the financial
statements.

REPORT OF INDEPENDENT ACCOUNTANTS 20 The auditors' opinion.

DISTRIBUTIONS 21

This report and the financial statements contained herein are submitted for the
general information of the shareholders of the fund. This report is not
authorized for distribution to prospective investors in the fund unless
preceded or accompanied by an effective prospectus.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

Neither of the funds is a bank.

ANNUAL REPORT 2
<PAGE> 202
MARKET ENVIRONMENT

Most stock and bond markets posted positive returns in 1996, aided by moderate
growth and low inflation. Sustained corporate earnings growth and a favorable
interest rate environment also proved beneficial. Japan, however, was the major
exception as an underperforming stock market and a weak yen undermined returns
for U.S.-based investors. The strongest gains came from the often-volatile
emerging bond markets in 1996, while performance of the bond markets of
developed countries was mixed.

U.S. STOCK MARKETS

The Standard & Poor's 500 Index -- a broad measure of U.S. stock market
performance -- rose 22.96% for the 12 months that ended December 31, 1996, well
above the index's long-term average annual return of about 12%. The Russell
2000 Index -- a measure of small stock performance -- rose 16.49%. The Dow
Jones Industrial Average -- an index of 30 blue-chip stocks -- posted a return
of 28.70%, closing above 6500 for the first time in November.

The U.S. stock market spent much of the past year breaking price and trading
volume records. Solid corporate earnings reports, large cash inflows into
mutual funds, widespread optimism and a generally favorable interest rate
environment propelled share prices higher. Large-capitalization stocks thrived
as investors sought their lower volatility and higher degree of liquidity over
smaller-cap stocks in an environment where it was sometimes difficult to
discern the health of the economy.

Most industry sectors experienced positive, if not strong performance. At
mid-year, technology stocks suffered from a sell-off sparked by fears that
company earnings were weakening. Nevertheless, this sector proved to be the
strongest in the U.S. market in 1996. Earnings surprises and positive earnings
projections were the main drivers of solid performance, especially among
semiconductor manufacturers, companies that make disk drives and monitors, and
software firms. Even though consensus estimates pointed toward increases in
short-term interest rates by the Fed, financial stocks -- usually sensitive to
changes in interest rates -- shrugged off this concern and posted solid
performance based on low interest rates and positive business prospects. Energy
stocks reaped the benefits of higher-than-expected energy prices, which
resulted in part from the delayed re-entry of Iraq into the world market.
Uncertainty over the direction of the economy benefited consumer nondurables --
such as food, beverage and tobacco companies -- health care and traditional
big-name growth stocks, as these companies tend to post steady earnings growth
in many economic environments.

Utilities stocks struggled in 1996 for two reasons. First, and most important,
uncertainty over the direction and form of deregulation in the sector tended to
diminish investor interest. Second, stocks in the sector tend to move in
concert with bonds, which lagged due to periodic inflation fears and confusing
economic signals. Stocks in the telecommunications field especially were
affected by uncertainty over legislation signed into law in February 1996.
Biotechnology issues had a hard time recovering from a correction in stock
prices from overvalued levels that they experienced earlier in 1996. Cyclical
stocks -- those that usually rise and fall with the economy -- posted mixed
results that largely depended on the outlook for companies in the specific
sector rather than the direction of the economy.

FOREIGN STOCK MARKETS

Foreign stock markets posted mixed results in 1996. The Morgan Stanley Capital
International (MSCI) EAFE Index -- which measures stock performance in Europe,
Australia and the Far East -- returned 6.05% in 1996. Europe posted the most
consistently strong equity markets due to stronger economic growth, lower
interest rates, higher corporate earnings, the relative weakness of the
continent's major currencies and a new emphasis on shareholder friendliness by
many of the region's corporations. The MSCI Europe Index was up 21.09% in 1996.
The Japanese stock market underperformed on the weakness of the economic
recovery and the uncertainty for any substantial economic reform. The Tokyo
Stock Exchange TOPIX Total Return Index was off 16.26%. Emerging market equity
performance ran the gamut from negative to positive, with the MSCI Emerging
Markets Free Index returning 6.03% for 1996. While Hong Kong was a top
performer -- benefiting from the rising value of the property sector, solid
economic growth and stable interest rates -- other Asian markets posted mixed
returns as concerns rose over declining export growth in the region. Latin
America enjoyed a strong first half, but faded toward the end of 1996 due to
low domestic savings rates and inefficient governments, among other factors.

U.S. BOND MARKETS

Uncertainty over the direction of the economy led to mixed performance in U.S.
bond markets in 1996. For the year, the Lehman Brothers Aggregate Bond Index --
a broad measure of the performance of the U.S. taxable bond market -- posted a
total return of 3.63%. Stronger-than-expected economic signals rattled the bond
market in the early spring. Investors spent most of the summer anticipating a
short-term interest rate increase by the Federal Reserve Board. However, the
Fed neither raised nor lowered rates through the end of 1996. Interest rates
responded to the Fed's inaction by falling during much of October and November.
In December, though, bond prices dropped due to inflation concerns,
stronger-than-expected economic data and comments by Fed Chairman Alan
Greenspan that the stock markets may be overvalued.

FOREIGN BOND MARKETS

While low inflation and moderate growth helped provide a positive backdrop for
most bond markets in 1996, performance in overseas bond markets was mixed. The
Salomon Brothers World Government Bond Index -- a measure of government bond
market performance in developed nations -- returned 3.62% for the 12 months
that ended December 31, 1996. In Europe, focus centered on the continuing
progress toward the European Monetary Union (EMU). Attractive opportunities
arose as countries worked to meet the requirements for joining the EMU.
However, Germany and Japan -- two of the larger components of the Salomon
Brothers World Government Bond Index -- experienced currency problems that hurt
returns. In stark contrast to the developed world, the often-volatile emerging
debt markets enjoyed a particularly strong year, helped by inflows of foreign
capital, low interest rates and the implementation of country-specific reforms
- -- especially in Latin America. The J.P. Morgan Emerging Markets Bond Index --
of which Latin America is a large component -- posted a return of 34.16% during
the period.

3 ANNUAL REPORT
<PAGE> 203
EQUITY INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE

There are several ways to evaluate a fund's historical performance: total
percentage change in value or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment, assuming
reinvestment of the fund's dividend income and capital gains (the profits the
fund earns when it sells securities that have grown in value).

<TABLE>
<CAPTION>
- --------------------------------------------
CUMULATIVE TOTAL RETURNS
- --------------------------------------------
PERIOD ENDED DECEMBER 31, 1996

LIFE OF
FUND
<S> <C>
Equity Income Portfolio 11.69%

S&P 500 (R) 13.51%
</TABLE>

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a
set period -- in this case, since the fund started on August 30, 1996.

You can compare the fund's return to the performance of the Standard & Poor's
500 Index -- a widely recognized, unmanaged index of common stocks. This
benchmark includes reinvested dividends and capital gains, if any.

If certain fund expenses had not been reimbursed, the total return would have
been lower.

Performance numbers are net of all fund operating expenses, but do not include
any insurance charges imposed by your insurance company's separate account. If
performance information included the effect of these additional charges, the
total return would be lower.

Past performance is no guarantee of future results. Principal and investment
return will vary and you may have a gain or loss when you withdraw your money.

X UNDERSTANDING PERFORMANCE

How a fund did yesterday is no guarantee of how it will do tomorrow. The stock
market, for example, has a history of growth in the long run and volatility in
the short run. In turn, the share price and return of a fund that invests in
stocks will vary. That means if you sell your shares during a market downturn,
you might lose money. But if you can ride out the market's ups and downs, you
may have a gain.

- ----------------------------------------------------
$10,000 OVER LIFE OF FUND
- ----------------------------------------------------

Equity Income Portfolio Standard & Poor's 500

[CHART]

Let's say hypothetically that $10,000 was invested in the Equity Income
Portfolio on August 30, 1996, when the fund started. As the chart shows, by
December 31, 1996, the investment would have grown to $11,169 -- an 11.69%
increase. With reinvested dividends and capital gains, if any, a $10,000
investment in the S&P 500 would have grown to $11,351 over the same period -- a
13.51% increase.

<TABLE>
<CAPTION>
INVESTMENT SUMMARY

- ----------------------------------------------------
TOP FIVE STOCKS AS OF DECEMBER 31, 1996
- ----------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
Philip Morris Companies, Inc. 4.1
General Electric Co. 3.9
British Petroleum PLC ADR 3.6
Federal National Mortgage Association 2.8
General Motors Corp. 2.2
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1996
- ----------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
Finance 21.3
Energy 14.4
Industrial Machinery & Equipment 8.4
Utilities 8.1
Nondurables 7.0
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------
ASSET ALLOCATION AS OF DECEMBER 31, 1996*
- ----------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
Stocks 92.7%
Convertible
securities 2.8%
Short-term investments 4.5%
* Foreign investments 5.5%
</TABLE>

[CHART]

ANNUAL REPORT 4
<PAGE> 204
EQUITY INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

[PHOTO]

An interview with
Stephen Petersen, Portfolio
Manager of Traveler's
Equity Income Portfolio

Q. HOW DID THE FUND PERFORM, STEPHEN?

A. While performing well on an absolute basis, the fund underperformed the
Standard & Poor's 500 Index, which returned 13.51% from the fund's inception on
August 30, 1996 through December 31, 1996. Given that the fund has only been in
existence for four months, I'd like to point out that it's difficult to draw
any conclusions from such a short period of time, and that a fund's performance
is best judged over the long term.

Q. WHY DID THE FUND'S RETURN LAG THE S&P 500 DURING THE PERIOD?

A. There are a couple of reasons, although primarily it's because of the
equity-income style of investing this fund follows. Equity-income fund managers
seek to own stocks of quality companies that also have attractive dividend
yields equal to or greater than the market average. Having that sort of
orientation attracts equity-income style managers to utility stocks, financial
stocks and cyclical stocks such as automobiles and basic industries. As a
group, the industries I just mentioned -- with the exception of financial
stocks -- performed well on an absolute basis but underperformed the overall
market during the past year. As in 1995, the strong performance of the overall
stock market was primarily concentrated in technology stocks and larger
market-capitalization stocks.

Q. AND THE FUND DIDN'T HAVE LARGE HOLDINGS IN MANY OF THE OUTPERFORMING STOCKS?

A. Exactly. The past 12 months have not really been a stock picker's market,
but one in which the S&P 500 managed to outperform most actively managed mutual
funds, including this one. Also, the fund had a fairly large weighting in
mid-cap stocks that underperformed the market average.

Q. WHAT HOLDINGS DID PERFORM WELL?

A. The fund was helped by its weighting in financial stocks such as the Federal
National Mortgage Association and Bank of New York.

Q. HOW WOULD YOU DESCRIBE YOUR INVESTMENT STYLE TO SHAREHOLDERS IN THIS FUND?

A. As a long-time equity income manager, my investment strategy has always been
to look for better-than-average yielding large-cap stocks with attractive
attributes that will lead to capital appreciation over time. I also try to buy
stocks that are currently out-of-favor within this framework, and I put
together the portfolio on a stock by stock basis focusing on individual
turnaround or recovery stories rather than broad sector trends. Once the
out-of-favor stocks appreciate, I sell them and buy other out-of-favor stocks.
My investment style is a methodical, straight-forward process that emphasizes
individual stock picking more than anything else.

Q. WHAT DO YOU LOOK FOR IN DIVIDEND-YIELDING STOCKS?

A. I usually buy stocks that have dividend yield equal to or above the average
yield of the S&P 500 -- currently about 2%. If I own companies with lower
yields, it's because the company has decided to distribute excess capital to
shareholders in other ways, such as stock repurchase programs. This is
consistent with my strategy of owning companies that are strong income
producers with higher-than-average dividends, along with stocks of undervalued
companies that I think have the potential to appreciate over time.

Q. DOES THE FUND OWN TURNAROUND STOCKS OR COMPANIES UNDERGOING POSITIVE CHANGE?

A. Yes. While my goal is to have the fund primarily invested in quality
companies with consistent earnings growth, I would like to own some companies
that haven't performed well in the market recently, and therefore may have
lower valuations and better opportunity for capital appreciation. It's an
approach I've used in the past with some other funds I've managed, and it's
worked well.

Q. WHAT'S YOUR OUTLOOK FOR THE MONTHS AHEAD?

A. I don't sense that there's been any significant change in the mood of the
market -- it still favors consistent earnings growth. Since the market has
continued to reward stocks of large-cap companies with consistent earnings,
it's been quite difficult for bottom-up stock pickers to outperform the general
market. However, as everyone knows, the economic recovery has been underway
since 1991 -- historically, quite a long period of time for a strong economy
without an interruption or correction. Therefore, I'm trying to structure the
fund so it can perform relatively well when and if the market changes course.
While I think the outlook for this fund remains good, investors should be
cautious after two years of more than 20% returns from the overall market.

The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.

X FUND FACTS
GOAL: seeks reasonable income by investing primarily in income-producing equity
securities to provide current income and increase the value of the fund's
shares

START DATE: August 30, 1996

SIZE: as of December 31, 1996, more than $3 million

MANAGER: Stephen Petersen, since inception, joined Fidelity in 1980

5 ANNUAL REPORT
<PAGE> 205
EQUITY INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value Investment in Securities

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
COMMON STOCKS -- 92.7%
- ------------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
<S> <C> <C>
AEROSPACE & DEFENSE - 3.2%
AEROSPACE & DEFENSE - 2.8%
Boeing Co. . . . . . . . . . . . . . . . . . . . . . . . 21 $ 2,220
Harsco Corp. . . . . . . . . . . . . . . . . . . . . . . 200 13,700
Lockheed Martin Corp. . . . . . . . . . . . . . . . . . . 400 36,600
Northrop Grumman Corp. . . . . . . . . . . . . . . . . . 200 16,550
Rockwell International Corp. . . . . . . . . . . . . . . 500 30,438
----------
99,508
----------
DEFENSE ELECTRONICS - 0.4%
Raytheon Co. . . . . . . . . . . . . . . . . . . . . . . 300 14,438
----------
SHIP BUILDING & REPAIR - 0.0%
Newport News Shipbuilding, Inc. (a) . . . . . . . . . . . 40 600
----------
TOTAL AEROSPACE & DEFENSE . . . . . . . . . . . . . . . . 114,546
----------
BASIC INDUSTRIES - 5.4%
CHEMICALS & PLASTICS - 2.8%
du Pont (E.I.) de Nemours & Co. . . . . . . . . . . . . . 400 37,750
Great Lakes Chemical Corp. . . . . . . . . . . . . . . . 300 14,025
Nalco Chemical Co. . . . . . . . . . . . . . . . . . . . 400 14,450
Union Carbide Corp. . . . . . . . . . . . . . . . . . . . 500 20,438
Witco Corp. . . . . . . . . . . . . . . . . . . . . . . . 500 15,250
----------
101,913
----------
METALS & MINING - 1.3%
Alumax, Inc. (a) . . . . . . . . . . . . . . . . . . . . 411 13,717
Aluminum Co. of America . . . . . . . . . . . . . . . . . 500 31,875
----------
45,592
----------
PAPER & FOREST PRODUCTS - 1.3%
Champion International Corp. . . . . . . . . . . . . . . 300 12,975
International Paper Co. . . . . . . . . . . . . . . . . . 200 8,075
Weyerhaeuser Co. . . . . . . . . . . . . . . . . . . . . 500 23,688
----------
44,738
----------
TOTAL BASIC INDUSTRIES . . . . . . . . . . . . . . . . . 192,243
----------
CONGLOMERATES - 3.7%
AlliedSignal, Inc. . . . . . . . . . . . . . . . . . . . 500 33,500
American Standard Companies, Inc. (a) . . . . . . . . . . 400 15,300
Textron, Inc. . . . . . . . . . . . . . . . . . . . . . . 200 18,850
Tyco International Ltd. . . . . . . . . . . . . . . . . . 500 26,438
United Technologies Corp. . . . . . . . . . . . . . . . . 600 39,600
----------
133,688
----------
CONSTRUCTION & REAL ESTATE - 0.6%
BUILDING MATERIALS - 0.3%
Masco Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 10,800
---------
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Equity Residential Properties Trust (SBI) . . . . . . . . 300 12,375
---------
TOTAL CONSTRUCTION & REAL ESTATE . . . . . . . . . . . . 23,175
---------
DURABLES - 6.9%
AUTOS, TIRES, & ACCESSORIES - 5.9%
Chrysler Corp. . . . . . . . . . . . . . . . . . . . . . 1,800 59,400
Eaton Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 20,925
General Motors Corp. . . . . . . . . . . . . . . . . . . 1,400 78,050
Goodyear Tire & Rubber Co. . . . . . . . . . . . . . . . 200 10,275
Johnson Controls, Inc. . . . . . . . . . . . . . . . . . 200 16,575
Snap-on Tools Corp. . . . . . . . . . . . . . . . . . . . 450 16,031
TRW, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 200 9,900
----------
211,156
----------
CONSUMER ELECTRONICS - 0.7%
Maytag Co. . . . . . . . . . . . . . . . . . . . . . . . 500 9,875
Whirlpool Corp. . . . . . . . . . . . . . . . . . . . . . 300 13,988
----------
23,863
----------
TEXTILES & APPAREL - 0.3%
Kellwood Co. . . . . . . . . . . . . . . . . . . . . . . 500 10,000
----------
TOTAL DURABLES . . . . . . . . . . . . . . . . . . . . . 245,019
----------
ENERGY - 13.9%
ENERGY SERVICES - 2.5%
Dresser Industries, Inc. . . . . . . . . . . . . . . . . 700 21,700
Halliburton Co. . . . . . . . . . . . . . . . . . . . . . 300 18,075
Schlumberger Ltd. . . . . . . . . . . . . . . . . . . . . 500 49,938
----------
89,713
----------
OIL & GAS - 11.4%
Amerada Hess Corp. . . . . . . . . . . . . . . . . . . . 200 11,575
Amoco Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 24,150
Atlantic Richfield Co. . . . . . . . . . . . . . . . . . 300 39,750
British Petroleum PLC ADR . . . . . . . . . . . . . . . . 900 127,238
Burlington Resources, Inc. . . . . . . . . . . . . . . . 200 10,075
Exxon Corp. . . . . . . . . . . . . . . . . . . . . . . . 100 9,800
Kerr-McGee Corp. . . . . . . . . . . . . . . . . . . . . 100 7,200
Mobil Corp. . . . . . . . . . . . . . . . . . . . . . . . 200 24,450
Occidental Petroleum Corp. . . . . . . . . . . . . . . . 500 11,688
Phillips Petroleum Co. . . . . . . . . . . . . . . . . . 300 13,275
Royal Dutch Petroleum Co. ADR . . . . . . . . . . . . . . 300 51,225
Total SA sponsored ADR . . . . . . . . . . . . . . . . . 500 20,125
USX-Marathon Group . . . . . . . . . . . . . . . . . . . 1,000 23,875
Unocal Corp. . . . . . . . . . . . . . . . . . . . . . . 825 33,516
---------
407,942
---------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . 497,655
---------
FINANCE - 21.3%
BANKS - 8.4%
Bank of Boston Corp. . . . . . . . . . . . . . . . . . . 300 19,275
Bank of New York Co., Inc. . . . . . . . . . . . . . . . 1,800 60,750
BankAmerica Corp. . . . . . . . . . . . . . . . . . . . . 300 29,925
Chase Manhattan Corp. . . . . . . . . . . . . . . . . . . 300 26,775
Citicorp . . . . . . . . . . . . . . . . . . . . . . . . 200 20,600
Comerica, Inc. . . . . . . . . . . . . . . . . . . . . . 400 20,950
First Bank System, Inc. . . . . . . . . . . . . . . . . . 400 27,300
NationsBank Corp. . . . . . . . . . . . . . . . . . . . . 500 48,875
Norwest Corp. . . . . . . . . . . . . . . . . . . . . . . 400 17,400
Wells Fargo & Co. . . . . . . . . . . . . . . . . . . . . 100 26,975
----------
298,825
----------
CREDIT & OTHER FINANCE - 2.2%
Beneficial Corp. . . . . . . . . . . . . . . . . . . . . 200 12,675
First Chicago NBD Corp. . . . . . . . . . . . . . . . . . 900 48,375
Household International, Inc. . . . . . . . . . . . . . . 200 18,450
----------
79,500
----------
FEDERAL SPONSORED CREDIT - 2.8%
Federal National Mortgage Association . . . . . . . . . . 2,700 100,575
---------
INSURANCE - 6.9%
Aetna, Inc. . . . . . . . . . . . . . . . . . . . . . . . 400 32,000
Allstate Corp. . . . . . . . . . . . . . . . . . . . . . 1,200 69,450
American Bankers Insurance Group, Inc. . . . . . . . . . 400 20,450
American Financial Group, Inc. . . . . . . . . . . . . . 600 22,650
CIGNA Corp. . . . . . . . . . . . . . . . . . . . . . . . 100 13,663
General Re Corp. . . . . . . . . . . . . . . . . . . . . 100 15,775
</TABLE>

See accompanying notes which are in integral part of the Financial statements.

ANNUAL REPORT 6
<PAGE> 206
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
- ------------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - CONTINUED
<S> <C> <C>
ITT Hartford Group, Inc. . . . . . . . . . . . . . . . . 600 $ 40,500
Provident Companies, Inc. . . . . . . . . . . . . . . . . 200 9,675
Reliastar Financial Corp. . . . . . . . . . . . . . . . . 400 23,100
----------
247,263
----------
SAVINGS & LOANS - 0.7%
Washington Mutual, Inc. . . . . . . . . . . . . . . . . . 600 25,988
---------
SECURITIES INDUSTRY - 0.3%
Lehman Brothers Holdings, Inc. . . . . . . . . . . . . . 300 9,413
----------
TOTAL FINANCE . . . . . . . . . . . . . . . . . . . . . . 761,564
----------
HEALTH - 3.9%
DRUGS & PHARMACEUTICALS - 2.9%
American Home Products Corp. . . . . . . . . . . . . . . 200 11,725
Bristol-Myers Squibb Co. . . . . . . . . . . . . . . . . 300 32,625
Pharmacia & Upjohn, Inc. . . . . . . . . . . . . . . . . 600 23,775
Pfizer, Inc. . . . . . . . . . . . . . . . . . . . . . . 200 16,575
Schering-Plough Corp. . . . . . . . . . . . . . . . . . . 300 19,425
----------
104,125
----------
MEDICAL EQUIPMENT & SUPPLIES - 1.0%
Allegiance Corp. . . . . . . . . . . . . . . . . . . . . 60 1,658
Baxter International, Inc. . . . . . . . . . . . . . . . 300 12,300
Johnson & Johnson . . . . . . . . . . . . . . . . . . . . 400 19,900
---------
33,858
----------
TOTAL HEALTH . . . . . . . . . . . . . . . . . . . . . . 137,983
----------
HOLDING COMPANIES - 0.8%
CINergy Corp. . . . . . . . . . . . . . . . . . . . . . . 400 13,350
U.S. Industries, Inc. (a) . . . . . . . . . . . . . . . . 400 13,750
----------
27,100
----------
INDUSTRIAL MACHINERY & EQUIPMENT - 8.0%
ELECTRICAL EQUIPMENT - 4.3%
General Electric Co. . . . . . . . . . . . . . . . . . . 1,400 138,425
Westinghouse Electric Corp. . . . . . . . . . . . . . . . 700 13,913
----------
152,338
----------
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Caterpillar, Inc. . . . . . . . . . . . . . . . . . . . . 200 15,050
Cooper Industries, Inc. . . . . . . . . . . . . . . . . . 400 16,850
Ingersoll-Rand Co. . . . . . . . . . . . . . . . . . . . 300 13,350
Keystone International, Inc. . . . . . . . . . . . . . . 500 10,063
Parker-Hannifin Corp. . . . . . . . . . . . . . . . . . . 300 11,625
Tenneco, Inc. . . . . . . . . . . . . . . . . . . . . . . 200 9,025
----------
75,963
----------
POLLUTION CONTROL - 1.6%
Browning-Ferris Industries, Inc. . . . . . . . . . . . . 900 23,625
WMX Technologies, Inc. . . . . . . . . . . . . . . . . . 1,000 32,625
----------
56,250
----------
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT . . . . . . . . . 284,551
----------
MEDIA & LEISURE - 1.5%
ENTERTAINMENT - 0.4%
Viacom, Inc. Class B (non-vtg.) (a) . . . . . . . . . . . 400 13,950
---------
LEISURE DURABLES & TOYS - 0.3%
Hasbro, Inc. . . . . . . . . . . . . . . . . . . . . . . 300 11,663
---------
LODGING & GAMING - 0.5%
ITT Corp. (a) . . . . . . . . . . . . . . . . . . . . . . 400 17,350
---------
PUBLISHING - 0.3%
ACNielsen Corp. (a) . . . . . . . . . . . . . . . . . . . 66 998
Cognizant Corp. (a) . . . . . . . . . . . . . . . . . . . 200 6,600
Dun & Bradstreet Corp. . . . . . . . . . . . . . . . . . 200 4,750
---------
12,348
----------
TOTAL MEDIA & LEISURE . . . . . . . . . . . . . . . . . . 55,311
----------
NONDURABLES - 6.3%
FOODS - 0.9%
General Mills, Inc. . . . . . . . . . . . . . . . . . . . 300 19,013
Ralston Purina Group . . . . . . . . . . . . . . . . . . 200 14,675
----------
33,688
----------
HOUSEHOLD PRODUCTS - 0.4%
Rubbermaid, Inc. . . . . . . . . . . . . . . . . . . . . 600 13,650
---------
TOBACCO - 5.0%
Philip Morris Companies, Inc. . . . . . . . . . . . . . . 1,300 146,413
RJR Nabisco Holdings Corp. . . . . . . . . . . . . . . . 900 30,600
---------
177,013
----------
TOTAL NONDURABLES . . . . . . . . . . . . . . . . . . . . 224,351
----------
RETAIL & WHOLESALE - 4.8%
APPAREL STORES - 0.4%
Limited, Inc. (The) . . . . . . . . . . . . . . . . . . . 700 12,863
---------
DRUG STORES - 0.3%
CVS Corp. . . . . . . . . . . . . . . . . . . . . . . . . 300 12,413
---------
GENERAL MERCHANDISE STORES - 3.2%
Dayton Hudson Corp. . . . . . . . . . . . . . . . . . . . 300 11,775
Federated Department Stores, Inc. (a) . . . . . . . . . . 600 20,475
May Department Stores Co. (The) . . . . . . . . . . . . . 300 14,025
Sears, Roebuck & Co. . . . . . . . . . . . . . . . . . . 500 23,063
Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . . . . 2,000 45,750
----------
115,088
----------
RETAIL & WHOLESALE, MISCELLANEOUS - 0.9%
Tandy Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 13,200
Toys "R" Us, Inc. (a) . . . . . . . . . . . . . . . . . . 600 18,000
----------
31,200
----------
TOTAL RETAIL & WHOLESALE. . . . . . . . . . . . . . . . . 171,564
---------
SERVICES - 1.0%
LEASING & RENTAL - 0.4%
GATX Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 14,550
---------
PRINTING - 0.6%
Deluxe Corp. . . . . . . . . . . . . . . . . . . . . . . 400 13,100
Donnelley (R.R.) & Sons Co. . . . . . . . . . . . . . . . 300 9,413
---------
22,513
----------
TOTAL SERVICES . . . . . . . . . . . . . . . . . . . . . 37,063
----------
TECHNOLOGY - 2.6%
COMMUNICATIONS EQUIPMENT - 0.1%
Lucent Technologies, Inc. . . . . . . . . . . . . . . . . 97 4,486
---------
COMPUTERS & OFFICE EQUIPMENT - 1.4%
Digital Equipment Corp. (a) . . . . . . . . . . . . . . . 300 10,913
International Business Machines Corp. . . . . . . . . . . 200 30,200
Xerox Corp. . . . . . . . . . . . . . . . . . . . . . . . 200 10,525
----------
51,638
----------
ELECTRONICS - 0.6%
AMP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 300 11,513
Thomas & Betts Corp.. . . . . . . . . . . . . . . . . . . 200 8,875
----------
20,388
----------
</TABLE>

See accompanying notes which are an integral part of the financial statements.

7 ANNUAL REPORT

<PAGE> 207
EQUITY INCOME PORTFOLIO
INVESTMENTS - CONTINUED

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
- ------------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.5%
<S> <C> <C>
Eastman Kodak Co. . . . . . . . . . . . . . . . . . . . . 200 $ 16,050
---------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . . . . . 92,562
---------
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.3%
Viad Corp. . . . . . . . . . . . . . . . . . . . . . . . 700 11,550
---------
RAILROADS - 0.7%
Burlington Northern Santa Fe Corp. . . . . . . . . . . . 200 17,275
CSX Corp. . . . . . . . . . . . . . . . . . . . . . . . . 200 8,450
----------
25,725
----------
TOTAL TRANSPORTATION . . . . . . . . . . . . . . . . . . 37,275
---------
UTILITIES - 7.8%
ELECTRIC UTILITY - 1.4%
American Electric Power Co., Inc. . . . . . . . . . . . . 300 12,338
Entergy Corp. . . . . . . . . . . . . . . . . . . . . . . 500 13,875
Illinova Corp. . . . . . . . . . . . . . . . . . . . . . 400 11,000
Pinnacle West Capital Corp. . . . . . . . . . . . . . . . 400 12,700
----------
49,913
----------
GAS - 1.6%
El Paso Natural Gas Co. . . . . . . . . . . . . . . . . . 18 909
MCN Corp. . . . . . . . . . . . . . . . . . . . . . . . . 300 8,663
Pacific Enterprises . . . . . . . . . . . . . . . . . . . 600 18,225
PanEnergy Corp. . . . . . . . . . . . . . . . . . . . . . 300 13,500
Questar Corp. . . . . . . . . . . . . . . . . . . . . . . 400 14,700
----------
55,997
----------
TELEPHONE SERVICES - 4.8%
AT&T Corp. . . . . . . . . . . . . . . . . . . . . . . . 300 13,050
Ameritech Corp. . . . . . . . . . . . . . . . . . . . . . 600 36,375
Bell Atlantic Corp. . . . . . . . . . . . . . . . . . . . 400 25,900
BellSouth Corp. . . . . . . . . . . . . . . . . . . . . . 700 28,263
Frontier Corp. . . . . . . . . . . . . . . . . . . . . . 400 9,050
NYNEX Corp. . . . . . . . . . . . . . . . . . . . . . . . 700 33,688
SBC Communications, Inc. . . . . . . . . . . . . . . . . 500 25,875
---------
172,201
----------
TOTAL UTILITIES . . . . . . . . . . . . . . . . . . . . . 278,111
----------
TOTAL COMMON STOCKS
(Cost $3,007,577). . . . . . . . . . . . . . . . . . . 3,313,761
---------
- ------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 2.5%
- ------------------------------------------------------------------------------------
ENERGY - 0.5%
OIL & GAS - 0.5%
Occidental Petroleum Corp.
Indexed $3.00 . . . . . . . . . . . . . . . . . . . . . 300 17,700
---------
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.4%
Westinghouse Electric Corp.
$1.30 (b) . . . . . . . . . . . . . . . . . . . . . . 800 14,300
---------
MEDIA & LEISURE - 0.3%
ENTERTAINMENT - 0.3%
Time Warner Financing Trust
$1.24 . . . . . . . . . . . . . . . . . . . . . . . . 300 11,625
---------
NONDURABLES - 0.7%
TOBACCO - 0.7%
RJR Nabisco Holdings Corp.
depositary shares . . . . . . . . . . . . . . . . . . 3,700 24,975
---------
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.3%
K mart Financing I $3.875 . . . . . . . . . . . . . . . . 200 $ 9,750
---------
UTILITIES - 0.3%
CELLULAR - 0.3%
AirTouch Communications, Inc.
Class B $1.74 . . . . . . . . . . . . . . . . . . . . 400 10,900
---------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $83,497) . . . . . . . . . . . . . . . . . . . . 89,250
---------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.3%
- ------------------------------------------------------------------------------------
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
<S> <C> <C>
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.3%
Federated Department
Stores, Inc. 5%, 10/1/03
(Cost $11,500) . . . . . . . . . . . . . . . . . .Ba3 $ 10,000 11,613
---------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CASH EQUIVALENTS -- 4.5%
- ------------------------------------------------------------------------------------
MATURITY
AMOUNT
<S> <C> <C>
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 . . . . . . . . . . . . . . . . . $160,060 160,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,262,574) . . . . . . . . . . . . . . . . . . $ 3,574,624
===========
</TABLE>

LEGEND

(a) Non-income producing

(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the period end, the value of
these securities amounted to $14,300 or 0.4% of net assets.

OTHER INFORMATION

Purchases and sales of securities, other than short-term securities, aggregated
$3,229,602 and $140,258, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms
which are affiliates of Fidelity Management & Research Company. The commissions
paid to these affiliated firms amounted to $29 for the period (see Note 4 of
Notes to Financial Statements).

INCOME TAX INFORMATION

At December 31, 1996, the aggregate cost of investment securities for income
tax purposes was $3,262,574. Net unrealized appreciation aggregated $312,050,
of which $351,079 related to appreciated investment securities and $39,029
related to depreciated investment securities.

See accompanying notes which are an integral part of the financial statements.

ANNUAL REPORT 8

<PAGE> 208

EQUITY INCOME PORTFOLIO
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
ASSETS
<S> <C>
Investment in securities, at value
(including repurchase agreements
of $160,000) (cost $3,262,574)--
See accompanying schedule . . . . . . . . . . . . . . . . $ 3,574,624
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,439
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . 8,248
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . 124
Receivable for expense reductions . . . . . . . . . . . . . . . . . 37,905
------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . 3,622,340

LIABILITIES
Other payables and
accrued expenses . . . . . . . . . . . . . . . . . . . . . 21,943
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,600,397
============
Net Assets consist of:
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,275,445
Accumulated undistributed net realized
gain (loss) on investments . . . . . . . . . . . . . . . . 12,902
Net unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . . 312,050
------------
NET ASSETS, for 324,747 shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . $ 3,600,397
============

NET ASSET VALUE, offering price
and redemption price per share
($3,600,397 / 324,747 shares) . . . . . . . . . . . . . . $11.09
======
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
AUGUST 30, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,559
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,215
----------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 35,774

EXPENSES
Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,203
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . 20,052
Non-interested trustees' compensation . . . . . . . . . . . . . . . . . . 1,667
Custodian fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 6,623
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500
----------
Total expenses before reductions . . . . . . . . . . . . . . . . 50,432
Expense reductions . . . . . . . . . . . . . . . . . . . . . . . (40,114) 10,318
---------- ----------

NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 25,456
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
investment securities . . . . . . . . . . . . . . . . . . . . . 13,230
Change in net unrealized
appreciation (depreciation)
on investment securities . . . . . . . . . . . . . . . . . . . . 312,050
----------
NET GAIN (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,280
----------
NET INCREASE (DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 350,736
==========
</TABLE>

See accompanying notes which are an integral part of the financial statements.

9 ANNUAL REPORT
<PAGE> 209
EQUITY INCOME PORTFOLIO
FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,456
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,230
Change in net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . 312,050
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . 350,736
-----------
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . . (25,784)
-----------
Share transactions
Net proceeds from sales of shares . . . . . . . . . . . . . . . . . . . . . . . . . 3,249,728
Reinvestment of distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,784
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67)
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS . . . . . . 3,275,445
-----------
TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . 3,600,397

NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
-----------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,600,397
===========

OTHER INFORMATION
Shares
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,467
Issued in reinvestment of distributions . . . . . . . . . . . . . . . . . . . . . . 2,286
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)
-----------
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,747
===========
</TABLE>

See accompanying notes which are an integral part of the financial statements.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA

Net asset value, beginning of period . . . . . . . . . . . . . . . . . $ 10.00
---------
Income from investment Operations
Net investment income . . . . . . . . . . . . . . . . . . . . .08
Net realized and unrealized gain (loss) . . . . . . . . . . . 1.09
---------
Total from investment operations . . . . . . . . . . . . . . . 1.17
---------
Less Distributions
From net investment income . . . . . . . . . . . . . . . . . . (.08)
---------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . $ 11.09
=========
TOTAL RETURN (B,C) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.69%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) . . . . . . . . . . . . . . . . $ 3,600
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . .95%(A)
Ratio of net investment income to average net assets . . . . . . . . . 2.34%(A)
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 14%(A)
Average commission rate(D) . . . . . . . . . . . . . . . . . . . . . . $ .0168
</TABLE>

(A) Annualized
(B) Total returns for periods of less than one year are not annualized.
(C) The total return would have been lower had certain expenses not been
reduced during the period shown (see Note 5 of Notes to Financial
Statements).
(D) A fund is required to disclose its average commission rate per share for
security trades notes on which commissions are changed. This amount may
vary from period to period and fund to fund depending on the mix of
trades executed in various markets where trading practices and commission
rate structures may differ.

ANNUAL REPORT 10
<PAGE> 210
LARGE CAP PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE

There are several ways to evaluate a fund's historical performance: total
percentage change in value or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment assuming
reinvestment of the fund's dividend income and capital gains (the profits the
fund earns when it sells securities that have grown in value).

CUMULATIVE TOTAL RETURNS

<TABLE>
<CAPTION>
- -------------------------------------------------
PERIOD ENDED DECEMBER 31, 1996
- -------------------------------------------------
LIFE OF
FUND
<S> <C>
Large Cap Portfolio 13.30%
S&P 500 (R) 13.51%
</TABLE>

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a
set period -- in this case, since the fund started on August 30, 1996.

If certain fund expenses had not been reimbursed, the total return would have
been lower.

PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT INCLUDE
ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT. IF
PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL CHARGES, THE
TOTAL RETURN WOULD BE LOWER.

Past performance is no guarantee of future results. Principal and investment
return will vary and you may have a gain or loss when you withdraw your money.

X UNDERSTANDING PERFORMANCE

- -------------------------------------------------
$10,000 OVER LIFE OF FUND
- -------------------------------------------------
Large Cap Portfolio Standard & Poor's 500

[CHART]

Let's say hypothetically that $10,000 was invested in the Large Cap Portfolio
on August 30, 1996, when the fund started. As the chart shows, by December 31,
1996, the investment would have grown to $11,330 -- a 13.30% increase. With
reinvested dividends and capital gains, if any, a $10,000 investment in the S&P
500 would have grown to $11,351 over the same period -- a 13.51% increase.

INVESTMENT SUMMARY

<TABLE>
<CAPTION>
- -------------------------------------------------
TOP FIVE STOCKS AS OF DECEMBER 31, 1996
- -------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
International Business Machines Corp. 2.7
Owens-Illinois, Inc. 2.1
Merck & Co., Inc. 1.9
Adaptec, Inc. 1.8
General Electric Co. 1.7
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1996
- -------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
Technology 20.8
Health 12.2
Finance 12.0
Retail & Wholesale 8.8
Nondurables 7.2
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------
ASSET ALLOCATION AS OF DECEMBER 31, 1996*
- -------------------------------------------------
% OF FUND'S
INVESTMENTS
<S> <C>
Stocks 94.3%
Short-term investments 5.7%
* Foreign investments 3.6%
</TABLE>

[CHART]

11 ANNUAL REPORT

<PAGE> 211
LARGE CAP PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

[PHOTO]
An interview with
Thomas Sprague,
Portfolio Manager of
Large Cap Portfolio

Q. TOM, HOW HAS THE FUND PERFORMED?

A. Since its inception on August 30, 1996, the fund has performed roughly in
line with the Standard & Poor's 500 Index, which posted a return of 13.51%. At
the same time, I'd like to point out that it's difficult to make any
conclusions about a fund's performance over such a short time period. A fund's
performance should be judged over the long term.

Q. TOM, SINCE THIS IS THE FUND'S FIRST REPORT, LET'S TAKE A FEW MINUTES
DISCUSSING YOUR INVESTMENT DISCIPLINE. HOW DO YOU GO ABOUT SELECTING STOCKS FOR
THE FUND?

A. I base my investment decisions by focusing primarily on three
characteristics: long-term earnings growth, short-term earnings momentum and
attractive overall stock valuations -- stock prices relative to other measures
such as earnings. Looking first at long-term earnings growth, I search out
companies that can increase their earnings more than the 8% average posted by
the fund's benchmark, the S&P 500 Index. In fact, I prefer to buy the stocks of
companies that can post earnings growth of at least 10% a year over a
three-year period. These are companies that have built some type of sustainable
competitive advantage in manufacturing, distribution, marketing or research &
development. The second step is to determine which of these companies will beat
market expectations of their earnings over the short-term. Finally, I try to
make sure a stock's price is attractive.

Q. HOW DO YOU DO THAT?

A. I analyze a stock's price per unit of earnings growth, using a measure
called price-to-earnings to growth, or "p-e to growth." If, for example, the
market is selling at a price-to-earnings ratio of about 16 times earnings, and
earnings are growing at 8% a year, the market's "p-e to growth" measure would
be 16 divided by 8, or 2. I'm looking for stocks with a "p-e to growth" of
closer to one, which means I can get a unit of earnings growth priced at half
the market -- in other words, a bargain. With this strategy, I can stay fully
focused on the stocks that have true earnings growth and are selling at
reasonable valuations because, over time, the market tends to reward stocks
such as these.

Q. HOW WOULD YOU CHARACTERIZE THE INVESTMENT CLIMATE OVER THE PAST FOUR MONTHS?

A. It's been pretty benign. Interest rates generally have been down, although
they spiked somewhat in December. At that time, Federal Reserve Board Chairman
Alan Greenspan commented on the market's exuberance and caused some volatility
in the stock market as well, although the market ended the year on an up note.
Corporate earnings generally have come in stronger than expected. The
combination of good earnings growth and a relatively positive interest rate
environment allowed the market to post solid returns during the period.

Q. INVESTMENTS IN TECHNOLOGY REPRESENT THE FUND'S TOP MARKET SECTOR, 20.8% OF
INVESTMENTS AT THE END OF THE PERIOD. WHAT'S THE ATTRACTION THERE?

A. Valuations -- or stock prices relative to other measures such as earnings --
were attractive, and business prospects for many companies showed improvement.
Inventories were worked down and demand increased -- as seen in the
semiconductor's book-to-bill ratio. As a result, I've overweighted the fund's
technology stake versus the index during the period. Some of the technology
stocks I favored were chip-maker Intel -- which reported a 41% year-over-year
earnings gain in the third quarter -- semiconductor company Adaptec, IBM and
networking firm Cisco Systems.

Q. WHAT ARE THE MAIN DIFFERENCES BETWEEN LARGE AND SMALL COMPANIES?

A. Large companies typically have been around longer and are more entrenched
within their marketplaces. As a result, they're able to develop capabilities
that make it harder for smaller companies to compete. A good large company has
many weapons in its arsenal. Walt Disney, for example, rarely has a period with
"down earnings." If the company is expecting a period of weakness, it can dip
into its film archives and re-release a film like "Snow White." This action
gives it an earnings boost that smaller companies can't match. The drawback to
larger companies is that, because of their sheer size, they normally don't
exhibit the rapid growth rate typically posted by smaller companies. Smaller
companies also can react more quickly to market shifts.

Q. WHAT'S YOUR OUTLOOK AS WE ENTER 1997?

A. Earnings growth and interest rates have the most impact on stock market
performance. Since I don't try to predict where rates are going, I'll stick to
my basic philosophy of looking for companies that offer short-term earnings
momentum, long-term earnings growth and good valuations. If rates stay where
they are and earnings growth momentum can be sustained, the market should stay
healthy. If something significant happens -- be it a rate hike or a recession
- -- it could be a different ball game.

X FUND FACTS

GOAL: Long-term growth of capital by investing primarily in equity securities
of companies with large market capitalization

START DATE: August 30, 1996

SIZE: as of December 31, 1996, more than $3 million

MANAGER: Thomas Sprague, since inception; joined Fidelity in 1989

ANNUAL REPORT 12
<PAGE> 212
LARGE CAP PORTFOLIO
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMMON STOCKS -- 94.3%
- -------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.9%
<S> <C> <C>
Boeing Co. . . . . . . . . . . . . . . . . . . 100 $ 10,620
Lockheed Martin Corp. . . . . . . . . . . . . . 200 18,300
--------------
28,920
--------------
BASIC INDUSTRIES - 4.6%
CHEMICALS & PLASTICS - 1.5%
du Pont (E.I.) de Nemours & Co. . . . . . . . . 200 18,875
Monsanto Co. . . . . . . . . . . . . . . . . . 400 15,550
Praxair, Inc. . . . . . . . . . . . . . . . . . 400 18,450
--------------
52,875
--------------
METALS & MINING - 0.3%
Alumax, Inc. . . . . . . . . . . . . . . . . . 300 10,013
--------------
PACKAGING & CONTAINERS - 2.5%
Owens-Illinois, Inc. (a) . . . . . . . . . . . 3,200 72,800
Tupperware Corp. . . . . . . . . . . . . . . . 200 10,725
--------------
83,525
--------------
PAPER & FOREST PRODUCTS - 0.3%
Kimberly-Clark Corp. . . . . . . . . . . . . . 100 9,525
--------------
TOTAL BASIC INDUSTRIES . . . . . . . . . . . . 155,938
--------------
CONGLOMERATES - 2.0%
AlliedSignal, Inc. . . . . . . . . . . . . . . 400 26,800
Tyco International Ltd. . . . . . . . . . . . . 800 42,300
--------------
69,100
--------------
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.5%
Sherwin-Williams Co. . . . . . . . . . . . . . 300 16,800
--------------
DURABLES - 2.8%
AUTOS, TIRES, & ACCESSORIES - 0.6%
Snap-on Tools Corp. . . . . . . . . . . . . . . 600 21,375
--------------
CONSUMER ELECTRONICS - 0.6%
Black & Decker Corp. . . . . . . . . . . . . . 400 12,050
Newell Co. . . . . . . . . . . . . . . . . . . 300 9,450
--------------
21,500
--------------
HOME FURNISHINGS - 0.7%
Leggett & Platt, Inc. . . . . . . . . . . . . . 700 24,238
--------------
TEXTILES & APPAREL - 0.9%
Jones Apparel Group, Inc. (a) . . . . . . . . . 200 7,475
Nine West Group, Inc. (a) . . . . . . . . . . . 200 9,275
Warnaco Group, Inc. Class A . . . . . . . . . . 400 11,850
--------------
28,600
--------------
TOTAL DURABLES . . . . . . . . . . . . . . . . 95,713
--------------
ENERGY - 7.0%
ENERGY SERVICES - 3.0%
BJ Services Co. (a) . . . . . . . . . . . . . . 400 20,400
Dresser Industries, Inc. . . . . . . . . . . . 600 18,600
Halliburton Co. . . . . . . . . . . . . . . . . 600 36,150
Schlumberger Ltd. . . . . . . . . . . . . . . . 200 19,975
Weatherford Enterra, Inc. . . . . . . . . . . . 200 6,000
--------------
101,125
--------------
OIL & GAS - 4.0%
Anadarko Petroleum Corp. . . . . . . . . . . . 200 12,950
British Petroleum PLC ADR . . . . . . . . . . . 300 42,413
Oryx Energy Co. . . . . . . . . . . . . . . . . 300 7,425
Phillips Petroleum Co. . . . . . . . . . . . . 300 13,275
Royal Dutch Petroleum Co. ADR . . . . . . . . . 200 34,150
Texaco, Inc. . . . . . . . . . . . . . . . . . 100 9,813
Unocal Corp. . . . . . . . . . . . . . . . . . 400 16,250
--------------
136,276
--------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . 237,401
--------------
FINANCE - 12.0%
BANKS - 4.8%
Bank of New York Co., Inc. . . . . . . . . . . 1,600 54,000
BankAmerica Corp. . . . . . . . . . . . . . . . 300 29,925
Citicorp . . . . . . . . . . . . . . . . . . . 300 30,900
NationsBank Corp. . . . . . . . . . . . . . . . 500 48,875
--------------
163,700
--------------
CREDIT & OTHER FINANCE - 0.3%
Household International, Inc. . . . . . . . . . 100 9,225
--------------
FEDERAL SPONSORED CREDIT - 2.1%
Federal Home Loan
Mortgage Corporation . . . . . . . . . . . . . 300 33,038
Federal National Mortgage Association . . . . . 1,000 37,250
--------------
70,288
--------------
INSURANCE - 4.8%
Aetna, Inc. . . . . . . . . . . . . . . . . . . 500 40,000
Allstate Corp. . . . . . . . . . . . . . . . . 900 52,088
AMBAC, Inc. . . . . . . . . . . . . . . . . . . 300 19,913
American International Group, Inc. . . . . . . 100 10,825
MBIA, Inc. . . . . . . . . . . . . . . . . . . 200 20,250
UNUM Corp. . . . . . . . . . . . . . . . . . . 300 21,675
--------------
164,751
--------------
TOTAL FINANCE . . . . . . . . . . . . . . . . . 407,964
--------------
HEALTH - 12.2%
DRUGS & PHARMACEUTICALS - 5.3%
American Home Products Corp. . . . . . . . . . 700 41,038
Bristol-Myers Squibb Co. . . . . . . . . . . . 300 32,625
Merck & Co., Inc. . . . . . . . . . . . . . . . 800 63,400
Pfizer, Inc. . . . . . . . . . . . . . . . . . 100 8,288
Schering-Plough Corp. . . . . . . . . . . . . . 200 12,950
SmithKline Beecham PLC ADR . . . . . . . . . . 300 20,400
--------------
178,701
--------------
MEDICAL EQUIPMENT & SUPPLIES - 3.4%
Baxter International, Inc. . . . . . . . . . . 400 16,400
Becton, Dickinson & Co. . . . . . . . . . . . . 800 34,700
Bergen Brunswig Corp. Class A . . . . . . . . . 700 19,950
Cardinal Health, Inc. . . . . . . . . . . . . . 150 8,738
Johnson & Johnson . . . . . . . . . . . . . . . 400 19,900
St. Jude Medical, Inc. (a) . . . . . . . . . . 400 17,050
--------------
116,738
--------------
MEDICAL FACILITIES MANAGEMENT - 3.5%
Columbia/HCA Healthcare Corp. . . . . . . . . . 1,200 48,900
HEALTHSOUTH Rehabilitation Corp. . . . . . . . 300 11,588
Health Management Associates, Inc.
Class A (a) . . . . . . . . . . . . . . . . . . 600 13,500
Health Care & Retirement Corp. (a) . . . . . . 500 14,313
Tenet Healthcare Corp. (a) . . . . . . . . . . 700 15,313
Vencor, Inc. (a) . . . . . . . . . . . . . . . 500 15,813
--------------
119,427
--------------
TOTAL HEALTH . . . . . . . . . . . . . . . . . 414,866
--------------
</TABLE>

See accompanying notes which are an integral part of the financial statements.

13 ANNUAL REPORT

<PAGE> 213

LARGE CAP PORTFOLIO
INVESTMENTS -- CONTINUED

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
- -------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.1%
<S> <C> <C>
General Electric Co. . . . . . . . . . . . . . 600 $ 59,325
Westinghouse Electric Corp. . . . . . . . . . . 600 11,925
--------------
71,250
--------------
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Caterpillar, Inc. . . . . . . . . . . . . . . . 400 30,100
Ingersoll-Rand Co. . . . . . . . . . . . . . . 400 17,800
Stanley Works (The) . . . . . . . . . . . . . . 700 18,900
--------------
66,800
--------------

TOTAL INDUSTRIAL MACHINERY & EQUIPMENT . . . . 138,050
--------------
MEDIA & LEISURE - 4.3%
ENTERTAINMENT - 0.4%
Carnival Cruise Lines, Inc. Class A . . . . . . 400 13,200
--------------
LEISURE DURABLES & TOYS - 0.2%
Hasbro, Inc. . . . . . . . . . . . . . . . . . 200 7,775
--------------
LODGING & GAMING - 2.4%
HFS, Inc. (a) . . . . . . . . . . . . . . . . . 600 35,850
Hilton Hotels Corp. . . . . . . . . . . . . . . 300 7,838
La Quinta Motor Inns, Inc. . . . . . . . . . . 500 9,563
Marriott International, Inc. . . . . . . . . . 500 27,625
--------------
80,876
--------------
PUBLISHING - 0.6%
Knight-Ridder, Inc. . . . . . . . . . . . . . . 300 11,475
Times Mirror Co. Class A . . . . . . . . . . . 200 9,950
--------------
21,425
--------------
RESTAURANTS - 0.7%
Brinker International, Inc. (a) . . . . . . . . 1,000 16,000
Rainforest Cafe, Inc. . . . . . . . . . . . . . 300 7,050
--------------
23,050
--------------

TOTAL MEDIA & LEISURE . . . . . . . . . . . . . 146,326
--------------
NONDURABLES - 7.2%
AGRICULTURE - 0.4%
Pioneer Hi-Bred International, Inc. . . . . . . 200 14,000
--------------
BEVERAGES - 0.8%
Coca-Cola Co. (The) . . . . . . . . . . . . . . 200 10,525
PepsiCo, Inc. . . . . . . . . . . . . . . . . . 600 17,550
--------------
28,075
--------------
FOODS - 1.1%
ConAgra, Inc. . . . . . . . . . . . . . . . . . 100 4,975
General Mills, Inc. . . . . . . . . . . . . . . 200 12,675
Ralston Purina Group . . . . . . . . . . . . . 100 7,338
Sysco Corp. . . . . . . . . . . . . . . . . . . 400 13,050
--------------
38,038
--------------
HOUSEHOLD PRODUCTS - 2.0%
Clorox Co. . . . . . . . . . . . . . . . . . . 100 10,038
First Brands Corp. . . . . . . . . . . . . . . 300 8,513
Gillette Co. . . . . . . . . . . . . . . . . . 200 15,550
Procter & Gamble Co. . . . . . . . . . . . . . 300 32,250
--------------
66,351
--------------
TOBACCO - 2.9%
Philip Morris Companies, Inc. . . . . . . . . . 500 56,313
RJR Nabisco Holdings Corp. . . . . . . . . . . 1,200 40,800
--------------
97,113
--------------

TOTAL NONDURABLES . . . . . . . . . . . . . . . 243,577
--------------
PRECIOUS METALS - 0.3%
Newmont Mining Corp. . . . . . . . . . . . . . 200 8,950
--------------
RETAIL & WHOLESALE - 8.8%
APPAREL STORES - 0.6%
Gymboree Corp. (a) . . . . . . . . . . . . . . 900 20,588
--------------
DRUG STORES - 1.3%
General Nutrition Companies, Inc. (a) . . . . . 900 15,188
Rite Aid Corp. . . . . . . . . . . . . . . . . 700 27,825
--------------
43,013
--------------
GENERAL MERCHANDISE STORES - 1.1%
Dollar General Corp. . . . . . . . . . . . . . 200 6,400
Sears, Roebuck & Co. . . . . . . . . . . . . . 700 32,288
--------------
38,688
--------------
GROCERY STORES - 1.1%
Kroger Co. (The) (a) . . . . . . . . . . . . . 400 18,600
Safeway, Inc. . . . . . . . . . . . . . . . . . 400 17,100
--------------
35,700
--------------
RETAIL & WHOLESALE, MISCELLANEOUS - 4.7%
Circuit City Stores, Inc. . . . . . . . . . . . 800 24,100
Lowe's Companies, Inc. . . . . . . . . . . . . 600 21,300
PETsMART, Inc. (a) . . . . . . . . . . . . . . 1,500 32,813
Staples, Inc. (a) . . . . . . . . . . . . . . . 1,000 18,063
Toys "R" Us, Inc. (a) . . . . . . . . . . . . . 1,700 51,000
Viking Office Products, Inc. . . . . . . . . . 500 13,344
--------------
160,620
--------------

TOTAL RETAIL & WHOLESALE . . . . . . . . . . . 298,609
--------------
SERVICES - 1.4%
ADVERTISING - 0.6%
Omnicom Group, Inc. . . . . . . . . . . . . . . 400 18,300
--------------
SERVICES - 0.8%
CDI Corp. . . . . . . . . . . . . . . . . . . . 600 17,025
Service Corp. International . . . . . . . . . . 400 11,200
--------------
28,225
--------------

TOTAL SERVICES . . . . . . . . . . . . . . . . 46,525
--------------
TECHNOLOGY - 20.8%
COMMUNICATIONS EQUIPMENT - 4.8%
Ascend Communications, Inc. (a) . . . . . . . . 600 37,275
Aspect Telecommunications Corp. . . . . . . . . 100 6,350
Cisco Systems, Inc. (a) . . . . . . . . . . . . 800 50,900
Network General Corp. (a) . . . . . . . . . . . 1,400 42,350
Pairgain Technologies, Inc. . . . . . . . . . . 400 12,175
3Com Corp. (a) . . . . . . . . . . . . . . . . 200 14,675
--------------
163,725
--------------
COMPUTER SERVICES & SOFTWARE - 4.6%
America Online, Inc. (a) . . . . . . . . . . . 300 9,975
American Management Systems, Inc. (a) . . . . . 500 12,250
Automatic Data Processing, Inc. . . . . . . . . 500 21,438
CUC International, Inc. (a) . . . . . . . . . . 1,550 36,813
Computer Sciences Corp. (a) . . . . . . . . . . 200 16,425
Electronic Data Systems Corp. . . . . . . . . . 200 8,650
Equifax, Inc. . . . . . . . . . . . . . . . . . 300 9,188
Forte Software, Inc. . . . . . . . . . . . . . 500 16,375
Oracle Systems Corp. (a) . . . . . . . . . . . 200 8,350
PeopleSoft, Inc. . . . . . . . . . . . . . . . 200 9,588
SunGard Data Systems, Inc. . . . . . . . . . . 200 7,900
--------------
156,952
--------------

See accompanying notes which are an integral part of the financial statements.

ANNUAL REPORT 14
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
- -------------------------------------------------------------------------------
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 6.7%
<S> <C> <C>
Adaptec, Inc. (a) . . . . . . . . . . . . . . . 1,500 $ 60,000
Bay Networks, Inc. (a) . . . . . . . . . . . . 1,000 20,875
Compaq Computer Corp. (a) . . . . . . . . . . . 200 14,850
International Business Machines Corp. . . . . . 600 90,600
Pitney Bowes, Inc. . . . . . . . . . . . . . . 600 32,700
Silicon Graphics, Inc. . . . . . . . . . . . . 300 7,650
--------------
226,675
--------------
ELECTRONICS - 3.7%
Analog Devices, Inc. (a) . . . . . . . . . . . 500 16,938
Intel Corp. . . . . . . . . . . . . . . . . . . 400 52,375
Linear Technology Corp. . . . . . . . . . . . . 900 39,488
Maxim Integrated Products, Inc. (a) . . . . . . 400 17,300
--------------
126,101
--------------
PHOTOGRAPHIC EQUIPMENT - 1.0%
Eastman Kodak Co. . . . . . . . . . . . . . . . 400 32,100
--------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . 705,553
--------------
TRANSPORTATION - 0.7%
RAILROADS - 0.7%
CSX Corp. . . . . . . . . . . . . . . . . . . . 600 25,350
--------------
UTILITIES - 4.7%
CELLULAR - 1.0%
360 Degrees Communications Co. (a) . . . . . . 900 20,813
Vodafone Group PLC sponsored ADR . . . . . . . 300 12,413
--------------
33,226
--------------
TELEPHONE SERVICES - 3.7%
Ameritech Corp. . . . . . . . . . . . . . . . . 400 24,250
Cincinnati Bell, Inc. . . . . . . . . . . . . . 100 6,163
Frontier Corp. . . . . . . . . . . . . . . . . 400 9,050
LCI International, Inc. (a) . . . . . . . . . . 500 10,750
MCI Communications Corp. . . . . . . . . . . . 400 13,075
SBC Communications, Inc. . . . . . . . . . . . 800 41,400
WorldCom, Inc. (a) . . . . . . . . . . . . . . 800 20,850
--------------
125,538
--------------
TOTAL UTILITIES . . . . . . . . . . . . . . . . 158,764
--------------
TOTAL COMMON STOCKS
(Cost $2,852,938) . . . . . . . . . . . . . 3,198,406
--------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CASH EQUIVALENTS -- 5.7%
- -------------------------------------------------------------------------------
MATURITY
AMOUNT
<S> <C> <C>
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 . . . . . . . . . . . . $ 192,072 192,000
--------------
TOTAL INVESTMENT IN SECURITIES - 100%
Cost $3,044,938) . . . . . . . . . . . . . $ 3,390,406
==============
</TABLE>

LEGEND

(a)Non-income producing

OTHER INFORMATION

Purchases and sales of securities, other than short-term securities, aggregated
$3,399,944 and $591,247, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms
which are affiliates of Fidelity Management & Research Company. The commissions
paid to these affiliated firms amounted to $355 for the period (see Note 4 of
Notes to Financial Statements).

INCOME TAX INFORMATION

At December 31, 1996, the aggregate cost of investment securities for income
tax purposes was $3,044,938. Net unrealized appreciation aggregated $345,468,
of which $388,731 related to appreciated investment securities and $43,263
related to depreciated investment securities.

See accompanying notes which are an integral part of the financial statement.

15 ANNUAL REPORT
<PAGE> 215
LARGE CAP PORTFOLIO
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
<S> <C>
ASSETS
Investment in securities, at value
(including repurchase agreements
of $192,000) (cost $3,044,938)--
See accompanying schedule . . . . . . . . . . . . . . . . $ 3,390,406
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
Receivable for fund shares sold . . . . . . . . . . . . . . . . . . 235
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . 4,292
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . 20
Receivable for expense reductions . . . . . . . . . . . . . . . . . 38,107
------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . 3,433,426

LIABILITIES
Other payables and
accrued expenses . . . . . . . . . . . . . . . . . . . . . 21,942
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,411,484
============
Net Assets consist of:
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,023,210
Accumulated undistributed net
realized gain (loss) on investments . . . . . . . . . . . 42,806
Net unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . . 345,468
------------
NET ASSETS, for 302,060 shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . $ 3,411,484
============

NET ASSET VALUE, offering price
and redemption price per share
($3,411,484 / 302,060 shares) . . . . . . . . . . . . . . $11.29
======
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
AUGUST 30, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,218
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,702
-----------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . 20,920

EXPENSES
Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,211
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . 376
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . 20,052
Non-interested trustees' compensation . . . . . . . . . . . . . . . 1,667
Custodian fees and expenses . . . . . . . . . . . . . . . . . . . . 6,756
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500
----------
Total expenses before reductions . . . . . . . . . . . . . 50,562
Expense reductions . . . . . . . . . . . . . . . . . . . . (40,246) 10,316
---------- -----------

NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . 10,604
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
investment securities . . . . . . . . . . . . . . . . . . 44,241
Change in net unrealized
appreciation (depreciation)
on investment securities . . . . . . . . . . . . . . . . . 345,468
-----------
NET GAIN (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . 389,709
-----------
NET INCREASE (DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . $ 400,313
==========
</TABLE>

See accompanying notes which are an integral part of the financial statements.

ANNUAL REPORT 16
<PAGE> 216

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,604
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,241
Change in net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . 345,468
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . 400,313
------------
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,039)
------------
Share transactions
Net proceeds from sales of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011,171
Reinvestment of distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,039
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS . . . . . . . . . . . . . . . 3,023,210
------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,411,484

NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,411,484
============

OTHER INFORMATION
Shares
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,006
Issued in reinvestment of distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054
------------
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,060
============
</TABLE>

See accompanying notes which are an integral part of the financial statements.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1996
<S> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
---------
Income from Investment Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .04
Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.29
---------
Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.33
---------
Less Distributions
From net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.04)
---------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.29
=========

TOTAL RETURN (B,C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.30%

RATIOS AND SUPPLEMENT DATA
Net assets, end of period (000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,411
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95%(A)
Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98%(A)
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57%(A)
Average commission rate(D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .0214
</TABLE>

(A) Annualized
(B) Total returns for periods of less than one year are not annualized.
(C) The total return would have been lower had certain expenses not been
reduced during the period shown (see Note 5 of Notes to Financial
Statements).
(D) A fund is required to disclose its average commission rate per share for
security trades on which commissions are changed. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission rate
structures may differ.

17 ANNUAL REPORT
<PAGE> 217

NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

1. SIGNIFICANT ACCOUNTING POLICIES.

Equity Income Portfolio and Large Cap Portfolio (the funds) are funds of The
Travelers Series Trust (the trust) and are authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements have been
prepared in conformity with generally accepted accounting principles which
permit management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the funds:

SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.

INCOME TAXES. Each fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By so qualifying, each fund
will not be subject to income taxes to the extent that it distributes
substantially all of its taxable income for the fiscal year. The schedules of
investments include information regarding income taxes under the caption
"Income Tax Information."

INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except
certain dividends from foreign securities where the ex-dividend date may have
passed, are recorded as soon as the funds are informed of the ex-dividend date.
Non-cash dividends included in dividend income, if any, are recorded at the
fair market value of the securities received. Interest income is accrued as
earned. Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.

EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the funds
in the trust.

DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend
date.

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences may result in distribution reclassifications.

Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital and may affect the
per-share allocation between net investment income and realized and unrealized
gain (loss). Accumulated undistributed net realized gain (loss) on investments
may include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.

SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.

2. OPERATING POLICIES.

JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the funds, along with affiliated entities of Fidelity
Management & Research Company (FMR), may transfer uninvested cash balances into
one or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of purchase
for U.S. Treasury or Federal Agency obligations.

REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the funds, or to the Joint Trading
Account, at a bank custodian. The securities are marked-to-market daily and
maintained at a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the funds' investment sub-adviser,
is responsible for determining that the value of the underlying securities
remains in accordance with the market value requirements stated above.

RESTRICTED SECURITIES. The funds are permitted to invest in securities that are
subject to legal or contractual restrictions on resale. These securities
generally may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, the funds had no
investments in restricted securities (excluding 144A issues).

3. PURCHASES AND SALES OF INVESTMENTS.

Information regarding purchases and sales of securities (other than short-term
securities) is included under the caption "Other Information" at the end of
each applicable fund's schedule of investments.

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.

MANAGEMENT FEE. As each fund's investment adviser, Travelers Asset Management
International Corporation (TAMIC), an affiliate of The Travelers Insurance
Company (The Travelers), receives a fee that is computed daily at an annualized
rate of .75% of each fund's average net assets. TAMIC, on behalf of each fund,
has entered into a sub-advisory agreement with FMR. For its services as each
fund's sub-adviser, FMR is paid a portion of TAMIC's

ANNUAL REPORT 18

<PAGE> 218
4. FEES AND OTHER TRANSACTION WITH AFFILIATES - CONTINUED

MANAGEMENT FEE - CONTINUED

management fee that is computed daily at an annualized rate of .45% of each
fund's average net assets.

TRANSFER AGENT FEES. The Travelers is each fund's transfer, dividend
disbursing, and shareholder servicing agent. The trust, on behalf of each fund,
has entered into a sub-arrangement with Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR, under which FIIOC performs
each fund's transfer, dividend disbursing, and shareholder servicing agent
functions. For its services, FIIOC receives account fees and asset-based fees
that vary according to account size and type of account.

ACCOUNTING FEES. The trust, on behalf of each fund, has entered into a service
agent agreement with Fidelity Service Co. (FSC), an affiliate of FMR, under
which FSC maintains each fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.

BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The commissions
paid to these affiliated firms are shown under the caption "Other Information"
at the end of each applicable fund's schedule of investments.

5. EXPENSE REDUCTIONS.

The Travelers voluntarily agreed to reimburse each funds' operating expenses
above an annual rate of .95% of average net assets. For the period, the
reimbursement reduced expenses by $40,114 and $40,246 for Equity Income
Portfolio and Large Cap Portfolio, respectively. Through an arrangement
between The Travelers and Fidelity Investments Institutional Services Co., Inc.
(FIIS), an affiliate of FMR, FIIS has agreed to pay The Travelers a portion of
these reimbursements.

6. BENEFICIAL INTEREST.

At the end of the period, The Travelers, its affiliates and Separate Accounts
of The Travelers were record owners of approximately 100% of the total
outstanding shares of each fund.

19 ANNUAL REPORT

<PAGE> 219
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of The Travelers Series Trust and the Shareholders of Equity
Income Portfolio and Large Cap Portfolio:

In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and Standard &
Poor's ratings), and the related statements of operations and changes in net
assets and the financial highlights present fairly, in all material respects,
the financial position of Equity Income Portfolio and Large Cap Portfolio
(funds of The Travelers Series Trust) at December 31, 1996, and the results of
their operations, the changes in their net assets and the financial highlights
for the period August 30, 1996 (commencement of operations) through December
31, 1996 in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of The Travelers Series Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP

Boston, Massachusetts
February 7, 1997

ANNUAL REPORT 20

<PAGE> 220
DISTRIBUTIONS

The Board of Trustees of The Travelers Series Trust voted to pay to
shareholders of record at the opening of business on record date, the following
distributions derived from capital gains realized from sales of portfolio
securities:

<TABLE>
<CAPTION>
PAY DATE RECORD DATE CAPITAL GAINS
<S> <C> <C> <C>
Equity Income Portfolio 2/7/97 2/7/97 $.03
Large Cap Portfolio 2/7/97 2/7/97 $.14
</TABLE>

21 ANNUAL REPORT

<PAGE> 221

ANNUAL REPORT 22

<PAGE> 222
23 ANNUAL REPORT

<PAGE> 223
INVESTMENT ADVISER

Travelers Asset Management International Corporation
Hartford, Connecticut

INVESTMENT SUB-ADVISER

Fidelity Management & Research Company
Boston, Massachusetts

INDEPENDENT ACCOUNTANTS

Price Waterhouse
Boston, Massachusetts

CUSTODIAN

Brown Brothers Harriman & Co.
Boston, MA

This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Series Trust: Equity Income or Large
Cap Portfolios. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Annuity Insurance products
offered by the Travelers Insurance Company or the Travelers Life and Annuity
Company and the prospectuses for the underlying funds, which collectively
contain all pertinent information, including the applicable sales commissions.

<PAGE> 224
THE TRAVELERS VARIABLE
PRODUCTS FUNDS

ANNUAL REPORTS
DECEMBER 31, 1996

THE TRAVELERS SERIES TRUST:

TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO

[TRAVELERSLIFE LOG0]

The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183

<PAGE> 225
THE TRAVELERS VARIABLE

PRODUCTS FUND

ANNUAL REPORTS
December 31, 1996

THE TRAVELERS SERIES TRUST:

TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO

[TRAVELERSLIFE LOG0]

The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183

<PAGE> 226

ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
- --------------------------------------------------------------------------------

DEAR SHAREHOLDER:

We are pleased to provide you with the annual report for five of the thirteen
portfolios of The Travelers Series Trust -- Travelers Quality Bond, Lazard
International Stock, MFS Emerging Growth, Federated High Yield, and Federated
Stock Portfolios ("Portfolios") for the period ended December 31, 1996. In this
letter, we summarize the period's prevailing economic and market conditions and
outline each Portfolio's investment strategy. A detailed summary of performance
can be found in the appropriate sections that follow in the report.

ECONOMIC REVIEW AND MARKET OUTLOOK

As 1996 began, the federal government found itself paralyzed by a prolonged
budget dispute. In the financial markets, investors were focused on signs of a
slowing economy. With two-year Treasury notes priced to yield less than the
federal funds rate, the bond market clearly expected the Federal Reserve Board
("Fed") to cut interest rates significantly. The Fed lowered the federal funds
rate by 0.25% in January, but strong employment growth over the next several
months sent the bond market into a tailspin reminiscent of 1994. Interest rates
hit their highest levels for the year in the June to September period as
investors prepared for the Fed to raise interest rates at their September
meeting.

The policymakers at the Fed decided to hold steady at their September meeting
and interest rates declined through the autumn as economic growth once again
slowed. The financial markets also responded positively to the Republicans'
success in retaining control of Congress in the November election. Going into
December, the bond and stock markets reflected a "best of all worlds" scenario
of moderate economic growth with low inflation, low unemployment and a benign to
positive political landscape. Interest rates started to move back up again in
December as some economic indicators strengthened, but ended the year well below
the levels seen in the second and third quarters.

We expect real economic growth to average around 2% in 1997. The consumer
sector, which makes up two-thirds of Gross Domestic Product ("GDP"), should show
modest growth. The factors that would otherwise contribute to strong consumer
spending -- low unemployment, high consumer confidence, and the wealth effects
from the strong stock market -- should be muted by high consumer debt
(particularly at lower income levels) and the lack of pent-up demand. The export
sector should continue to grow 5% to 10% in 1997, helped by the United States'
strong competitive position and continued robust growth in emerging markets.
Growth should improve slightly in Europe and Japan, helped by the recent
strengthening of the dollar against those currencies. The stronger dollar is
likely to be a mixed blessing, by making the prices of foreign imports more
attractive and thereby helping to dampen inflation. The capital goods sector has
slowed in recent quarters, but is still expected to grow faster than overall the
U.S. economy. The government sector should continue to be a drag on GDP growth.

Overall, we believe that the U.S. economy is likely to remain on a path of
moderate non-inflationary growth in 1997. However, because of the current low
level of unemployment, we also expect that the Fed will remain cautious and
biased towards a tighter monetary policy. Whether or not the Fed acts may depend
in part on market psychology. Upward shifts in long-term bond yields have served
to moderate economic growth in recent years and reduced the need for any major
changes in Fed policy.

FIXED INCOME COMMENTARY

Within the fixed income market, all private issuer sectors outperformed Treasury
bonds as quality spreads continued to narrow. While Treasuries performed almost
as poorly in 1996 as in 1994, the effect on other sectors was relatively
neutral, unlike 1994 when there were problems with mortgage-backed derivatives,
Mexico, and Orange County. The yield curve was also remarkably stable in 1996,
unlike 1994 when short-term interest rates rose considerably. The
mortgage-backed, high yield, and municipal sectors were the best performing
areas in 1996 on a duration adjusted basis. Within the corporate sector, lower
quality and foreign issues were the best performers based on both higher coupons
and spread tightening.

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inflationary wage growth. We believe this sets a floor for long-term bond yields
at about 6.0%. At the upper end of the range, the 7.2% level has proved to be
sufficient to generate increased demand for bonds and depress high risk asset
classes and interest sensitive sectors of the economy. We feel that central bank
vigilance against inflation, globalization, and productivity improvements will
keep inflation under control, preventing interest rates from rising much above
their 1996 high.

EQUITY COMMENTARY

During 1996, financial markets were repeatedly jolted by changes in sentiment
about the strength of the U.S. economy and the direction of Fed policy. When
investors gained confidence that the economy was continuing on a track of
moderate, non-inflationary growth, the stock market advanced strongly and posted
another year of outstanding performance. For the year ended December 31, 1996,
the Standard & Poor's 500 Stock Index ("S&P 500") provided a total return of
22.95%. Over the same period, the Russell 2000 Stock Index ("Russell 2000"), a
measure of the performance of the small company segment of the equity market,
provided a total return of 16.5%.

As measured by the S&P 500, the U.S. stock market has provided a cumulative
total return of nearly 70% over the past two years, capping a six-year bull
market that began in October of 1990. Notwithstanding the strong overall
environment for equities, 1996 marked the third consecutive year of
underperformance by small and mid sized company stocks relative to "blue chip"
indices. The underperformance of small company stocks can be explained in part
by the sharper falloff in earnings growth experienced by smaller companies in
the 1995-96 period. The performance lag also reflected a backing away by
investors from higher risk growth stocks, in an environment of rising interest
rates and market volatility.

Given the frequent alarms raised in 1996 about slowing earnings growth,
investors showed an understandable preference for industry sectors with visible
earnings momentum. In the energy sector, analysts' earnings estimates and share
prices moved sharply higher in response to firmer prices for oil and natural
gas. Stocks in the finance sector also performed exceptionally well despite
emerging credit quality concerns. In the consumer sector, specialty and
broad-line retail stocks were up strongly in response to higher than expected
levels of consumer spending. The technology sector provided superior returns for
investors last year, led by Intel and Microsoft. Within the technology sector,
software, semiconductor and computer product stocks had the strongest relative
performance. Industrial cyclical stocks underperformed, as soft domestic and
export demand led to declining commodity prices for paper, copper, aluminum,
steel and fertilizer products. The health care sector was mixed. Drug stocks
kept pace with the market due to strong earnings gains, while the Health
Maintenance Organizations ("HMO") HMO group declined sharply on repeated
earnings disappointments. Utilities were the weakest overall sector during the
year, held back by the relatively poor performance of local telephone carriers
and electrical companies.

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becoming more attractive. However, we believe that caution should still be
exercised since the small capitalization segment of the equity market has a
relatively high exposure to cyclical industries and would be vulnerable to any
combination of higher interest rates and slower profit growth.

TRAVELERS QUALITY BOND PORTFOLIO

For the period ended December 31, 1996, the Travelers Quality Bond Portfolio had
a total return of 3.56% versus the 3.88% total for the Lehman Intermediate
Government/Corporate Index.

1996 started with the federal government shutdown and investor concerns about a
possible recession. Many bond market investors clearly expected the Fed to cut
interest rates significantly as the two year U.S. Treasury yield was lower than
the Federal Funds rate. The Fed did cut the Federal Funds target rate 25 basis
points in January but strong employment growth over the next several months sent
bonds into a tailspin reminiscent of 1994. Interest rates hit their highest
levels of the year from June to September as many investors expected the Fed to
raise interest rates at its September meeting.

The Fed decided to hold steady at the September meeting and interest rates
declined from then until December as U.S. economic growth slowed in the fourth
quarter. The market also responded positively to the November election results
as the Republicans maintained control of Congress despite President Clinton's
re-election victory. Going into December, many bond investors expected a
continuation of low inflation, low unemployment and a benign political
landscape. In December, rates started rising again as some economic indicators
strengthened but ended the year below the levels seen in the second and third
quarters.

We expect interest rates to remain in the trading range established in 1996
(i.e., the 30 Year U.S. Treasury ranged from 6.00% to 7.20%). In our opinion,
low unemployment creates the potential for strong consumer spending growth and
higher wages puts upward pressure on inflation, putting a lower limit on where
interest rates can go. The 7% level has proven to be sufficient to attract
investor interest in bonds. We believe that continued Fed vigilance against
inflation, globalization and productivity improvements should keep inflation
under control and prevent interest rates from rising much above their 1996 high.
We are therefore keeping the Portfolio's duration and maturity structure
relatively close to the Lehman Intermediate Government/Corporate Index. In
addition, we continue to weed out riskier bonds from a credit quality standpoint
and issues that we believe do not offer enough yield premium to offset their
potential for negative surprises. In our view, foreign bonds continue to offer
opportunities, particularly foreign corporate bonds that sometimes have strong
balance sheets but are capped by the credit rating of their home country.

LAZARD INTERNATIONAL STOCK PORTFOLIO

The fourth quarter proved a fitting end to another strong year as several
international equity markets reached record highs. Although U.S. market
performance captured much of the headlines throughout the year, European
equities rivaled its performance. In Japan, the market closed at its year low
after reaching a four-year high in June. The Lazard International Stock
Portfolio had a total return of 7.80% for the period August 1, 1996
(commencement of operations) through December 31, 1996 which outperformed the
MSCI Index by a wide margin.

In 1996, investors witnessed a pivotal year for shareholder value creation by
many international companies. The "shareholder value" focus that began in the
U.S. has quickly been adopted by Europe and is slowly gaining ground in Japan.
Investing in companies that understand this concept and that are taking concrete
steps in line with the interests of shareholders has been a major driver of the
Portfolio's outperformance in 1996.

European pharmaceutical companies continued to increase value during the fourth
quarter. Two Switzerland pharmaceutical giants -- Ciba-Geigy and
Sandoz -- announced a merger in the first quarter and formed a new company
called "Novartis" which began trading in December. Hoechst continued to blaze
the trail of shareholder value in Germany. First, the company outlined plans to
create a strategic holding company to provide transparency; to separate
businesses into operating units and to motivate management. Next, Hoechst
managed to sell its non-core specialty chemicals business in a tax-free
transaction. Lastly, Hoechst purchased the remaining portion of Roussel Uclaf to
solidify its pharmaceutical business which it may list separately in the U.S.
German corporate governance as a whole has advanced with the government approval
of tax efficient share buy backs. While France may be a step behind Germany, we
are finding companies that are taking positive action. After

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years of destroying capital, Elf Aquitane demonstrated its commitment to its
core oil business by selling its stake in the financial company Suez and by
expressing its willingness to part with its pharmaceutical business, Sanofi.

The consolidation of the European banking, utility and telecommunications
industries is additional evidence of the growing commitment to create
shareholder value. In preparation for telecommunications deregulation, Germany
began to privatize Deutsche Telekom with the largest ever European initial
public offering ("IPO"); Veba allied with RWE; and Generale des Eaux added
British Telecommunications to its telecom joint venture. In the United Kingdom
banking industry and after a strong run in 1996, Lloyds Abbey Life was bought by
Lloyds TSB. In Sweden, Svenska Handelsbanken consolidated its superior position
with an offer to buy Stadshypotek. Utilities experienced a boost in performance
as Midlands Electric accepted a bid from two U.S. utilities, and National Power
returned cash to shareholders through a huge special dividend. In the fourth
quarter, Elektrowatt, which had been unable to find a buyer for its combined
(but disparate) engineering and electric utility businesses, divided and has
already received separate bids.

Despite good company results, a weak Japanese tankan (business outlook) survey
dragged the Nikkei Index down for the fourth quarter and the year. "Japan Inc."
is further behind Europe with respect to restructuring. Combined with a slow
economy and more austere government programs, careful individual stock selection
in Japan is essential. Japanese companies that face their problems and make
changes should continue to profit, especially if the Japanese economy continues
to struggle. 1996 was a good example of astute Japanese stock selection in the
Lazard International Stock Portfolio, which helped contribute to its
outperformance this past year. Honda and Toyota were two of Japan's best
performers as attractive valuations, a weaker yen and some movement towards
enhancing shareholder value boosted share prices. Toyota became the first
Japanese company to announce plans to buy back stock. Elsewhere in the Pacific,
HSBC (Hong Kong-Shanghai Banking Corp.) was a strong performer for the Portfolio
and outperformed the overall Hong Kong market, which had an excellent year.

Looking ahead, we believe global investors should be encouraged by attractive
stock valuations and by the concrete steps that many international companies are
taking to improve their return on capital, as well as lowering the cost of their
capital. While the prevailing U.S. stock market culture is well advanced, the
Europeans, Japanese and other Asians are now setting up pension and retirement
plans in an effort to create more wealth for their retirement. In all
likelihood, this should result in an inflow of cash to their local equity
markets. The emergence of this new "equity culture" globally should create
greater pressures on many foreign companies to generate higher returns for
shareholders. In our view, other important issues to watch in 1997 include the
development of a common European currency ("ECU"), the willingness of Japanese
banks to write-off their bad debts, Hong Kong's transition to mainland Chinese
rule and the value of the U.S. dollar.

After several years of record-breaking U.S. stock market returns, some investors
may be questioning the need to invest internationally. We believe it is
important to note that many of the same forces that drove U.S. equity returns
the past few years are now in place in many foreign markets. Improving global
competitiveness, higher corporate earnings, declining interest rates,
inexpensive foreign stock valuations and a new "equity culture" abroad bodes
well for possible international equity outperformance versus the U.S. stock
market in the coming years.

MFS EMERGING GROWTH PORTFOLIO

Since its inception on August 30, 1996, the MFS Emerging Growth Portfolio
provided a total return of 6.00%. This compares to the 9.31% return for Russell
2000 and 14.42% return for S&P 500 for the same period.

Although the Portfolio's performance benefited from the strong appreciation in
the stock prices of many of its holdings in the technology and consumer sectors,
the overall stock market of 1996 was dominated by the larger capitalization
issues as represented by the Dow Jones Industrial Average ("DJIA") and the S&P
500.

The U.S. economic and business environment was generally benign during the
reporting period. Modest U.S. economic growth, coupled with productivity gains
by corporate America, provided a favorable backdrop for the equity market.
Semiconductor stocks performed strongly as investors focused on the potential
for an upswing in demand. On the other hand, health maintenance organizations
("HMOs") performed poorly as companies underestimated health care costs and set
their prices too low. This poor performance spilled over into the first half of
the year and resulted in underperformance by the entire technology and health
care sectors -- two of the largest components of the Portfolio. In addition,
many emerging

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growth companies underperformed throughout most of the year. With a very strong
U.S. stock market, many investors ignored the strong earnings growth of many
emerging growth companies and instead bid up the prices of larger companies. In
fact, earnings results for emerging growth companies in the Portfolio remained
strong all through the year.

We believe the performance of technology stocks, which make up the Portfolio's
largest sector, is a reflection of ongoing restructuring occurring throughout
corporate America and that has improved productivity. In our opinion, much of
this corporate restructuring has been made possible by technology companies,
especially software and networking companies which are helping to reduce costs
for many corporate customers. For example, Oracle Corp., BMC Software, Computer
Associates and Compuware have all performed well.

At the same time, consumer services companies such as HFS Inc. have also helped
the Portfolio's performance this past year. HFS has acquired companies in the
hotel, real estate and car rental businesses. In our view, these businesses make
strategic sense for HFS Inc. and the company has experienced 30% internal growth
from both revenue opportunities and cost savings. Supplementing HFS' internal
growth has been the contributions of what we believe is the best acquisition
management team of the 1990s. And while the company's stock has outperformed the
broad market, its valuation has lagged its earnings growth rate this year. In
our view, HFS Inc. is attractively priced.

One sector of the MFS Emerging Growth Portfolio that did not perform as well as
expected is healthcare. In our view, HMOs set their prices too low to ensure
adequate revenues in 1996. United Healthcare, Healthsource and Pacificare all
underperformed. We are, however, optimistic that these companies will benefit
from price increases implemented so far in 1997.

During the fourth quarter, we continued to increase the Portfolio's weighting in
semiconductor stocks such as Altera and Analog Devices to take advantage of
their attractive valuations and the recovery we believe is taking place in the
industry's fundamentals. We reduced or eliminated entirely the Portfolio's
holdings in the radio industry because of an unfavorable regulatory climate. In
addition, we reduced select technology holdings because certain product
transitions were encountering difficulty.

Looking ahead, we expect a continuation of the slow growth that the U.S. economy
has been experiencing over the last few years. While this has been a slow growth
U.S. economy, it has been a generally great time for corporate earnings as
restructurings have lowered corporate America's costs and helped improve
margins. We believe that many low-cost emerging growth companies can capitalize
on this trend. In addition, we think that technology and outsourcing companies,
which are large Portfolio holdings, also stand to benefit from corporate
restructuring.

FEDERATED HIGH YIELD PORTFOLIO

The Federated High Yield Portfolio began investing in high yield securities in
September 1996. From September through year end, the high yield bond market,
like most financial markets, generated excellent returns. In our view, the
markets reacted positively to a maintaining of the "status quo" on several
fronts. The November elections provided political stability -- namely, a
Democratic President and a Republican-majority Congress. The U.S. economy
continued on a slow growth, low inflation track. And despite Alan Greenspan's
comments about "irrational exuberance" in the financial markets, the Federal
Reserve Board continued its stable interest rate policy. Against this backdrop,
stock prices moved higher and interest rates moved lower.

From the perspective of high yield bond investors, steady U.S. economic growth
was an excellent environment for most high yield issuers. In addition, strong
technical conditions enabled the high yield bond market to easily absorb
seasonal heavy new issuance in November and early December. In our view, the
combination of positive fundamental economic conditions and strong technical
supply conditions resulted in excellent performance for many high yield bonds.
For example, for the period ended December 31, 1996, the Lehman Brothers High
Yield Bond Index returned 5.98% versus the 4.79% total return for the Lehman
Brothers Aggregate Bond Index for the same period.

The Federated High Yield Portfolio with a total return of 7.61%, for the period
August 30, 1996 through December 31, 1996, which outperformed the Lehman
Brothers High Yield Index for the same period. Several factors in our view had a
positive impact on the Portfolio's performance. The Portfolio's overweighting in
the United Kingdom cable TV industry had a

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positive impact on performance because of strong fundamentals and what we
believe is a significant consolidation in the UK market. In addition, the
Portfolio's overweighting in the telecommunications sector also outperformed the
overall market.

The Portfolio also benefited from the above market performance of its holdings
in AMF, Affiliated Newspapers and Six Flags Theme Parks. The Portfolio also
avoided several big troubled situations such as Marvel and Penn Traffic. Yet its
position in Riverwood underperformed the overall market as pricing pressure in
the commodity paper markets negatively impacted the company's operating
performance.

As we look ahead into 1997, our outlook for high yield securities remains
optimistic. We believe that U.S. economic growth will continue to be moderate,
inflation will remain under control and interest rates should remain in a narrow
trading range. From a macroeconomic standpoint, as the creditworthiness of
issuers stays at acceptable levels, high yield securities should perform well.
Moreover, the technical environment is also attractive. Demand for many high
yield securities continues to be strong. We believe these two factors should
result in a narrowing of the yield spread (or risk premium) between high yield
bonds and U.S. Treasuries.

However, the yield spread between high yield bonds and U.S. Treasuries closed
1996 at its low point for this economic cycle. In our opinion, this has two
implications. First, the relative total return advantage of high yield bonds
over high quality bonds will probably not approach the roughly 775 basis point
advantage seen in 1996. Second, individual companies that do not meet investor
expectations will be dealt with harshly as current yield spread levels leave
little room for disappointment.

FEDERATED STOCK PORTFOLIO

The U.S. stock market posted a strong gain in the final quarter of 1996, with
the S&P 500 generating a total return of 8.34%. Major stock prices again hit
all-time highs during December as investors reacted positively to election
results. Fundamentally, the backdrop for the U.S. stock market continues to be
quite positive -- moderate economic growth, subdued inflation and rising
corporate profits. Moreover, equity mutual fund purchases remain strong, while
many U.S. corporations are generating significant cash flow.

While we are mainly "bottom-up" investors, and not market timers, we do share
some of the publicized concerns about the elevated level of the market after two
years of exceptional returns despite signs of "irrational exuberance" (to quote
Federal Reserve Board Chairman Alan Greenspan). However, at 17 times estimated
1997 earnings (S&P 500), the market in our view does not appear to be
unreasonably valued relative to an environment of 2 1/2% inflation and a narrow
range for interest rates.

Perhaps the best defense is a good offense, which has led us to place a heavy
emphasis on valuation and strong fundamentals in our stock selection process. We
still like companies poised to benefit from trends such as corporate
restructuring, industry consolidation and globalization. Consistent with our
disciplined investment approach, we currently have no underweightings or
overweightings with respect to the Portfolio's sector diversification. We
believe the Portfolio reflects a good balance between cyclical and non-cyclical
company stocks. What follows are our thoughts regarding certain key Portfolio
holdings.

Great Lakes Chemical Corp. -- Great Lakes Chemical is a major specialty chemical
manufacturer. The company produces bromine and fuel additives and is trading at
a five-year low. In addition to many restructuring opportunities, we believe the
company's valuation is compelling by almost any measure.

General Motors Corporation (common) -- As you know, General Motors ("GM") is one
of the world's largest vehicle manufacturers. In our view, GM appears to be
substantially undervalued based on "sum of the parts" analysis and cash flow. GM
has significant internal restructuring opportunities and is expected to announce
a major dividend increase and share repurchase plan in the near future.

General Motors Corp. (Class "H") -- This stock represents GM's Hughes
Electronics subsidiary consisting of automotive, defense electronics and
telecommunications businesses. We believe the stock is undervalued relative to
its individual business segments and parent GM is seeking bids for the aerospace
and defense businesses.

H&R Block, Inc. -- H&R Block owns and franchises tax preparation services and
owns 80% of Compuserve ("CSRV"), an on-line service, which has had difficulties
in competing for customers. CSRV plans to retrench to its core users and is
expected to be spun-off from H&R Block once a turnaround is completed. The
company's main tax preparation business is solid as evidenced by its net cash
position, customer retention levels and pricing power of its services. We
believe this stock has outstanding value.

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KLM Royal Dutch Airlines -- This Dutch-based airline has formed a global hub and
spoke network with partner Northwest Airlines. While Europe's deregulatory
climate remains uncertain, KLM is trading at a very low earnings multiple and
should represent a good value opportunity.

In closing, we would like to thank you for your investment in The Travelers
Series Trust Portfolios. We look forward to continuing to help you achieve your
financial goals.

Sincerely,

/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman

January 15, 1997

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SCHEDULES OF INVESTMENTS DECEMBER 31, 1996

TRAVELERS QUALITY BOND PORTFOLIO

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 67.9%
$1,725,000 AAA U.S. Treasury Notes, 6.375% due 5/15/99............................... $1,740,801
1,775,000 AAA U.S. Treasury Notes, 6.500% due 8/31/01............................... 1,795,341
- -----------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost -- $3,482,427) 3,536,142
- -----------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 22.7%
- -----------------------------------------------------------------------------------------------------------
BROADCASTING -- 4.4%
200,000 BBB Continental Cablevision, Inc., Sr. Sub. Debentures, 11.000% due
6/1/07................................................................ 227,750
- -----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.1%
225,000 AA+ Hewlett-Packard Finance, 6.500% due 12/30/99.......................... 227,109
250,000 A+ New Plan Realty Trust, Medium-Term Notes, 5.950% due 11/2/26.......... 249,688
- -----------------------------------------------------------------------------------------------------------
476,797
- -----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 9.2%
250,000 AAA BellSouth Capital Funding Corp., Debentures, 6.040% due 11/15/26...... 247,813
225,000 A MCI Communications Corp., Sr. Notes, 7.125% due 6/15/27............... 233,719
- -----------------------------------------------------------------------------------------------------------
481,532
- -----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $1,191,777)............................ 1,186,079
- -----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.4%
489,000 Citibank, Inc., 6.817% due 1/2/97: Proceeds at maturity -- $489,185;
(Fully collateralized by U.S. Treasury Notes, 5.750% due 12/31/98;
Market value -- $499,375) (Cost -- $489,000).......................... 489,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $5,163,204*)....................... $5,211,221
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Aggregate cost for Federal income tax purposes is substantially the same.

See page 25 for definition of ratings.

SEE NOTES TO FINANCIAL STATEMENTS.

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SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

LAZARD INTERNATIONAL STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
STOCKS -- 100.0%
- ---------------------------------------------------------------------------------------------------------
AUSTRALIA -- 2.8%
5,934 Coles Myer Ltd................................................................. $ 24,415
16,000 Westpac Banking Corp. Ltd...................................................... 90,995
- ---------------------------------------------------------------------------------------------------------
115,410
- ---------------------------------------------------------------------------------------------------------
DENMARK -- 1.1%
900 Unidanmark A/S Class A Shares.................................................. 46,534
- ---------------------------------------------------------------------------------------------------------
FINLAND -- 1.0%
2,100 UPM-Kymmene Corp.+............................................................. 43,968
- ---------------------------------------------------------------------------------------------------------
FRANCE -- 15.1%
300 Accor S.A...................................................................... 37,913
1,300 Alcatel Alsthom................................................................ 104,224
1,800 Banque Nationale de Paris...................................................... 69,524
600 Compagnie de Saint Gobain...................................................... 84,712
760 Compagnie Generale des Eaux.................................................... 93,999
1,000 Elf Aquitaine S.A.............................................................. 90,848
3,100 Rhone-Poulenc Class A Shares................................................... 105,484
550 Total S.A. Class B Shares...................................................... 44,645
- ---------------------------------------------------------------------------------------------------------
631,349
- ---------------------------------------------------------------------------------------------------------
GERMANY -- 13.3%
1,500 Daimler-Benz AG+............................................................... 102,686
1,700 Deutsche Bank AG............................................................... 79,203
1,500 Deutsche Telekom AG ADR+....................................................... 30,563
3,100 Hoeschst AG.................................................................... 143,424
130 Mannesmann AG.................................................................. 55,860
400 Metro AG+...................................................................... 31,276
220 Thyssen AG..................................................................... 38,958
1,300 VEBA AG........................................................................ 74,654
- ---------------------------------------------------------------------------------------------------------
556,624
- ---------------------------------------------------------------------------------------------------------
HONG KONG -- 3.4%
4,473 HSBC Holdings PLC.............................................................. 95,705
5,000 Swire Pacific Ltd. ............................................................ 47,672
- ---------------------------------------------------------------------------------------------------------
143,377
- ---------------------------------------------------------------------------------------------------------
ITALY -- 3.2%
8,500 Ente Nazionale Idrocarburi S.p.A. ............................................. 43,621
7,700 Fiat S.p.A. ................................................................... 23,148
29,000 Fiat S.p.A. Privilizio ........................................................ 47,777
13,300 Istituto Nationale delle Assicurazioni ........................................ 17,485
- ---------------------------------------------------------------------------------------------------------
132,031
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

9
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SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

LAZARD INTERNATIONAL STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
JAPAN -- 23.1%
2,000 Dai Nippon Printing Co. Ltd.................................................... $ 34,979
3,000 Honda Motor Co. Ltd............................................................ 85,552
4,000 Matsushita Electric Industrial Co. Ltd......................................... 65,133
10,000 Mitsubishi Heavy Industrial Ltd................................................ 79,263
3,000 Mitsui Marine and Fire Insurance Co. Ltd....................................... 16,102
1,000 Nintendo Corp. Ltd............................................................. 71,422
15,000 NKK Corp.+..................................................................... 33,730
2,000 Omron Corp..................................................................... 37,564
1,000 Orix Corp...................................................................... 41,527
700 Promise Co. Ltd................................................................ 34,376
8,000 Ricoh Co. Ltd.................................................................. 91,669
1,000 Rohm Co........................................................................ 65,478
5,000 Sekisui Chemical Co............................................................ 50,401
2,000 Sony Corp...................................................................... 130,783
7,000 Sumitomo Trust & Banking....................................................... 69,958
2,000 Toyota Motor Corp.............................................................. 57,379
- ---------------------------------------------------------------------------------------------------------
965,316
- ---------------------------------------------------------------------------------------------------------
NETHERLANDS -- 3.5%
250 Heineken N.V................................................................... 44,196
600 Royal Dutch Petroleum Co. New York Registered Shares........................... 102,450
- ---------------------------------------------------------------------------------------------------------
146,646
- ---------------------------------------------------------------------------------------------------------
NEW ZEALAND -- 0.4%
7,600 Lion Nathan Ltd................................................................ 18,205
- ---------------------------------------------------------------------------------------------------------
SPAIN -- 2.4%
1,400 Empresa Nacional de Electicidad S.A............................................ 99,450
- ---------------------------------------------------------------------------------------------------------
SWEDEN -- 3.7%
900 Astra AB Class B Shares........................................................ 43,366
800 Electrolux AB Class B Shares................................................... 46,397
2,300 Svenska Handelsbanken Class A Shares........................................... 66,022
- ---------------------------------------------------------------------------------------------------------
155,785
- ---------------------------------------------------------------------------------------------------------
SWITZERLAND -- 6.6%
20 Baloise Holding Ltd............................................................ 40,066
60 Elektrowatt AG Class B Shares.................................................. 23,817
75 Nestle SA...................................................................... 80,261
74 Novartis AG+................................................................... 85,243
20 SGS Societe Generale de Surveillance Holding SA Class B Shares................. 49,002
- ---------------------------------------------------------------------------------------------------------
278,389
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

10
<PAGE> 236

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

LAZARD INTERNATIONAL STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
UNITED KINGDOM -- 20.4%
6,900 Allied Domecq PLC.............................................................. $ 53,903
5,800 B.A.T. Industries PLC.......................................................... 48,089
6,000 British Aerospace PLC.......................................................... 131,428
15,400 BTR PLC........................................................................ 74,846
9,698 Cadbury Schweppes PLC.......................................................... 81,736
6,800 General Electric Co. PLC....................................................... 44,453
10,900 Grand Metropolitan PLC......................................................... 85,618
8,200 Mirror Group PLC............................................................... 30,240
10,200 National Power PLC............................................................. 85,356
5,300 Rank Group PLC................................................................. 39,499
6,200 Redland PLC.................................................................... 38,887
37,300 Sears PLC...................................................................... 60,640
3,300 Unilever PLC................................................................... 79,994
- ---------------------------------------------------------------------------------------------------------
854,689
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $3,876,736*)................................ $4,187,773
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

11
<PAGE> 237

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MFS EMERGING GROWTH PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 73.9%
- ---------------------------------------------------------------------------------------------------------
AEROSPACE -- 0.1%
400 Gulfstream Aerospace Corp.+.................................................. $ 9,701
- ---------------------------------------------------------------------------------------------------------
APPAREL & TEXTILES -- 0.6%
650 Fila Holding S.p.A. ADR+..................................................... 37,781
350 Gucci Group N.V. New York Registered Shares.................................. 22,356
350 Nine West Group Inc.+........................................................ 16,231
- ---------------------------------------------------------------------------------------------------------
76,368
- ---------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.0%
100 United Auto Group Inc.+...................................................... 2,575
- ---------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.0%
2,400 Biochem Pharmaceuticals, Inc.+............................................... 120,600
- ---------------------------------------------------------------------------------------------------------
BUSINESS MACHINES -- 2.1%
3,800 Affiliated Computer Services Inc.+........................................... 113,050
5,950 Sun Microsystems, Inc.+...................................................... 152,841
- ---------------------------------------------------------------------------------------------------------
265,891
- ---------------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 11.7%
100 Abacus Direct Corp.+......................................................... 1,875
5,900 Accustaff Inc.+.............................................................. 124,638
4,100 ADT Limited+................................................................. 93,788
1,400 Alco Standard Corp. ......................................................... 72,275
325 BISYS Group Inc.+............................................................ 12,045
1,450 Computer Sciences Corp.+..................................................... 119,081
6,200 CUC International Inc.+...................................................... 147,250
3,600 Danka Business Systems PLC ADR .............................................. 127,350
3,300 DST Systems Inc.+............................................................ 103,538
3,400 Employee Solutions Inc.+..................................................... 69,700
700 Equity Corp. International+.................................................. 14,000
300 FIserv Inc.+................................................................. 11,025
100 Forrester Research Inc.+..................................................... 2,575
100 Lason Inc.+.................................................................. 2,050
7,050 Learning Tree International Inc.+............................................ 207,975
1,100 Loewen Group Inc. ........................................................... 43,038
100 Memberworks Inc.+............................................................ 1,525
100 Nu Skin Asia Pacific Inc.+................................................... 3,088
300 Sabre Group Holdings Inc.+................................................... 8,363
100 Superior Consultant Holdings Corp.+.......................................... 2,475
5,800 Technology Solutions Co.+.................................................... 240,700
1,100 Transaction Systems Architects, Inc.+........................................ 36,575
- ---------------------------------------------------------------------------------------------------------
1,444,929
- ---------------------------------------------------------------------------------------------------------
CHEMICALS -- 0.3%
600 BetzDearborn Inc. ........................................................... 35,100
- ---------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE-PC -- 3.1%
25 Autodesk Inc................................................................. 700
500 Business Objects S.A. ADR+................................................... 6,750
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 238

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MFS EMERGING GROWTH PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMPUTER SOFTWARE-PC -- 3.1% (CONTINUED)
100 Cybermedia Inc.+............................................................. $ 1,575
3,760 First Data Corp.............................................................. 137,240
2,900 Microsoft Corp.+............................................................. 239,613
- ---------------------------------------------------------------------------------------------------------
385,878
- ---------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE-SYSTEMS -- 16.0%
200 Adobe Systems Inc............................................................ 7,475
100 Aurum Software Inc.+......................................................... 2,313
12,000 BMC Software Inc.+........................................................... 496,500
600 Cadence Design Systems, Inc.+................................................ 23,850
7,935 Computer Associates International, Inc....................................... 394,766
3,925 Compuware Corp.+............................................................. 196,741
500 Control Data Systems Inc.+................................................... 11,000
100 Document Sciences Corp.+..................................................... 988
100 Infinity Financial Technology, Inc.+......................................... 1,725
1,200 Informix Corp.+.............................................................. 24,450
100 Ingram Micro Inc.+........................................................... 2,300
100 Intelligroup Inc.+........................................................... 1,100
300 Netscape Communications Corp.+............................................... 17,063
12,400 Oracle Corp.+................................................................ 517,700
2,200 Parametric Technology, Co.+.................................................. 113,025
300 Sap Aktiengesellschaft ADR................................................... 13,650
300 Saville Systems PLC ADR+..................................................... 12,188
100 Seachange International, Inc.+............................................... 2,550
100 Select Software Tools Ltd. ADR+.............................................. 1,825
1,600 Sybase Inc.+................................................................. 26,700
1,100 Synopsys Inc.+............................................................... 50,875
600 System Software Associates, Inc.+............................................ 6,375
600 USCS International Inc.+..................................................... 10,125
425 Viasoft Inc.+................................................................ 20,081
1,400 Xionics Document Technology, Inc.+........................................... 17,500
- ---------------------------------------------------------------------------------------------------------
1,972,865
- ---------------------------------------------------------------------------------------------------------
CONSTRUCTION SERVICES -- 0.5%
2,600 Shaw Group Inc.+............................................................. 60,775
- ---------------------------------------------------------------------------------------------------------
CONSUMER GOODS & SERVICES -- 2.4%
5,600 Carson Inc.+................................................................. 77,700
400 Service Corp. International.................................................. 11,200
3,900 Tyco International Ltd. ..................................................... 206,213
- ---------------------------------------------------------------------------------------------------------
295,113
- ---------------------------------------------------------------------------------------------------------
ELECTRONICS -- 6.8%
800 Actel Corp.+................................................................. 19,000
2,600 Altera Corp.+................................................................ 188,988
2,800 Analog Devices Inc.+......................................................... 94,850
1,400 Atmel Corp.+................................................................. 46,375
400 Intel Corp. ................................................................. 52,375
1,400 Lattice Semiconductor Corp.+................................................. 64,400
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

13
<PAGE> 239

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MFS EMERGING GROWTH PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
ELECTRONICS -- 6.8% (CONTINUED)
1,975 Linear Technology Corp....................................................... $ 86,653
2,300 LSI Logic Corp.+............................................................. 61,525
1,100 Micron Electronics Inc.+..................................................... 21,381
100 Novellus Systems Inc.+....................................................... 5,419
2,000 Teradyne Inc.+............................................................... 48,750
600 Ultratech Stepper Inc.+...................................................... 14,250
2,400 VLSI Technology, Inc.+....................................................... 57,300
2,100 Xilinx Inc.+................................................................. 77,306
- ---------------------------------------------------------------------------------------------------------
838,572
- ---------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 1.1%
1,200 Cox Radio Inc.+.............................................................. 21,000
200 Infinity Broadcasting Corp.+................................................. 6,725
1,950 LIN Television Corp.+........................................................ 82,388
100 Metro Networks Inc.+......................................................... 2,525
300 Sinclair Broadcasting Group Inc.+............................................ 7,800
300 Univision Communications Inc.+............................................... 11,100
- ---------------------------------------------------------------------------------------------------------
131,538
- ---------------------------------------------------------------------------------------------------------
FINANCIAL INSTITUTIONS -- 1.5%
1,600 Associates First Capital Corp. .............................................. 70,600
500 Dean Witter Discover and Co. ................................................ 33,125
100 Delta Financial Corp.+....................................................... 1,800
100 Everen Capital Corp.......................................................... 2,238
725 Franklin Resources Inc....................................................... 49,572
700 MBNA Corp.................................................................... 29,050
- ---------------------------------------------------------------------------------------------------------
186,385
- ---------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE -- 0.6%
1,300 Earthgrains Co. ............................................................. 67,925
- ---------------------------------------------------------------------------------------------------------
MACHINERY -- 0.2%
2,100 SI Handling Systems Inc...................................................... 31,631
- ---------------------------------------------------------------------------------------------------------
MEDICAL & HEALTH SERVICES -- 6.8%
100 American Medserve Corp.+..................................................... 1,550
100 Applied Analytical Industries Inc.+.......................................... 1,913
25 Foundation Health Corp.+..................................................... 794
800 Healthsource Inc.+........................................................... 10,500
4,650 Healthsouth Corp.+........................................................... 179,606
2,000 Pacificare Health System Inc.+............................................... 170,500
1,000 St. Jude Medical Inc.+....................................................... 42,625
100 Transkaryotic Therapies Inc.+................................................ 1,850
9,400 United Healthcare Corp....................................................... 423,000
200 Ventritex Inc.+.............................................................. 4,925
- ---------------------------------------------------------------------------------------------------------
837,263
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

14
<PAGE> 240

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MFS EMERGING GROWTH PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
OIL SERVICES -- 0.0%
100 National Oilwell Inc.+....................................................... $ 3,075
100 Offshore Energy Development Corp.+........................................... 1,525
- ---------------------------------------------------------------------------------------------------------
4,600
- ---------------------------------------------------------------------------------------------------------
OIL -- 0.4%
1,000 Barrett Resources Corp.+..................................................... 42,625
100 Seacor Holdings Inc.+........................................................ 6,300
300 Titan Exploration Inc.+...................................................... 3,600
- ---------------------------------------------------------------------------------------------------------
52,525
- ---------------------------------------------------------------------------------------------------------
POLLUTION CONTROL -- 0.6%
2,220 U.S.A. Waste Services Inc.+.................................................. 70,763
- ---------------------------------------------------------------------------------------------------------
RAILROAD -- 0.8%
1,300 Kansas City Southern Industries Inc. ........................................ 58,500
900 Wisconsin Central Transportation Corp.+...................................... 35,663
- ---------------------------------------------------------------------------------------------------------
94,163
- ---------------------------------------------------------------------------------------------------------
RESTAURANTS & LODGING -- 4.2%
300 Applebees International Inc.................................................. 8,250
8,520 HFS Inc.+.................................................................... 509,070
100 PJ America Inc.+............................................................. 1,800
200 Promus Hotel Corp.+.......................................................... 5,925
- ---------------------------------------------------------------------------------------------------------
525,045
- ---------------------------------------------------------------------------------------------------------
STORES -- 2.3%
1,700 Corporate Express Inc.+...................................................... 50,044
1,600 General Nutrition Co.+....................................................... 27,000
100 Hot Topic Inc.+.............................................................. 1,975
300 Linens 'N Things Inc.+....................................................... 5,888
100 Mazel Stores Inc.+........................................................... 2,250
2,500 Office Depot Inc.+........................................................... 44,375
100 Stage Stores Inc.+........................................................... 1,825
8,150 Staples Inc.+................................................................ 147,209
100 Wild Oats Markets Inc.+...................................................... 1,850
- ---------------------------------------------------------------------------------------------------------
282,416
- ---------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 10.8%
100 Advanced Fibre Communications+............................................... 5,563
8,500 Cabletron Systems Inc.+...................................................... 282,625
6,875 Cisco Systems Inc.+.......................................................... 437,422
2,100 Glenayre Technologies Inc.+.................................................. 45,281
100 LCC International Inc.+...................................................... 1,850
1,275 Lucent Technologies Inc...................................................... 58,969
310 Premisys Communications Inc.+................................................ 10,463
700 Tel-Save Holdings Inc.+...................................................... 20,300
2,600 3Com Corp.+.................................................................. 190,775
100 Trusted Information Systems Inc.+............................................ 1,075
100 West Teleservices Corp.+..................................................... 2,275
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

15
<PAGE> 241

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

MFS EMERGING GROWTH PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
TELECOMMUNICATIONS -- 10.8% (CONTINUED)
10,500 Worldcom Inc.+............................................................... $ 273,647
100 Xlconnect Solutions Inc.+.................................................... 2,875
- ---------------------------------------------------------------------------------------------------------
1,333,120
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $9,165,947)..................................... 9,125,741
- ---------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- 1.9%
- ---------------------------------------------------------------------------------------------------------
GERMANY -- 1.1%
250 Adidas AG.................................................................... 21,575
850 SAP AG, Preferred............................................................ 116,819
- ---------------------------------------------------------------------------------------------------------
138,394
- ---------------------------------------------------------------------------------------------------------
HONG KONG -- 0.1%
10,000 Guangnan Holdings............................................................ 8,597
- ---------------------------------------------------------------------------------------------------------
PHILIPPINES -- 0.1%
13,700 Philippino Telephone......................................................... 11,590
- ---------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- 0.6%
20,300 Pace Micro Technology........................................................ 80,075
- ---------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS (Cost -- $256,197)...................................... 238,656
- ---------------------------------------------------------------------------------------------------------
WARRANTS -- 2.3%
- ---------------------------------------------------------------------------------------------------------
ELECTRONICS -- 2.3%
3,025 Intel Warrants, Exercise @ $41.75, Expire 3/14/1998
(Cost -- $240,533)........................................................... 279,056
- ---------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS -- 21.9%
$2,700,000 Federal Home Loan Mortgage Corp., 5.250% due 1/2/97
(Cost -- $2,699,606)......................................................... $ 2,699,606
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $12,362,283*)............................. $12,343,059
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

16
<PAGE> 242

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS -- 97.9%
- -----------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 3.0%
$ 50,000 B Blue Bird Body Co., Sr. Sub. Note, 10.750% due 11/15/06@............. $ 52,250
100,000 B Collins & Aikman Products Co., Sr. Sub. Note, 11.500% due 4/15/06.... 109,250
- -----------------------------------------------------------------------------------------------------------
161,500
- -----------------------------------------------------------------------------------------------------------
BANKING -- 2.0%
100,000 Ba3* First Nationwide Escrow Corp., Sr. Sub. Note, 10.625% due 10/1/03@... 108,000
- -----------------------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO -- 1.0%
50,000 B+ Delta Beverage Group Inc., Sr. Note, 9.750% due 12/15/03@............ 51,250
- -----------------------------------------------------------------------------------------------------------
BROADCAST RADIO & TV -- 6.8%
50,000 B- Chancellor Broadcasting Co., Sr. Sub. Note, 9.375% due 10/1/04....... 50,875
100,000 B- SFX Broadcasting, Inc., Sr. Sub. Note, 10.750% due 5/15/06........... 105,750
100,000 B Sinclair Broadcast Group, Sr. Sub. Note, 10.000% due 9/30/05......... 102,500
100,000 B- Sullivan Broadcast Holdings, Inc., Sr. Sub. Note, 10.250% due
12/15/05........................................................... 101,000
- -----------------------------------------------------------------------------------------------------------
360,125
- -----------------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES -- 2.1%
100,000 B+ Knoll, Inc., Sr. Sub. Note, 10.875% due 3/15/06...................... 110,750
- -----------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 10.4%
50,000 B2* Australis Holdings Pty Ltd., Unit, step bond to yield 15.000% due
11/1/02............................................................ 29,500
100,000 B Cablevision Systems Co., Sr. Sub. Debenture, 9.875% due 2/15/13...... 99,000
100,000 B Charter Communications Southeast, L.P., Sr. Note, 11.250% due
3/15/06............................................................ 104,750
100,000 B- Diamond Cable Communications PLC, Sr. Discount Note, step bond to
yield 11.429% due 12/15/05......................................... 71,500
100,000 B International Cabletel, Inc., Sr. Note, step bond to yield 11.941%
due 2/1/06......................................................... 68,000
100,000 BB+ Rogers Cablesystems Ltd., Sr. Secured 2nd Priority Note, 10.000%
due 3/15/05........................................................ 107,125
100,000 BB Telewest PLC, Sr. Discount Debenture, step bond to yield 11.504% due
10/1/07............................................................ 69,750
- -----------------------------------------------------------------------------------------------------------
549,625
- -----------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 5.2%
100,000 B- Astor Corp., Sr. Sub. Note, 10.500% due 10/15/06@.................... 103,250
100,000 B3* Crain Industries Inc., Sr. Sub. Note, 13.500% due 8/15/05............ 113,250
100,000 B+ Sterling Chemicals Holdings Inc., Sr. Discount Note, step bond to
yield 12.485% due 8/15/08.......................................... 58,500
- -----------------------------------------------------------------------------------------------------------
275,000
- -----------------------------------------------------------------------------------------------------------
CLOTHING & TEXTILES -- 1.9%
100,000 B+ Westpoint Stevens, Inc., Sr. Sub. Debenture, 9.375% due 12/15/05..... 103,000
- -----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 4.5%
100,000 BB- American Safety Razor Co., Sr. Note, 9.875% due 8/1/05............... 106,125
50,000 NR ICON Fitness Corp., Sr. Discount Note, step bond to yield 14.000% due
11/15/06........................................................... 26,250
100,000 B Simmons Co., Sr. Sub. Note, 10.750% due 4/15/06...................... 104,750
- -----------------------------------------------------------------------------------------------------------
237,125
- -----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

17
<PAGE> 243

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C>
CONTAINER & GLASS PRODUCTS -- 3.1%
$ 100,000 BB Owens Illinois, Inc., Sr. Amortizing Debenture, 11.000% due
12/1/03............................................................ $ 111,750
50,000 B U.S. Can Corp., Sr. Sub. Note, 10.125% due 10/15/06@................. 52,625
- -----------------------------------------------------------------------------------------------------------
164,375
- -----------------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES & EQUIPMENT -- 1.0%
50,000 B+ Allied Waste North America, Inc., Sr. Sub. Note, 10.250% due
12/1/06@........................................................... 52,750
- -----------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS -- 4.1%
100,000 B1* Ralph's Grocery Co., Sr. Note, 10.450% due 6/15/04................... 106,500
100,000 B- Smith's Food & Drug Centers, Inc., Sr. Sub. Note, 11.250% due
5/15/07............................................................ 111,000
- -----------------------------------------------------------------------------------------------------------
217,500
- -----------------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 3.1%
50,000 B2* International Home Foods Inc., Sr. Sub. Note, 10.375% due 11/1/06@... 52,000
100,000 B2* Van de Kamp, Inc., Sr. Sub. Note, 12.000% due 9/15/05................ 110,750
- -----------------------------------------------------------------------------------------------------------
162,750
- -----------------------------------------------------------------------------------------------------------
FOREST PRODUCTS -- 2.9%
100,000 B Four M Corp., Sr. Secured Note, 12.000% due 6/1/06................... 105,500
50,000 B- Riverwood International Corp., Sr. Sub. Note, 10.875% due 4/1/08..... 46,250
- -----------------------------------------------------------------------------------------------------------
151,750
- -----------------------------------------------------------------------------------------------------------
HEALTHCARE -- 4.1%
100,000 B Dade International, Inc., Sr. Sub. Note, 11.125% due 5/1/06.......... 108,250
100,000 Ba3* Tenet Healthcare Corp., Sr. Sub. Note, 10.125% due 3/1/05............ 110,625
- -----------------------------------------------------------------------------------------------------------
218,875
- -----------------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & CASINOS -- 2.0%
100,000 B- Courtyard By Marriott II L.P., Sr. Note, 10.750% due 2/1/08.......... 106,250
- -----------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- 5.0%
100,000 B2* AMF Group Inc., Sr. Discount Note, step bond to yield 11.960% due
3/15/06............................................................ 66,250
100,000 B Cobblestone Golf Group Inc., Sr. Note, 11.500% due 6/1/03............ 104,500
100,000 B Six Flags Theme Parks, Sr. Sub. Discount Note, step bond to yield
12.500% due 6/15/05................................................ 94,125
- -----------------------------------------------------------------------------------------------------------
264,875
- -----------------------------------------------------------------------------------------------------------
MACHINERY & EQUIPMENT -- 3.0%
50,000 B- Alvey Systems Inc., Sr. Sub. Note, 11.375% due 1/31/03............... 52,750
100,000 B3* Tokheim Corp., Sr. Sub. Note, 11.500% due 8/1/06@.................... 106,000
- -----------------------------------------------------------------------------------------------------------
158,750
- -----------------------------------------------------------------------------------------------------------
METALS & MINING -- 1.9%
100,000 B- Royal Oak Mines, Inc., Sr. Sub. Note, 11.000% due 8/15/06............ 100,750
- -----------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 3.4%
150,000 B Affiliated Newspaper Investments, Inc., Sr. Discount Note, step bond
to yield 12.262% due 7/1/06........................................ 124,875
50,000 B- Peterson Publishing Co., L.L.C., Sr. Sub. Note, 11.125% due
11/15/06........................................................... 52,500
- -----------------------------------------------------------------------------------------------------------
177,375
- -----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

18
<PAGE> 244

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C>
SERVICES -- 2.0%
$ 50,000 B* Intertek Finance PLC, Sr. Sub. Note, 10.250% due 11/1/06@............ $ 51,875
50,000 B+ Ryder TRS, Inc., Sr. Sub. Note, 10.000% due 12/1/06@................. 52,000
- -----------------------------------------------------------------------------------------------------------
103,875
- -----------------------------------------------------------------------------------------------------------
STEEL -- 3.8%
100,000 B EnviroSource, Sr. Note, 9.750% due 6/15/03........................... 93,125
100,000 B GS Technologies Operating Co., Inc., Sr. Note, 12.250% due 10/1/05... 105,250
- -----------------------------------------------------------------------------------------------------------
198,375
- -----------------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION -- 6.9%
100,000 BB Gearbulk Holding Ltd., Sr. Note, 11.250% due 12/1/04................. 110,250
50,000 B1* Statia Terminals, 1st Mortgage Note, 11.750% due 11/15/03@........... 52,000
100,000 Ba2* Stena AB, Sr. Note, 10.500% due 12/15/05............................. 107,750
100,000 B Trism, Inc., Sr. Sub. Note, 10.750% due 12/15/00..................... 96,250
- -----------------------------------------------------------------------------------------------------------
366,250
- -----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- 11.7%
100,000 NR Brooks Fiber Properties, Inc. Sr. Discount Note, step bond to yield
11.524% due 3/1/06................................................. 67,000
100,000 NR Millicom International Cellular, S.A., Sr. Sub. Discount Note, step
bond to yield 13.270% due 6/1/06................................... 62,000
100,000 B3* Nextel Communications, Inc., Sr. Discount Note, step bond to yield
13.986% due 8/15/04................................................ 68,250
50,000 B2* PhoneTel Technologies, Inc., Sr. Note, 12.000% due 12/15/06.......... 51,875
100,000 CCC+ Sygnet Wireless, Inc., Sr. Note, 11.500% due 10/1/06................. 103,750
100,000 B1* Teleport Communications Group, Inc., Sr. Discount Note, step bond to
yield 10.828% due 7/1/07........................................... 69,125
100,000 B2* U.S.A. Mobile Communications Inc., Sr. Note, 9.500% due 2/1/04....... 95,375
100,000 B+ Vanguard Cellular Systems Inc., Debenture, 9.375% due 4/15/06........ 100,750
- -----------------------------------------------------------------------------------------------------------
618,125
- -----------------------------------------------------------------------------------------------------------
UTILITIES -- 3.0%
100,000 BB California Energy Co., Inc., Sr. Discount Note, step bond to yield
9.369% due 1/15/04................................................. 105,750
50,000 BB- El Paso Electric Co., 1st Mortgage Note, 9.400% due 5/1/11........... 53,250
- -----------------------------------------------------------------------------------------------------------
159,000
- -----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $4,972,025) 5,178,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

19
<PAGE> 245

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C>
NON-CONVERTIBLE PREFERRED STOCK -- 2.0%
TELECOMMUNICATIONS & CELLULAR -- 2.0%
$ 1,029 K-III Communications Corp., Series B, Payment-in-kind
(Cost -- $104,127)................................................. $ 103,935
- -----------------------------------------------------------------------------------------------------------
WARRANTS -- 0.1%
CHEMICALS & PLASTICS -- 0.1%
100 Sterling Chemicals Holdings, Inc., Expires 8/15/08 (Cost -- $0)...... 3,500
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $5,076,152**)..................... $5,285,435
- -----------------------------------------------------------------------------------------------------------
</TABLE>

@ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.

** Aggregate cost for Federal income tax purposes is substantially the same.

See page 25 for definition of ratings.

SEE NOTES TO FINANCIAL STATEMENTS.

20
<PAGE> 246

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 99.2%
- ---------------------------------------------------------------------------------------------------------
AEROSPACE -- 4.5%
33 Boeing Co. ..................................................................... $ 3,510
328 Lockheed Martin Corp. .......................................................... 30,023
800 Rockwell International Corp. ................................................... 48,700
700 Textron Inc. ................................................................... 65,975
- ---------------------------------------------------------------------------------------------------------
148,208
- ---------------------------------------------------------------------------------------------------------
AIRLINES -- 1.2%
1,400 KLM Royal Dutch Airlines........................................................ 39,025
- ---------------------------------------------------------------------------------------------------------
APPAREL -- 1.0%
500 V.F. Corp. ..................................................................... 33,750
- ---------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.8%
500 General Motors Corp............................................................. 27,875
- ---------------------------------------------------------------------------------------------------------
BANKING -- 3.9%
600 Chase Manhattan Corp. .......................................................... 53,550
400 Citicorp........................................................................ 41,200
800 National City Corp. ............................................................ 35,900
- ---------------------------------------------------------------------------------------------------------
130,650
- ---------------------------------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.2%
339 Martin Marietta Materials....................................................... 7,882
- ---------------------------------------------------------------------------------------------------------
BUSINESS SYSTEMS -- 1.3%
1,000 Electronic Data Systems......................................................... 43,250
- ---------------------------------------------------------------------------------------------------------
CHEMICALS -- 5.6%
700 BetzDearborn Inc. .............................................................. 40,950
400 E.I. du Pont de Nemours & Co. .................................................. 37,750
500 FMC Corp.+...................................................................... 35,063
700 Great Lakes Chemical Corp. ..................................................... 32,725
1,000 Morton International Inc. ...................................................... 40,750
- ---------------------------------------------------------------------------------------------------------
187,238
- ---------------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 4.8%
1,000 AT & T Corp. ................................................................... 43,500
700 GTE Corp. ...................................................................... 31,850
2,600 MCI Communications.............................................................. 84,988
- ---------------------------------------------------------------------------------------------------------
160,338
- ---------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.1%
400 Kimberly-Clark.................................................................. 38,100
- ---------------------------------------------------------------------------------------------------------
COSMETICS -- 1.0%
600 Avon Products................................................................... 34,275
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

21
<PAGE> 247

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
DRUGS -- 4.6%
800 American Home Products.......................................................... 46,900
600 Bristol Myers Squibb............................................................ 65,250
500 Merck & Co. Inc. ............................................................... 39,625
- ---------------------------------------------------------------------------------------------------------
151,775
- ---------------------------------------------------------------------------------------------------------
ENERGY -- 2.0%
1,600 Occidental Petroleum Corp. ..................................................... 37,400
1,200 TECO Energy..................................................................... 28,950
- ---------------------------------------------------------------------------------------------------------
66,350
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.8%
500 Dean Witter Discover and Co..................................................... 33,125
1,500 Federal National Mortgage Association........................................... 55,875
1,300 H & R Block Inc. ............................................................... 37,700
- ---------------------------------------------------------------------------------------------------------
126,700
- ---------------------------------------------------------------------------------------------------------
FOOD PROCESSING -- 3.3%
400 CPC International............................................................... 31,000
600 H.J. Heinz & Co. ............................................................... 21,450
2,300 IBP Inc. ....................................................................... 55,775
- ---------------------------------------------------------------------------------------------------------
108,225
- ---------------------------------------------------------------------------------------------------------
HOSPITAL SUPPLIES & SERVICES -- 2.6%
900 Abbott Laboratories............................................................. 45,675
900 United Healthcare............................................................... 40,500
- ---------------------------------------------------------------------------------------------------------
86,175
- ---------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.6%
2,300 Rubbermaid Inc. ................................................................ 52,325
- ---------------------------------------------------------------------------------------------------------
INDUSTRIAL CONTROLS -- 3.2%
600 Unilever N.V. New York Shares................................................... 105,150
- ---------------------------------------------------------------------------------------------------------
INSURANCE -- 7.5%
1,000 Allstate Corp. ................................................................. 57,875
600 Cigna Corp. .................................................................... 81,975
700 Marsh & McLennan Inc. .......................................................... 72,800
700 Providian Corp. ................................................................ 35,962
- ---------------------------------------------------------------------------------------------------------
248,612
- ---------------------------------------------------------------------------------------------------------
MEDIA GROUP -- 1.4%
600 Gannett Inc. ................................................................... 44,925
- ---------------------------------------------------------------------------------------------------------
MEDICAL -- 2.7%
1,700 Biomet Inc. .................................................................... 25,712
900 Columbia HCA Healthcare Corp. .................................................. 36,675
2,200 Healthsource Inc. .............................................................. 28,875
- ---------------------------------------------------------------------------------------------------------
91,262
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

22
<PAGE> 248

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
OIL & GAS -- 11.2%
1,100 Baker Hughes Inc. .............................................................. 37,950
900 Chevron Corp. .................................................................. 58,500
500 Exxon Corp. .................................................................... 49,000
200 Royal Dutch Petroleum New York Registered Shares................................ 34,150
600 Texaco.......................................................................... 58,875
1,538 Union Pacific Resources......................................................... 44,986
2,200 USX Marathon Group Inc. ........................................................ 52,525
500 Western Atlas Inc.+ ............................................................ 35,438
- ---------------------------------------------------------------------------------------------------------
371,424
- ---------------------------------------------------------------------------------------------------------
PHARMACEUTICAL -- 1.0%
500 Smithkline Beecham Inc. ........................................................ 34,000
- ---------------------------------------------------------------------------------------------------------
RETAIL -- 6.2%
1,300 Dayton-Hudson Corp. ............................................................ 51,025
1,200 Sears Roebuck & Co. ............................................................ 55,350
1,000 Tambrands, Inc.................................................................. 40,875
2,500 Walmart Corp.................................................................... 57,188
- ---------------------------------------------------------------------------------------------------------
204,438
- ---------------------------------------------------------------------------------------------------------
STEEL & IRON -- 1.9%
1,100 Allegheny Teledyne Inc.......................................................... 25,300
3,200 LTV Corp. ...................................................................... 38,000
- ---------------------------------------------------------------------------------------------------------
63,300
- ---------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 7.5%
900 AMP, Inc........................................................................ 34,537
1,200 C.R. Bard Inc................................................................... 33,600
300 Intel Corp. .................................................................... 39,281
500 General Electric Co. ........................................................... 49,438
600 General Motors Class H Shares................................................... 33,750
100 International Business Machines................................................. 15,100
324 Lucent Technologies Inc......................................................... 14,985
600 Raytheon........................................................................ 28,875
- ---------------------------------------------------------------------------------------------------------
249,566
- ---------------------------------------------------------------------------------------------------------
TOBACCO -- 4.2%
400 Loews Corp. .................................................................... 37,700
900 Philip Morris Co. .............................................................. 101,363
- ---------------------------------------------------------------------------------------------------------
139,063
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

23
<PAGE> 249

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

FEDERATED STOCK PORTFOLIO

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
UTILITIES -- 6.5%
1,000 CMS Energy Corp. ............................................................. $ 33,625
700 Columbia Gas Systems Inc. .................................................... 44,537
1,100 Enron Corp. .................................................................. 47,437
700 FPL Group..................................................................... 32,200
1,400 Pacific Gas & Electric Co. ................................................... 29,400
1,300 Southern Co. ................................................................. 29,413
- ---------------------------------------------------------------------------------------------------------
216,612
- ---------------------------------------------------------------------------------------------------------
VISION CARE -- 1.0%
900 Bausch & Lomb Inc. ........................................................... 31,500
- ---------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT -- 1.6%
2,000 Browning-Ferris Industries.................................................... 52,500
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost -- $2,957,604)...................................... 3,294,493
- ---------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.8%
FOODS -- 0.8%
700 Dole Food Co. (Cost -- $28,728)............................................... 25,112
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $2,986,332*)............................... $3,319,605
- ---------------------------------------------------------------------------------------------------------
</TABLE>

+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.

24
<PAGE> 250

- --------------------------------------------------------------------------------
BOND RATINGS

All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:

Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.

<TABLE>
<S> <C> <C>
AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's. 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 highest rated issue only in a 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 than debt in higher rated categories.
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, B and CCC -- Debt rated "BB" and "B" are regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB represents a lower degree of speculation than B, and
CCC the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
</TABLE>

Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Baa", where 1 is the highest and 3 the lowest rating within its
generic category.

<TABLE>
<S> <C> <C>
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or 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 that are rated "A" possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and therefore not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B -- Bonds that are rated "B" generally lack characteristics of desirable investments.
Assurance of interest and principal payment or of maintenance of other terms of the
contract over any long period of time may be small.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>

25
<PAGE> 251

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996

<TABLE>
<CAPTION>
LAZARD MFS
TRAVELERS INTERNATIONAL EMERGING FEDERATED FEDERATED
QUALITY BOND STOCK GROWTH HIGH YIELD STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments -- Cost............................. $5,163,204 $ 3,876,736 $12,362,283 $5,076,152 $2,986,332
Foreign currency -- Cost........................ -- 6,909 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Investments, at value........................... $5,211,221 $ 4,187,773 $12,343,059 $5,285,435 $3,319,605
Foreign currency, at value...................... -- 7,036 -- -- --
Cash............................................ 66 123,778 269,334 10,289 55,732
Dividends and interest receivable............... 66,124 7,415 1,233 90,286 6,592
Receivable for Fund shares sold................. -- 722 314,685 -- --
Receivable from affiliate....................... 15,875 24,115 26,170 18,561 21,039
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS.................................... 5,293,286 4,350,839 12,954,481 5,404,571 3,402,968
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased................ -- 6,430 -- -- --
Accrued expenses................................ 20,767 22,080 30,635 23,468 23,441
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES............................... 20,767 28,510 30,635 23,468 23,441
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................. $5,272,519 $ 4,322,329 $12,923,846 $5,381,103 $3,379,527
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital................................. $5,224,502 $ 4,009,241 $12,953,381 $5,170,633 $3,046,254
Undistributed net investment income............. -- 9,721 -- 1,187 --
Accumulated loss from security transactions
and foreign currencies....................... -- (7,700) (10,311) -- --
Net unrealized appreciation (depreciation) of
investments and foreign currencies........... 48,017 311,067 (19,224) 209,283 333,273
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................. $5,272,519 $ 4,322,329 $12,923,846 $5,381,103 $3,379,527
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING................................ 522,059 400,880 1,225,164 516,375 304,332
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE........................ $10.10 $10.78 $10.55 $10.42 $11.10
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>

26
<PAGE> 252

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TRAVELERS LAZARD MFS
QUALITY INTERNATIONAL EMERGING
BOND STOCK GROWTH
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................................. $110,570 $ 9,753 $ 20,837
Dividends................................................................. -- 21,160 32,401
Less: Foreign withholding tax............................................. -- (2,622) --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................................... 110,570 28,291 53,238
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Audit and legal........................................................... 14,000 14,000 14,000
Investment advisory fees (Note 2)......................................... 5,626 13,997 15,666
Shareholder & system service fees......................................... 2,600 3,397 5,000
Shareholder communications................................................ 2,000 1,180 6,000
Registration fees......................................................... 1,650 1,215 250
Pricing service fees...................................................... 1,500 2,822 1,500
Administration fees (Note 2).............................................. 1,043 1,031 1,253
Trustee's fees............................................................ 1,000 2,000 2,000
Custody fees.............................................................. 200 8,147 6,500
Other..................................................................... 1,000 900 1,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES............................................................ 30,619 48,689 53,169
Less: Expense reimbursement (Note 2)...................................... (17,570) (27,482) (33,326)
- --------------------------------------------------------------------------------------------------------------------------
NET EXPENSES.............................................................. 13,049 21,207 19,843
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME....................................................... 97,521 7,084 33,395
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES
(NOTE 3):
Realized Gain (Loss) From:
Securities transactions (excluding short-term securities).............. 31,374 (7,700) 2,110
Foreign currency transactions.......................................... -- 2,637 --
- --------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS).................................................. 31,374 (5,063) 2,110
- --------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments
and Foreign Currencies:
Beginning of period.................................................... -- -- --
End of period.......................................................... 48,017 311,067 (19,224)
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION).................... 48,017 311,067 (19,224)
- --------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES....................... 79,391 306,004 (17,114)
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................................... $176,912 $ 313,088 $ 16,281
- --------------------------------------------------------------------------------------------------------------------------

FEDERATED FEDERATED
HIGH YIELD STOCK
PORTFOLIO(1) PORTFOLIO(1)
- --------------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................................. $168,489 $ 3,116
Dividends................................................................. 2,877 24,691
Less: Foreign withholding tax............................................. -- (195)
- --------------------------------------------------------------------------------------------------------------------------

TOTAL INVESTMENT INCOME................................................... 171,366 27,612
- --------------------------------------------------------------------------------------------------------------------------

EXPENSES:
Audit and legal........................................................... 14,000 14,000
Investment advisory fees (Note 2)......................................... 11,448 6,901
Shareholder & system service fees......................................... 2,500 3,000
Shareholder communications................................................ 3,000 3,000
Registration fees......................................................... 1,500 950
Pricing service fees...................................................... 1,000 1,000
Administration fees (Note 2).............................................. 1,057 662
Trustee's fees............................................................ 2,000 2,000
Custody fees.............................................................. 1,000 1,000
Other..................................................................... 1,000 1,000
- --------------------------------------------------------------------------------------------------------------------------

TOTAL EXPENSES............................................................ 38,505 33,513
Less: Expense reimbursement (Note 2)...................................... (21,773) (23,023)
- --------------------------------------------------------------------------------------------------------------------------

NET EXPENSES.............................................................. 16,732 10,490
- --------------------------------------------------------------------------------------------------------------------------

NET INVESTMENT INCOME....................................................... 154,634 17,122
- --------------------------------------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES
(NOTE 3):
Realized Gain (Loss) From:
Securities transactions (excluding short-term securities).............. 16,573 29,045
Foreign currency transactions.......................................... -- --
- --------------------------------------------------------------------------------------------------------------------------

NET REALIZED GAIN (LOSS).................................................. 16,573 29,045
- --------------------------------------------------------------------------------------------------------------------------

Change in Net Unrealized Appreciation (Depreciation) of Investments
and Foreign Currencies:
Beginning of period.................................................... -- --
End of period.......................................................... 209,283 333,273
- --------------------------------------------------------------------------------------------------------------------------

INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION).................... 209,283 333,273
- --------------------------------------------------------------------------------------------------------------------------

NET GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES....................... 225,856 362,318
- --------------------------------------------------------------------------------------------------------------------------

INCREASE IN NET ASSETS FROM OPERATIONS...................................... $380,490 $379,440
- --------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.
(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.

SEE NOTES TO FINANCIAL STATEMENTS.

27
<PAGE> 253

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
LAZARD MFS
TRAVELERS INTERNATIONAL EMERGING FEDERATED FEDERATED
QUALITY BOND STOCK GROWTH HIGH YIELD STOCK
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................... $ 97,521 $ 7,084 $ 33,395 $ 154,634 $ 17,122
Net realized gain (loss)................... 31,374 (5,063) 2,110 16,573 29,045
Increase in net unrealized appreciation
(depreciation).......................... 48,017 311,067 (19,224) 209,283 333,273
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS..... 176,912 313,088 16,281 380,490 379,440
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... (97,521) -- (33,395) (153,447) (17,122)
Net realized gain.......................... (31,374) -- (12,421) (16,573) (29,045)
Capital.................................... -- -- (13,669) -- (1,834)
- ---------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS
TO SHAREHOLDERS......................... (128,895) -- (59,485) (170,020) (48,001)
- ---------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares........... 5,094,655 4,009,241 12,907,565 5,000,613 3,000,087
Net asset value of shares issued for
reinvestment of dividends............... 129,847 -- 59,485 170,020 48,001
Cost of shares reacquired.................. -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS............................ 5,224,502 4,009,241 12,967,050 5,170,633 3,048,088
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS....................... 5,272,519 4,322,329 12,923,846 5,381,103 3,379,527
NET ASSETS:
Beginning of period........................ -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*............................. $5,272,519 $ 4,322,329 $ 12,923,846 $5,381,103 $3,379,527
- ---------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment
income of: ................................ -- $9,721 -- $1,187 --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.
(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.

SEE NOTES TO FINANCIAL STATEMENTS.

28
<PAGE> 254

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The Travelers Quality Bond, Lazard International Stock, MFS Emerging
Growth, Federated High Yield and Federated Stock Portfolios ("Portfolio(s)") are
separate investment portfolios of The Travelers Series Trust ("Trust"). The
Trust is a Massachusetts business trust registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company and consists of these portfolios and eight other separate investment
portfolios: U.S. Government Securities, Social Awareness Stock, Utilities, Large
Cap, Equity Income, Zero Coupon Bond Fund Portfolio Series 1998, Zero Coupon
Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio Series 2005
Portfolios. Shares of the Trust are offered only to insurance company separate
accounts that fund certain variable annuity and variable life insurance
contracts. The financial statements and financial highlights for the other
portfolios are presented in separate annual reports.

The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing price on such
markets or, if there were no sales during the day, at current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
closing values of such securities on their respective exchanges, except that
when a significant occurrence exists subsequent to the time a value was so
established and it is likely to have significantly changed the value, then the
fair value of those securities will be determined by consideration of other
factors by or under the direction of the Board of Trustees; securities traded in
the over-the-counter market are valued on the basis of the bid price at the
close of business on each day; U.S. Government and Agency obligations are valued
at the mean between the last reported bid and ask prices; (c) securities
maturing within 60 days are valued at cost plus accreted discount and, or minus
amortized premium, which approximates market value; (d) securities that have a
maturity of 60 days or more are valued at prices based on market quotations for
securities of similar type, yield and maturity; (e) interest income, adjusted
for amortization of premium and accretion of discount, is recorded on the
accrual basis and dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities are recorded as soon as practical
after the Portfolios are informed of the ex-dividend date; (f) gains or losses
on the sale of securities are calculated by using the specific identification
method; (g) dividends and distributions to shareholders are recorded on the
ex-dividend date; (h) the accounting records of the Portfolios are maintained in
U.S. dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of exchange quoted on
the respective date that such transactions are recorded. Differences between
income and expense amounts recorded and collected or paid are adjusted when
reported by the custodian bank; (i) the Portfolios intend to comply with the
requirements of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
and (j) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.

In addition, the Lazard International Stock Portfolio may enter into
forward exchange contracts in order to hedge against foreign currency risk.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as an unrealized
gain or loss. Realized gains or losses are recognized when the contracts are
settled.

As of December 31, 1996, there were no open forward foreign currency
contracts.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS

Travelers Asset Management International Corporation ("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as investment manager and
advisor to the Travelers Quality Bond ("TQB"), Lazard International Stock
("LIS"), MFS Emerging Growth ("MEG"), Federated High Yield ("FHY") and Federated
Stock ("FSP") Portfolios. TQB, LIS, MEG, FHY and FSP each pays TAMIC an
investment management and advisory fee calculated at the annual rate of 0.3233%,
0.35%, 0.375%, 0.25% and 0.25%, respectively, of the average daily net assets.
This fee is calculated daily and paid monthly.

TAMIC has entered into sub-advisory agreements with Lazard Freres Asset
Management ("Lazard"), Massachusetts Financial Services ("MFS"), and Federated
Investment Counseling ("Federated"). Pursuant to each sub-advisory

29
<PAGE> 255

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

agreement, Lazard and MFS are responsible for the day-to-day portfolio
operations and investment decisions for LIS and MEG, respectively. Federated is
responsible for the day-to-day portfolio operations and investment decisions for
FHY and FSP. As a result the Portfolios pay the following fees calculated at an
annual rate:

- LIS pays Lazard 0.475% of the average daily net assets

- MEG pays MFS 0.375% of the average daily net assets

- FHY and FSP pay Federated 0.40% and 0.375%, respectively, of their
average daily net assets.
These fees are calculated daily and paid monthly.

Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Portfolios. The Portfolios pay Travelers Insurance an administration fee
calculated at an annual rate of 0.06% of its average daily net assets. Travelers
Insurance has entered into a sub-administrative services agreement with Smith
Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith Barney
Holdings Inc. ("SBH"). Travelers Insurance pays SBMFM, as sub-administrator, a
fee calculated at an annual rate of 0.06% of the average daily net assets of the
Portfolios. This fee is calculated daily and paid monthly.

For the period ended December 31, 1996, Travelers Insurance waived all of
its fees for the Portfolios, and agreed to reimburse TQB, LIS, MEG, FHY, and FSP
for expenses in the amounts of $10,901, $12,454, $16,407, $9,268, and $15,460,
respectively.

One Trustee and all officers of the Trust are employees of Travelers Group
Inc., or its subsidiaries.

3. INVESTMENTS

The aggregate costs of purchases and proceeds from sales of investments
(including maturities, but excluding short-term securities), during the period
ended December 31, 1996 were as follows:

<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Travelers Quality Bond Portfolio............................................. $ 6,364,236 $1,722,974
Lazard International Stock Portfolio......................................... 4,217,499 338,429
MFS Emerging Growth Portfolio................................................ 12,537,794 2,877,226
Federated High Yield Portfolio............................................... 6,217,322 1,187,938
Federated Stock Portfolio.................................................... 3,323,315 366,028
- ---------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1996, aggregate gross unrealized appreciation and
depreciation of investments were approximately as follows:

<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO APPRECIATION* DEPRECIATION* (DEPRECIATION)*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers Quality Bond Portfolio........................... $ 53,715 $ (5,698) $ 48,017
Lazard International Stock Portfolio....................... 419,792 (108,755) 311,037
MFS Emerging Growth Portfolio.............................. 419,270 (438,494) (19,224)
Federated High Yield Portfolio............................. 240,789 (31,506) 209,283
Federated Stock Portfolio.................................. 377,125 (43,852) 333,273
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Substantially the same for Federal income tax purposes.

4. REPURCHASE AGREEMENTS

The Portfolios purchase (and their custodians take possession of) U.S.
Government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to 102% of the repurchase price.

30
<PAGE> 256

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. FUTURES CONTRACTS

The LIS and MEG Portfolios may from time to time enter into futures
contracts.

Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the Schedule of Investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolio's basis in the contract. The Portfolios bear the market risk that
arises from changes in the value of the financial instruments and securities
indices (futures contracts) and the credit risk should a counterparty fail to
perform under such contracts.

As of December 31, 1996, the Portfolios had no open futures contracts.

6. OPTIONS CONTRACTS

The LIS, MEG and FHY Portfolios may from time to time enter into options
contracts.

Premiums paid when put or call options are purchased by the Portfolios,
represent investments, which are "marked-to-market" daily. When a purchased
option expires, the Portfolios will realize a loss in the amount of the premium
paid. When the Portfolios enter into closing sales transaction, the Portfolios
will realize a gain or loss depending on whether the proceeds from the closing
sales transactions are greater or less than the premium paid for the option.
When the Portfolio exercises a put option, it will realize a gain or loss from
the sale of the underlying security and the proceeds from such sale will be
increased by the premium originally paid. When the Portfolios exercise a call
option, the cost of the security which the Portfolios purchase upon exercise
will be increased by the premium originally paid.

As of December 31, 1996, the Portfolios had no open purchased call or put
option contracts.

When Portfolios write a covered call or put option, an amount equal to the
premium received by the Portfolios is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Portfolios
realize a gain equal to the amount of the premium received. When the Portfolios
enter into a closing purchase transaction, the Portfolios realize a gain (or
loss if the cost of the closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the cost of the security
sold will be increased by the premium originally received. When a put option is
exercised, the amount of the premium originally received will reduce the cost of
the security which the Portfolios purchased upon exercise. When written index
options are exercised, settlement is made in cash. The risk associated with
purchasing options is limited to the premium originally paid. The Portfolios
enter into options for hedging purposes. The risk in writing a covered call
option is that the Portfolios give up the opportunity to participate in any
increase in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Portfolios are exposed to the risk of a
loss if the market price of the underlying security declines.

During the year ended December 31, 1996, the Portfolios did not write any
options.

7. CAPITAL LOSS CARRYFORWARD

At December 31, 1996, LIS had, for Federal income tax purposes,
approximately $7,000 of capital loss carryforwards available to offset future
realized capital gains through 2004. To the extent that these carryforward
losses are used to offset capital gains, it is probable that the gains so offset
will not be distributed.

8. FOREIGN SECURITIES

Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in U.S. companies and the U.S. Government. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. Government.

31
<PAGE> 257

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest without par value. Transactions in shares of each
Portfolio were as follows:

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C>
TRAVELERS QUALITY BOND PORTFOLIO(1):
Shares sold..................................................................... 509,203
Shares issued on reinvestment................................................... 12,856
Shares redeemed................................................................. --
- ------------------------------------------------------------------------------------------------------
Net Increase.................................................................... 522,059
- ------------------------------------------------------------------------------------------------------
LAZARD INTERNATIONAL STOCK PORTFOLIO(2):
Shares sold..................................................................... 400,880
Shares issued on reinvestment................................................... --
Shares redeemed................................................................. --
- ------------------------------------------------------------------------------------------------------
Net Increase.................................................................... 400,880
- ------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH PORTFOLIO(1):
Shares sold..................................................................... 1,219,526
Shares issued on reinvestment................................................... 5,638
Shares redeemed................................................................. --
- ------------------------------------------------------------------------------------------------------
Net Increase.................................................................... 1,225,164
- ------------------------------------------------------------------------------------------------------
FEDERATED HIGH YIELD PORTFOLIO(1):
Shares sold..................................................................... 500,058
Shares issued on reinvestment................................................... 16,317
Shares redeemed................................................................. --
- ------------------------------------------------------------------------------------------------------
Net Increase.................................................................... 516,375
- ------------------------------------------------------------------------------------------------------
FEDERATED STOCK PORTFOLIO(1):
Shares sold..................................................................... 300,008
Shares issued on reinvestment................................................... 4,324
Shares redeemed................................................................. --
- ------------------------------------------------------------------------------------------------------
Net Increase.................................................................... 304,332
- ------------------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.

(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.

32
<PAGE> 258

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

For a share of beneficial interest outstanding throughout the period:

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

(1) For the period from August 30, 1996 (commencement of operations) to December
31, 1996.

(2) For the period from August 1, 1996 (commencement of operations) to December
31, 1996.

(3) The Travelers has waived all of its fees for the period ended December 31,
1996. In addition, The Travelers has agreed to reimburse the Travelers
Quality Bond Portfolio, Lazard International Stock Portfolio, MFS Emerging
Growth Portfolio, Federated High Yield Portfolio, and Federated Stock
Portfolio for $10,901, $12,454, $16,407, $9,268, and $15,460, respectively,
of the Portfolios' expenses for the period ended December 31, 1996. If such
fees were not waived or reimbursed, the per share effect on net investment
income and the expense ratios would have been as follows:

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

++ Total return is not annualized, as it may not be representative of the
total return for the year.

+ Annualized.

33
<PAGE> 259

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Trustees of
Travelers Series Trust:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Travelers Quality Bond, Lazard
International Stock, MFS Emerging Growth, Federated High Yield and Federated
Stock Portfolios ("Portfolios") of the Travelers Series Trust ("Trust") as of
December 31, 1996, and the related statements of operations, statements of
changes in net assets and financial highlights for the period from August 30,
1996 (commencement of operations) to December 31, 1996 with respect to the
Travelers Quality Bond, MFS Emerging Growth, Federated High Yield and Federated
Stock Portfolios and for the period from August 1, 1996 (commencement of
operations) to December 31, 1996 with respect to the Lazard International Stock
Portfolio. These financial statements and financial highlights are the
responsibility of the Trust's 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, 1996, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate auditing procedures.
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
Portfolios as of December 31, 1996, the results of their operations, the changes
in their net assets and their financial highlights for the period from August
30, 1996 to December 31, 1996 with respect to the Travelers Quality Bond, MFS
Emerging Growth, Federated High Yield and Federated Stock Portfolios and for the
period from August 1, 1996 to December 31, 1996 with respect to the Lazard
International Stock Portfolio, in conformity with generally accepted accounting
principles.

/s/ KPMG PEAT MARKWICK LLP

New York, New York
February 19, 1997
<PAGE> 260

Investment Advisers

THE TRAVELERS SERIES TRUST: TRAVELERS QUALITY BOND, LAZARD INTERNATIONAL STOCK,
MFS EMERGING GROWTH, FEDERATED HIGH YIELD AND FEDERATED STOCK PORTFOLIO

TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION

Hartford, Connecticut

Independent Auditors

KPMG PEAT MARWICK LLP

New York, New York

Custodian

PNC BANK, N.A.
THE CHASE MANHATTAN BANK, N.A.

This report is prepared for the general information of contractowners and is not
an offer of shares of The Travelers Series Trust: Travelers Quality Bond, Lazard
International Stock, MFS Emerging Growth, Federated High Yield and Federated
Stock Portfolio. It should not be used in connection with any offer except in
conjunction with the Prospectuses for the Variable Annuity and 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.

Series Trust (Annual) (12-96) Printed in U.S.A.
<PAGE> 261
THE TRAVELERS VARIABLE

PRODUCTS FUNDS

ANNUAL REPORTS
December 31, 1996

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

[TRAVELERSLIFE LOGO]

The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183

<PAGE> 262

TRAVELERS SERIES TRUST: ZERO COUPON BOND FUND PORTFOLIOS: SERIES 1998, 2000,
2005
- --------------------------------------------------------------------------------

DEAR SHAREHOLDER:

We are pleased to provide you with the annual report for The Travelers Series
Trust: Zero Coupon Bond Fund Portfolios: Series 1998, 2000, and 2005 for the
year ended December 31, 1996. In this letter, we briefly discuss general
economic and market conditions. In addition, more detailed comparisons showing
the growth of a hypothetical $10,000 invested in each Portfolio since inception
date can also be found in this report. A more detailed summary of performance
and current holdings for each Portfolio can be found in the appropriate sections
that follow in this report.

ECONOMIC REVIEW AND OUTLOOK

As 1996 began, the federal government found itself paralyzed by a prolonged
budget dispute. In the financial markets, investors were focused on signs of a
slowing economy. With two-year Treasury notes priced to yield less than the
federal funds rate, the bond market clearly expected the Federal Reserve Board
("Fed") to cut interest rates significantly. The Fed lowered the federal funds
rate by 0.25% in January, but strong employment growth over the next several
months sent the bond market into a tailspin reminiscent of 1994. Interest rates
hit their highest levels for the year in the June to September period as
investors prepared for the Fed to raise interest rates at their September
meeting.

The policy makers at the Fed decided to hold steady at their September meeting
and interest rates declined through the autumn as economic growth once again
slowed. The financial markets also responded positively to the Republicans'
success in retaining control of Congress in the November election. Going into
December, the bond and stock markets reflected a "best of all worlds" scenario
of moderate economic growth with low inflation, low unemployment and a benign to
positive political landscape. Interest rates started to move back up again in
December as some economic indicators strengthened, but ended the year well below
the levels seen in the second and third quarters.

We expect real economic growth to average around 2% in 1997. The consumer
sector, which makes up two-thirds of Gross Domestic Product ("GDP"), should show
modest growth. The factors that would otherwise contribute to strong consumer
spending -- low unemployment, high consumer confidence, and the wealth effects
from the strong stock market -- should be muted by high consumer debt levels
(particularly at lower income levels) and lack of pent-up demand. The export
sector should continue to grow from 5% to 10% in 1997, helped by the United
States' strong competitive position and continued robust growth in emerging
markets. Growth should improve slightly in Europe and Japan, helped by the
recent strengthening of the dollar against those currencies. The stronger dollar
is likely to be a mixed blessing, by making the prices of foreign imports more
attractive and thereby helping to dampen inflation. The capital goods sector has
slowed in recent quarters, but is still expected to grow faster than overall
U.S. economy. The government sector should continue to be a drag on GDP growth.

FIXED INCOME COMMENTARY

1
<PAGE> 263

Within the fixed income markets, demand for corporate, mortgage-backed and
asset-backed issues continue to be high. Yield spreads (relative to Treasury
issues) for lower and higher quality corporate bonds are quite narrow. The
mortgage-backed and asset-backed markets are similarly compressed, with
investors digging for yield. There is nothing in our economic outlook that is
likely to change the tight spread environment in the near future. We are being
careful, however, to weed out riskier credits and issues that do not offer
enough yield premium to offset their potential for negative surprises. The
foreign area continues to offer opportunities, particularly foreign corporate
bonds that sometimes have very strong balance sheets but are capped by the
rating of their home country. Foreign sovereign credits are also continuing to
improve based on solid global economic growth and increased acceptance of the
need for sound fiscal and monetary policy.

ZERO COUPON BOND FUND PORTFOLIO PERFORMANCE

The three Zero Coupon Bond Fund Portfolios commenced operations on October 11,
1995. These funds were set up as an option for the new Travelers Single Premium
Variable Universal Life Product offered by The Travelers Insurance Company and
The Travelers Life and Annuity Company. The three funds have target maturity
dates of December 1998, December 2000, and December 2005. The Portfolios invest
primarily in U.S. Treasury zero coupon bonds which provide a "locked-in" rate of
return. Zero coupons, sometimes referred to as "strips," are long-term U.S.
Treasury bonds that have been "stripped" of their interest coupons. Instead of
regular interest payments, these securities offer a return based on the
difference between the purchase price and the value at maturity, or par value.
The yield for a zero coupon is the difference in price over the time until the
bond matures.

To enhance performance, we have added corporate zero coupons and other spread
assets, such as senior notes. Because spread assets are difficult to find, we
vary the maturities within a year or two 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.

ZERO COUPON BOND FUND PORTFOLIO SERIES 1998

The Zero Coupon Bond Fund Portfolio Series 1998 had a total return of 3.94% for
the year ended December 31, 1996.

ZERO COUPON BOND FUND PORTFOLIO SERIES 2000

The Zero Coupon Bond Fund Portfolio Series 2000 had a total return of 2.76% for
the year ended December 31, 1996.

ZERO COUPON BOND FUND PORTFOLIO SERIES 2005

The Zero Coupon Bond Fund Portfolio Series 2005 had a total return of 0.90% for
the year ended December 31, 1996.

In closing, we thank you for investing in The Travelers Series Trust Zero Coupon
Bond Fund Portfolios. We look forward to serving your investment needs.

Sincerely,

/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman

January 20, 1997

2
<PAGE> 264

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- ZERO COUPON BOND FUND PORTFOLIO SERIES 1998
(UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
---------------------------------------------
<S> <C>
Year Ended 12/31/96 3.94%
10/11/95* through 12/31/96 6.56%
*Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on October
11, 1995, assuming reinvestment of dividends, through December 31,
1996. The Merrill Lynch Zero Coupon Index - 2 year comprised of
U.S. Government Stripped Securities which have a maturity not
greater than two years.

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

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- ZERO COUPON BOND FUND PORTFOLIO SERIES 2000
(UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
---------------------------------------------
<S> <C>
Year Ended 12/31/96 2.76%
10/11/95* through 12/31/96 5.96%
*Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on October
11, 1995, assuming reinvestment of dividends, through December 31,
1996. The Merrill Lynch Zero Coupon Index - 5 year comprised of
U.S. Government Stripped Securities which have a maturity not
greater than five years.

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

3
<PAGE> 265

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- ZERO COUPON BOND FUND PORTFOLIO SERIES 2005
(UNAUDITED)

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
---------------------------------------------
<S> <C>
Year Ended 12/31/96 0.90%
10/11/95* through 12/31/96 5.80%
*Commencement of operations
</TABLE>

This chart assumes an initial investment of $10,000 made on October
11, 1995, assuming reinvestment of dividends, through December 31,
1996. The Merrill Lynch Zero Coupon Index - 10 year is comprised of
U.S. Government Stripped Securities which have a maturity not
greater than ten years.

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

Average annual total returns are historical in nature and measure net investment
income and capital gains or losses from portfolio investments assuming
reinvestment of dividends. The returns do not reflect expenses associated with
the subaccount such as administrative fees, account charges and surrender
charges which, if reflected, would reduce the performance shown.

4
<PAGE> 266

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS DECEMBER 31, 1996

ZERO COUPON BOND FUND PORTFOLIO SERIES 1998

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS -- 68.1%
$818,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 11/15/98..... $ 734,801
150,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 2/15/99...... 132,633
- ---------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost -- $866,890).................... 867,434
- ---------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 15.7%
- ---------------------------------------------------------------------------------------------------------
AUTOMOBILE -- 3.9%
48,000 A- General Motors Acceptance Corp., notes, 7.500% due 5/26/00............ 49,445
- ---------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 4.1%
63,000 BBB- Six Flags Entertainment Corp., zero coupon senior note to yield
6.512% due 12/15/99................................................... 51,818
- ---------------------------------------------------------------------------------------------------------
FINANCE -- 7.7%
60,000 A Avco Financial Services Inc., zero coupon structure note to yield
6.420% due 12/16/98................................................... 53,090
50,000 A2* Sears Overseas Financial NV, zero coupon bond to yield 5.689% due
7/12/98............................................................... 45,687
- ---------------------------------------------------------------------------------------------------------
98,777
- ---------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $201,892).................... 200,040
- ---------------------------------------------------------------------------------------------------------
FOREIGN BONDS AND NOTES -- 16.2%
- ---------------------------------------------------------------------------------------------------------
BANKING -- 7.9%
60,000 A1* Chemical New York NV Corp., zero coupon bond to yield 6.850% due
2/16/99............................................................. 50,287
60,000 NR International Bank of Reconstruction & Development, zero coupon bond
to yield 6.853% due 4/16/99......................................... 50,010
- ---------------------------------------------------------------------------------------------------------
100,297
- ---------------------------------------------------------------------------------------------------------
FOOD -- 4.2%
62,000 A1* PepsiCo, Inc., zero coupon note to yield 6.522% due 5/25/99........... 53,824
- ---------------------------------------------------------------------------------------------------------
INSURANCE -- 4.1%
60,000 AA New England Life, zero coupon bond to yield 6.772% due 2/1/99......... 52,688
- ---------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS AND NOTES (Cost -- $210,187)...................... 206,809
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $1,278,969**)...................... $1,274,283
- ---------------------------------------------------------------------------------------------------------
</TABLE>

** Aggregate cost for Federal income tax purposes is substantially the same.

See page 8 for definition of ratings.

SEE NOTES TO FINANCIAL STATEMENTS.

5
<PAGE> 267

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

ZERO COUPON BOND FUND PORTFOLIO SERIES 2000

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS -- 58.8%
$621,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 11/15/00..... $ 492,168
438,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 2/15/01...... 341,680
74,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 11/15/02..... 51,622
40,000 AAA U.S. Treasury Notes, Stripped Principal Payment only due 2/15/03...... 27,414
- ---------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost -- $915,027).................... 912,884
- ---------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.2%
62,000 AAA Federal Home Loan Mortgage Corp., zero coupon bond to yield 7.182%
due 9/15/18 (Cost -- $50,008)....................................... 49,638
- ---------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 18.0%
- ---------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 3.3%
63,000 BBB- Six Flags Entertainment Corp., zero coupon senior note to yield
6.512% due 12/15/99................................................. 51,818
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.2%
65,000 AAA Exxon Capital Ventures, Inc., zero coupon guaranteed note to yield
6.172% due 2/15/01.................................................. 50,131
- ---------------------------------------------------------------------------------------------------------
FOODS -- 3.2%
70,000 AA- Archer-Daniels Midland Co., zero coupon bond to yield 6.413% due
5/1/02.............................................................. 49,964
- ---------------------------------------------------------------------------------------------------------
HOSPITAL SUPPLIES & SERVICES -- 3.4%
65,000 A- Hospital Corp. of America, zero coupon bond to yield 7.303% due
6/1/00.............................................................. 52,569
- ---------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.9%
70,000 BBB- Tele-Communications Inc., amortizing note, 9.650% due 10/1/03......... 75,950
- ---------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $280,340).................... 280,432
- ---------------------------------------------------------------------------------------------------------
FOREIGN BONDS & NOTES -- 20.0%
- ---------------------------------------------------------------------------------------------------------
BANKING -- 6.5%
60,000 A1* Chemical New York NV Corp., zero coupon bond to yield 6.850% due
2/16/99............................................................. 50,288
60,000 NR International Bank of Reconstruction & Development, zero coupon bond
to yield 6.853% due 4/16/99......................................... 50,010
- ---------------------------------------------------------------------------------------------------------
100,298
- ---------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.3%
65,000 A+ American Express Co., zero coupon bond to yield 6.532% due 12/12/00... 51,268
- ---------------------------------------------------------------------------------------------------------
FOODS -- 3.5%
62,000 A1* PepsiCo, Inc., zero coupon note to yield 6.522% due 5/25/99........... 53,824
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT -- 3.3%
64,000 AA+ Kingdom of Sweden, zero coupon note to yield 6.040% due 7/31/00....... 51,560
- ---------------------------------------------------------------------------------------------------------
INSURANCE -- 3.4%
60,000 AA New England Life, zero coupon bond to yield 6.772% due 2/1/99......... 52,688
- ---------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS & NOTES (Cost -- $313,414)........................ 309,638
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $1,558,789**)...................... $1,552,592
- ---------------------------------------------------------------------------------------------------------
</TABLE>

** Aggregate cost for Federal income tax purposes is substantially the same.

See page 8 for definition of ratings.

SEE NOTES TO FINANCIAL STATEMENTS.

6
<PAGE> 268

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996

ZERO COUPON BOND FUND PORTFOLIO SERIES 2005

<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS -- 85.4%
$1,225,000 AAA U.S. Treasury Note, Stripped Principal Payment only due 11/15/05..... $ 695,788
1,555,000 AAA U.S. Treasury Note, Stripped Principal Payment only due 2/15/06...... 866,182
401,000 AAA U.S. Treasury Note, Stripped Principal Payment only due 2/15/09...... 180,622
- ----------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost -- $1,721,524)................. 1,742,592
- ----------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 4.8%
- ----------------------------------------------------------------------------------------------------------
FINANCE -- 2.4%
80,000 A+ Grand Metro Investment, zero coupon note to yield 6.589% due
1/6/04............................................................. 49,500
- ----------------------------------------------------------------------------------------------------------
FOODS -- 2.4%
70,000 AA- Archer-Daniels Midland Co., zero coupon bond to yield 6.413% due
5/1/02............................................................. 49,965
- ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $100,821)................... 99,465
- ----------------------------------------------------------------------------------------------------------
FOREIGN BONDS AND NOTES -- 9.8%
- ----------------------------------------------------------------------------------------------------------
BANKING -- 2.6%
75,000 A1* Chemical New York NV Corp., zero coupon bond to yield 7.137% due
2/16/02............................................................ 53,578
- ----------------------------------------------------------------------------------------------------------
FINANCE -- 2.4%
80,000 AAA Exxon Capital Corp., zero coupon note to yield 6.841% due 11/15/04... 49,300
- ----------------------------------------------------------------------------------------------------------
FOODS -- 2.4%
80,000 A+ General Mills, zero coupon bond to yield 7.089% due 8/15/04.......... 48,100
- ----------------------------------------------------------------------------------------------------------
INSURANCE -- 2.4%
80,000 AAA American International Group, zero coupon bond to yield 6.881% due
8/15/04............................................................ 48,400
- ----------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS AND NOTES (Cost -- $199,663)..................... 199,378
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $2,022,008**)..................... $2,041,435
- ----------------------------------------------------------------------------------------------------------
</TABLE>

** Aggregate cost for Federal income tax purposes is substantially the same.

See page 8 for definition of ratings.

SEE NOTES TO FINANCIAL STATEMENTS.

7
<PAGE> 269

- --------------------------------------------------------------------------------
BOND RATINGS

All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's),
except those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:

Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.

<TABLE>
<S> <C>
AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's. 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 highest rated issue only in a 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 than debt in higher rated categories.
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.

Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "Baa",
where 1 is the highest and 3 the lowest rating within its generic category.

Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as in Aaa
securities or 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 that are rated "A" possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a susceptibility
to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>

8
<PAGE> 270

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996

<TABLE>
<CAPTION>
ZERO COUPON ZERO COUPON ZERO COUPON
BOND FUND BOND FUND BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO
SERIES 1998 SERIES 2000 SERIES 2005
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost -- $1,278,969, $1,558,789 and
$2,022,008, respectively).................................... $1,274,283 $1,552,592 $2,041,435
Cash............................................................ 26,669 8,187 62,184
Receivable for securities sold.................................. -- 51,492 --
Interest receivable............................................. 908 1,707 --
Receivable from affiliate....................................... 30,897 30,775 30,400
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS.................................................... 1,332,757 1,644,753 2,134,019
- -------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased................................ -- 49,862 49,862
Accrued expenses................................................ 30,187 30,147 29,915
- -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES............................................... 30,187 80,009 79,777
- -------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................................. $1,302,570 $1,564,744 $2,054,242
- -------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital................................................. $1,307,256 $1,573,979 $2,040,963
Undistributed net investment income............................. -- -- 1,326
Accumulated net realized loss on security transactions.......... -- (3,038) (7,474)
Net unrealized appreciation (depreciation) of investments....... (4,686) (6,197) 19,427
- -------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS.................................................. $1,302,570 $1,564,744 $2,054,242
- -------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING................................................ 130,362 157,087 206,046
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE........................................ $9.99 $9.96 $9.97
- -------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

9
<PAGE> 271

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
ZERO COUPON ZERO COUPON ZERO COUPON
BOND FUND BOND FUND BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO
SERIES 1998 SERIES 2000 SERIES 2005
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................... $ 67,436 $ 78,118 $ 96,560
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Audit and legal............................................... 20,000 20,000 20,000
Shareholder and system servicing fees......................... 7,500 7,500 7,500
Trustees' fees................................................ 2,000 2,000 2,000
Investment advisory fees (Note 2)............................. 1,175 1,335 1,556
Custody....................................................... 200 200 200
Other......................................................... 2,000 2,000 2,000
- -------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES................................................ 32,875 33,035 33,256
Less: Expense reimbursement (Note 2).......................... (31,112) (31,032) (30,922)
- -------------------------------------------------------------------------------------------------------------
NET EXPENSES.................................................. 1,763 2,003 2,334
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................... 65,673 76,115 94,226
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain (Loss) From Security Transactions (excluding
short-term securities):
Proceeds from sales........................................ 221,231 428,589 247,143
Cost of securities sold.................................... 219,930 430,417 252,749
- -------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)...................................... 1,301 (1,828) (5,606)
- -------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year.......................................... 12,989 19,342 36,813
End of year................................................ (4,686) (6,197) 19,427
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION)........ (17,675) (25,539) (17,386)
- -------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS......................................... (16,374) (27,367) (22,992)
- -------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS.......................... $ 49,299 $ 48,748 $ 71,234
- -------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

10
<PAGE> 272

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998 1996 1995(a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 65,673 $ 12,428
Net realized gain (loss).................................................... 1,301 (358)
(Increase) decrease in net unrealized depreciation.......................... (17,675) 12,989
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................................... 49,299 25,059
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (78,270) --
Net realized gain........................................................... (943) --
- ---------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (79,213) --
- ---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares............................................ 239,165 1,000,000
Net asset value of shares issued for reinvestment of dividends 79,213 --
Cost of shares reacquired................................................... (9,692) (1,261)
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... 308,686 998,739
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS........................................................ 278,772 1,023,798
NET ASSETS:
Beginning of year........................................................... 1,023,798 --
- ---------------------------------------------------------------------------------------------------------
END OF YEAR*................................................................ $1,302,570 $1,023,798
- ---------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:............................ -- $12,428
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.

SEE NOTES TO FINANCIAL STATEMENTS.

11
<PAGE> 273

- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000 1996 1995(a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 76,115 $ 12,592
Net realized loss........................................................... (1,828) (1,210)
(Increase) decrease in net unrealized depreciation.......................... (25,539) 19,342
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................................... 48,748 30,724
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (88,804) --
- ---------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................... (88,804) --
- ---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares............................................ 504,039 1,000,000
Net asset value of shares issued for reinvestment of dividends.............. 88,804 --
Cost of shares reacquired................................................... (17,510) (1,257)
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... 575,333 998,743
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS........................................................ 535,277 1,029,467
NET ASSETS:
Beginning of year........................................................... 1,029,467 --
- ---------------------------------------------------------------------------------------------------------
END OF YEAR*................................................................ $1,564,744 $1,029,467
- ---------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:............................ -- $12,592
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 274

- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005 1996 1995(a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 94,226 $ 13,259
Net realized loss........................................................... (5,606) (1,868)
Increase (decrease) in net unrealized appreciation.......................... (17,386) 36,813
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................................... 71,234 48,204
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (106,679) --
- ---------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................... (106,679) --
- ---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares............................................ 1,100,998 1,002,907
Net asset value of shares issued for reinvestment of dividends.............. 106,679 --
Cost of shares reacquired................................................... (167,911) (1,190)
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS......................... 1,039,766 1,001,717
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS........................................................ 1,004,321 1,049,921
NET ASSETS:
Beginning of year........................................................... 1,049,921 --
- ---------------------------------------------------------------------------------------------------------
END OF YEAR *............................................................... $2,054,242 $1,049,921
- ---------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:............................ $1,326 $13,259
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.

SEE NOTES TO FINANCIAL STATEMENTS.

13
<PAGE> 275

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The Zero Coupon Bond Fund Portfolio Series 1998 ("Series 1998"), Zero
Coupon Bond Fund Portfolio Series 2000 ("Series 2000") and Zero Coupon Bond Fund
Portfolio Series 2005 ("Series 2005"), (collectively the "Portfolios"), are
separate investment portfolios of The Travelers Series Trust ("Trust"). The
Trust is a Massachusetts business trust registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company and consists of these portfolios and ten other separate investment
portfolios: U.S. Government Securities, Social Awareness Stock, Utilities,
Travelers Quality Bond, Lazard International Stock, MFS Emerging Growth,
Federated High Yield, Federated Stock, Large Cap and Equity Income Portfolios.
Shares of the Trust are offered only to insurance company separate accounts that
fund certain variable annuity and variable life insurance contracts. The
financial statements and financial highlights for the other portfolios are
presented in separate annual reports.

The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets; securities for which no sales prices were reported and U.S. Government
and Agency obligations are valued at the mean between the last reported bid and
ask prices or on the basis of quotations received from reputable brokers or
other recognized sources; (c) securities maturing within 60 days are valued at
cost plus accreted discount and, or minus amortized premium, which approximates
market value; (d) securities that have a maturity of 60 days or more are valued
at prices based on market quotations for securities of similar type, yield and
maturity; (e) interest income, adjusted for amortization of premium and
accretion of discount, is recorded on the accrual basis; (f) gains or losses on
the sale of securities are calculated by using the specific identification
method; (g) dividends and distributions to shareholders are recorded on the
ex-dividend date; (h) the Portfolios intend to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (i) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At December 31, 1996, reclassifications were made to the Portfolios'
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of overdistributed net investment income amounting to $169, $97, and $520, were
reclassified to paid-in capital for Series 1998, Series 2000, and Series 2005,
respectively. Net investment income, net realized gains and net assets for each
Portfolio were not affected by these changes; and (j) estimates and assumptions
are required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS

Travelers Asset Management International Corporation ("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as investment manager and
advisor to the Portfolios. The Portfolios pay TAMIC an investment management and
advisory fee calculated at the annual rate of 0.10% of the average daily net
assets. This fee is calculated daily and paid monthly.

Travelers Insurance Company ("Travelers Insurance") acts as administrator
to the Portfolios. The Portfolios pay Travelers Insurance an administration fee
calculated at an annual rate of 0.06% of the average daily net assets. Travelers
Insurance has entered into a sub-administrative services agreement with Smith
Barney Mutual Funds Management, Inc. ("SBMFM"). Travelers Insurance pays SBMFM,
as sub-administrator, a fee calculated at an annual rate of 0.06% of the average
daily net assets of each Portfolio. This fee is calculated daily and paid
monthly.

For the year ended December 31, 1996, Travelers Insurance has agreed to
reimburse Series 1998, Series 2000, and Series 2005 for expenses in the amount
of $31,112, $31,032, and $30,922, respectively.

14
<PAGE> 276

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS

During the year ended December 31, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:

<TABLE>
<CAPTION>
SERIES 1998 SERIES 2000 SERIES 2005
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases.......................................................... $ 431,724 $ 906,231 $ 1,171,865
Sales.............................................................. 221,231 428,589 247,143
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1996, for Federal income tax purposes, the aggregate
unrealized appreciation and depreciation of investments were approximately as
follows:

<TABLE>
<CAPTION>
SERIES 1998 SERIES 2000 SERIES 2005
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation....................................... $ 1,305 $ 6,458 $ 37,777
Gross unrealized depreciation....................................... (5,991) (12,655) (18,350)
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation).......................... $(4,686) $ (6,197) $ 19,427
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

4. REPURCHASE AGREEMENTS

As of December 31, 1996, the Portfolios had no open repurchase agreements.

5. FUTURES CONTRACTS

Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the Schedule of Investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolios' basis in the contract. The Portfolios bear the market risk that
arises from changes in the value of the financial instruments and securities
indices (futures contracts) and the credit risk should a counterparty fail to
perform under such contracts.

At December 31, 1996, the Portfolios had no open futures contracts.

6. STRIPPED SECURITIES

Each 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.

15
<PAGE> 277

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. CAPITAL LOSS CARRYFORWARD

At December 31, 1996, Series 2000 and Series 2005 had, for Federal income
tax purposes, approximately $700 and $7,500, respectively, of capital loss
carryforwards available to offset future capital gains. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed. The amount and expiration of the
carryforwards are indicated below. Expiration occurs on December 31 of the year
indicated:

<TABLE>
<CAPTION>
2003 2004
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series 2000......................................................................... $ 700 --
Series 2005......................................................................... 1,900 $5,600
- -------------------------------------------------------------------------------------------------------
</TABLE>

8. 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERIES 1998
Shares sold................................................ 23,525 100,000
Shares issued on reinvestment.............................. 7,906 --
Shares redeemed............................................ (944) (125)
- --------------------------------------------------------------------------------------------------------
Net Increase............................................... 30,487 99,875
- --------------------------------------------------------------------------------------------------------
SERIES 2000
Shares sold................................................ 50,040 100,000
Shares issued on reinvestment.............................. 8,881 --
Shares redeemed............................................ (1,710) (124)
- --------------------------------------------------------------------------------------------------------
Net Increase............................................... 57,211 99,876
- --------------------------------------------------------------------------------------------------------
SERIES 2005
Shares sold................................................ 111,855 100,281
Shares issued on reinvestment.............................. 10,654 --
Shares redeemed............................................ (16,627) (117)
- --------------------------------------------------------------------------------------------------------
Net Increase............................................... 105,882 100,164
- --------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.

16
<PAGE> 278

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 1998 1996 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............................................... $10.25 $10.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (b)...................................................... 0.53 0.12
Net realized and unrealized gain (loss)........................................ (0.13) 0.13
- ----------------------------------------------------------------------------------------------------
Total Income From Operations..................................................... 0.40 0.25
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......................................................... (0.65) --
Net realized gains............................................................. (0.01) --
- ----------------------------------------------------------------------------------------------------
Total Distributions.............................................................. (0.66) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR..................................................... $ 9.99 $10.25
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN..................................................................... 3.94% 2.50%++
- ----------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR ( 000'S)................................................. $1,303 $1,024
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (b)(c)................................................................ 0.15% 0.15%+
Net investment income.......................................................... 5.64 5.55+
- ----------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.......................................................... 19% 20%
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.
(b) For the year ended December 31, 1996, The Travelers reimbursed the Portfolio
for $31,112 in expenses. If such fees were not waived and expenses not
reimbursed, the per share decrease of net investment income would have been
$0.24 and the expense ratio would have been 2.82%.
(c) The expense ratio for the period ended December 31, 1995 reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the expense ratio would have
been 6.51% (annualized).
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.

17
<PAGE> 279

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 2000 1996 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............................................... $10.31 $10.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (b)...................................................... 0.50 0.13
Net realized and unrealized gain (loss)........................................ (0.22) 0.18
- ----------------------------------------------------------------------------------------------------
Total Income From Operations..................................................... 0.28 0.31
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......................................................... (0.63) --
- ----------------------------------------------------------------------------------------------------
Total Distributions.............................................................. (0.63) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR..................................................... $ 9.96 $10.31
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN..................................................................... 2.76% 3.10%++
- ----------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S).................................................. $1,565 $1,029
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (b)(c)................................................................ 0.15% 0.15%+
Net investment income.......................................................... 5.74 5.61+
- ----------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.......................................................... 33% 34%
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.
(b) For the year ended December 31, 1996, The Travelers reimbursed the Portfolio
for $31,032 in expenses. If such fees were not waived and expenses not
reimbursed, the per share decrease of net investment income would have been
$0.20 and the expense ratio would have been 2.49%.
(c) The expense ratio for the period ended December 31, 1995 reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the expense ratio would have
been 6.51% (annualized).
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.

18
<PAGE> 280

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year:

<TABLE>
<CAPTION>
ZERO COUPON BOND FUND PORTFOLIO SERIES 2005 1996 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............................................... $10.48 $10.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (b)...................................................... 0.48 0.13
Net realized and unrealized gain (loss)........................................ (0.38) 0.35
- ----------------------------------------------------------------------------------------------------
Total Income From Operations..................................................... 0.10 0.48
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......................................................... (0.61) --
- ----------------------------------------------------------------------------------------------------
Total Distributions.............................................................. (0.61) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR..................................................... $ 9.97 $10.48
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN..................................................................... 0.90% 4.80%++
- ----------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S).................................................. $2,054 $1,050
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (b)(c)................................................................ 0.15% 0.15%+
Net investment income.......................................................... 6.14 5.89+
- ----------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.......................................................... 17% 23%
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) For the period from October 11, 1995 (commencement of operations) to
December 31, 1995.
(b) For the year ended December 31, 1996, The Travelers reimbursed the Portfolio
for $30,922 in expenses. If such fees were not waived and expenses not
reimbursed, the per share decrease of net investment income would have been
$0.15 and the expense ratio would have been 2.17%.
(c) The expense ratio for the period ended December 31, 1995 reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations. Without the expense reimbursement, the expense ratio would have
been 6.48% (annualized).
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.

19
<PAGE> 281

- --------------------------------------------------------------------------------
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 schedules of investments as of December 31, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for the periods ended December 31, 1996 and 1995, and
the financial highlights for each of the applicable periods ended December 31,
1996 and 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, 1996, by correspondence with the custodian and also with brokers
for the Zero Coupon Bond Fund Portfolio Series 2000 and the Zero Coupon Bond
Fund Portfolio Series 2005. 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, 1996, the results of their operations for the
year then ended, the changes in their net assets for the periods ended December
31, 1996 and 1995, and the financial highlights for each of the applicable
periods ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 24, 1997
<PAGE> 282

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

PNC BANK, N.A.

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 Travelers Life and
Annuity Company and the Prospectuses for the underlying funds, which
collectively contain all pertinent information, including the applicable sales
commissions.

VG-ZERO (Annual) (12-96) Printed in U.S.A.
<PAGE> 283
PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) The financial statements of the Registrant and the Report of Independent
Accountants are contained in the applicable Fund's Annual Report which
is incorporated in the Statement of Additional Information by reference.
The Registrant's financial statements for the period ended
December 31, 1996 include:

U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
ZERO COUPON BOND FUND PORTFOLIOS - SERIES 1998, 2000 and 2005
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
MID-CAP DISCIPLINED EQUITY FUND

Statements of Assets and Liabilities as of December 31, 1996
Statements of Operations for the applicable period ended December
31, 1996
Statements of Changes in Net Assets for the applicable periods
ended December 31, 1996 and 1995
Statements of Investments as of December 31, 1996
Notes to Financial Statements

(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> 284
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). 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). Investment Advisory Agreement between MFS Emerging Growth
Portfolio of the Registrant and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(e) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

5(g). Investment Advisory Agreement between Federated Stock Portfolio
of the Registrant and Travelers Asset Management International
Corporation. (Incorporated herein by reference to Exhibit 5(g)
to Post-Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

5(h). Investment Advisory Agreement between Lazard International Stock
Portfolio of the Registrant and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(h) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

5(i). Investment Advisory Agreement between Large Cap Portfolio of the
Registrant and Travelers Asset Management International
Corporation. (Incorporated herein by reference to Exhibit 5(i)
to Post-Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

5(j). Investment Advisory Agreement between Equity Income Portfolio of
the Registrant and Travelers Asset Management International
Corporation. (Incorporated herein by reference to Exhibit 5(j)
to Post-Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

5(k). Investment Advisory Agreement between Travelers Quality Bond
Portfolio of the Registrant and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(k) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

5(l). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Massachusetts Financial Services
Company as Subadviser to MFS Emerging Growth Portfolio.
(Incorporated herein by reference to Exhibit 5(l) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(m). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Federated Investment Counseling as
Subadviser to Federated High Yield Portfolio. Incorporated
herein by reference to Exhibit 5(m) to Post-Effective Amendment
No. 16 to the Registration Statement on N-1A filed on July 31,
1996.)
<PAGE> 285
5(n). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Federated Investment Counseling as
Subadviser to Federated Stock Portfolio. (Incorporated herein
by reference to Exhibit 5(n) to Post-Effective Amendment No. 16
to the Registration Statement on N-1A filed on July 31, 1996.)

5(o). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Lazard Freres Asset Management as
Subadviser to Lazard International Stock Portfolio.
(Incorporated herein by reference to Exhibit 5(o) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(p). Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Fidelity Management & Research
Company as Subadviser to Equity Income Portfolio and Large Cap
Portfolio. (Incorporated herein by reference to Exhibit 5(p) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(q). Sub-Subadvisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc.
(Incorporated herein by reference to Exhibit 5(q) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(r). Sub-Subadvisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc.
(Incorporated herein by reference to Exhibit 5(r) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(s). Investment Advisory Agreement between The Mid Cap Disciplined
Equity Fund of the Registrant and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(s) to Post-Effective Amendment No. 17 to the
Registration Statement on N-1A filed on October 31, 1996.)

8(a). Custody Agreement between the Registrant and Chase Manhattan
Bank, N.A., Brooklyn, New York.

8(b). Custody Agreement between the Registrant and PNC Bank.
(Incorporated herein by reference to Exhibit 8(b) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

8(c). Custody Agreement between the Registrant and Bank of New York.
(Incorporated herein by reference to Exhibit 8(c) to
Post-Effective Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

8(d). Custody Agreement between the Registrant and Barclays Bank PLC.
To be filed by amendment.

8(e). Custody Agreement between the Registrant and Brown Brothers
Harriman & Co. (Incorporated herein by reference to Exhibit
8(e) to Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)
<PAGE> 286
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). Amendment to Transfer and Recordkeeping Agreement between the
Registrant and The Travelers Insurance Company. (Incorporated
herein by reference to Exhibit 9(b) to Post-Effective Amendment
No. 16 to the Registration Statement on N-1A filed on July 31,
1996.)

9(c). Transfer Agent Agreement between Fidelity Investments
Institutional Operations Company and the Equity Income Portfolio
and Large Cap Portfolio of the Registrant. Incorporated herein
by reference to Exhibit 9(c) to Post-Effective Amendment No. 16
to the Registration Statement on N-1A filed on July 31, 1996.)

9(d). Administrative Services Agreement between the Registrant and The
Travelers Insurance Company. (Incorporated herein by reference
to Exhibit 9(d) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

9(e). Service Agent Agreement between Fidelity Service Company and the
Equity Income Portfolio and Large Cap Portfolio of the
Registrant. (Incorporated herein by reference to Exhibit 9(e)
to Post-Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

9(f). Participation Agreement between the Registrant and The Travelers
Insurance Company.

10. Opinion and Consent of Counsel. (Incorporated herein by
reference to the Registrant's most recent Rule 24f-2 Notice
filing on February 28, 1997.)

11(a). Consent of Coopers & Lybrand L.L.P., Independent Accountants.

Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants.

Consent of Price Waterhouse LLP, 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.)

Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Lewis E. Daidone. (incorporated herein
by reference to Exhibit 11 to Post-Effective Amendment No. 18 to
the Registration Statement on Form N-1A filed on February 24,
1997.)

27. Financial Data Schedule.
<PAGE> 287
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 21, 1997
- -------------- ----------------------------
<S> <C>
Shares of beneficial interest, Nine (9)
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> 288
Item 28. Business and Other Connections of Investment Advisers

U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIOS (SERIES 1998, 2000, 2005)
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
MID CAP DISCIPLINED EQUITY 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 and Vice President*
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*

Edward Hinchliffe III Vice President and Cashier Cashier*

Kathryn D. Karlic Vice President Vice President*

David R. Miller Vice President Vice President*

Emil J. Molinaro Vice President Vice President*
</TABLE>
<PAGE> 289
<TABLE>
<S> <C> <C>
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> 290
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> 291
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> 292
Lazard Freres & Co. LLC, serves as the investment subadviser to the Lazard
International Stock Portfolio. Lazard Freres is a limited liability company,
an organization for which its 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 -
Jesses 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 -
</TABLE>
<PAGE> 293
<TABLE>
<CAPTION>
Position with Lazard
Name Freres & Co. LLC Other Business
- ---- -------------------- --------------
<S> <C> <C>
Gerald Rosenfeld General Member -
Peter L. Smith General Member -
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 -
Michael A. Wildish General Member -
Kendrick R. Wilson, III General Member -
Alexander B. Zagoreos General Member -
</TABLE>
<PAGE> 294
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> 295
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> 296
MID CAP DISCIPLINED EQUITY FUND

Officers and Directors of The Travelers Investment Management Company (TIMCO),
the Sub-Adviser to the Mid Cap Disciplined Equity Fund of the Registrant, are
set forth in the following table:

<TABLE>
<CAPTION>
Name Position with TIMCO Other Business
- ---- ------------------- --------------
<S> <C> <C>
Jeffrey B. Lane Director and Chairman Vice Chairman
Smith Barney Inc.*

Kent A. Kelley Director and Chief** Not Applicable
Executive Officer

Sandip A. Bhagat Director and President** Not Applicable

Heath B. McLendon Director Managing Director
Smith Barney Inc.*

Jacob E. Hurwitz Senior Vice President** Not Applicable

Emil Molinaro Vice President Vice President
Travelers Group Inc.**

Daniel Willey Vice President** Not Applicable

Gloria G. Williams Assistant Vice President** Not Applicable

Michael F. Rosenbaum Corporate Secretary Associate General Counsel
Smith Barney Inc.*

Michael Day Treasurer Managing Director
Smith Barney Inc.*
</TABLE>

*Address: Smith Barney Inc., 388 Greenwich Street, New York, New York 10013
**Address: One Tower Square, Hartford, Connecticut 01683
<PAGE> 297
Item 29. Principal Underwriter

Not Applicable.

Item 30. Location of Accounts and Records

(1) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, NY 10013

(2) Fidelity Investments Institutional Operations Company
82 Devonshire Street
Boston, MA 02109

(3) Fidelity Service Company
82 Devonshire Street
Boston, MA 02109

(4) Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY

(5) PNC Bank, N.A.
200 Stevens Drive
Lester, PA 19113

(6) Barclay's Bank, PLC
75 Wall Street
New York, NY 10265

(7) Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109

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> 298
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 April __, 1997.

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 April __, 1997.

*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)

*LEWIS E. DAIDONE Treasurer
- ---------------------------------------
(Lewis E. Daidone)

*By: Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
<PAGE> 299
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <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(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). 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). Investment Advisory Agreement between MFS
Emerging Growth Portfolio of the Registrant and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(e) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)

5(f). Investment Advisory Agreement between
Federated High Yield Portfolio of the Registrant and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(f) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)
</TABLE>
<PAGE> 300
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C>
5(g). Investment Advisory Agreement between
Federated Stock Portfolio of the Registrant and Travelers
Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(g) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)

5(h). Investment Advisory Agreement between
Lazard International Stock Portfolio of the Registrant and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(h) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)

5(i). Investment Advisory Agreement between Large
Cap Portfolio of the Registrant and Travelers Asset
Management International Corporation. (Incorporated
herein by reference to Exhibit 5(i) to Post-Effective
Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(j). Investment Advisory Agreement between Equity
Income Portfolio of the Registrant and Travelers Asset
Management International Corporation. (Incorporated
herein by reference to Exhibit 5(j) to Post-Effective
Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(k). Investment Advisory Agreement between Travelers
Quality Bond Portfolio of the Registrant and Travelers Asset
Management International Corporation. (Incorporated
herein by reference to Exhibit 5(k) to Post-Effective
Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(l). Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Massachusetts
Financial Services Company as Subadviser to MFS Emerging
Growth Portfolio. (Incorporated herein by reference to
Exhibit 5(l) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

5(m). Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Federated
Investment Counseling as Subadviser to Federated High
Yield Portfolio. (Incorporated herein by reference to
Exhibit 5(m) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)
</TABLE>
<PAGE> 301
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C>
5(n). Sub-Advisory Agreement between Travelers
Asset Management International Corporation and
Federated Investment Counseling as Subadviser to
Federated Stock Portfolio. (Incorporated herein by
reference to Exhibit 5(n) to Post-Effective Amendment
No. 16 to the Registration Statement on N-1A filed on
July 31, 1996.)

5(o). Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Lazard Freres
Asset Management as Subadviser to Lazard International
Stock Portfolio. (Incorporated herein by reference to
Exhibit 5(o) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

5(p). Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Fidelity
Management & Research Company as Subadviser to
Equity Income Portfolio and Large Cap Portfolio.
(Incorporated herein by reference to Exhibit 5(p) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)

5(q). Sub-Subadvisory Agreement between Fidelity
Management & Research Company and Fidelity
Management & Research (U.K.) Inc. (Incorporated herein
by reference to Exhibit 5(q) to Post-Effective Amendment
No. 16 to the Registration Statement on N-1A filed on
July 31, 1996.)

5(r). Sub-Subadvisory Agreement between Fidelity
Management & Research Company and Fidelity
Management & Research (Far East) Inc. (Incorporated
herein by reference to Exhibit 5(r) to Post-Effective
Amendment No. 16 to the Registration Statement on
N-1A filed on July 31, 1996.)

5(s). Investment Advisory Agreement between The Mid-Cap
Disciplined Equity Fund of the Registrant and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(s) to Post-
Effective Amendment No. 17 to the Registration Statement
on N-1A filed on October 31, 1996.)

5(t). Sub-Advisory Agreement between Travelers
Asset Management International Corporation and
The Travelers Investment Management Company,
as Subadviser to the Mid-Cap Disciplined Equity Fund.
(Incorporated herein by reference to Exhibit 5(t) to Post-
Effective Amendment No. 17 to the Registration Statement
on N-1A filed on October 31, 1996.)
</TABLE>
<PAGE> 302
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
8(a). Custody Agreement between the Registrant and Electronically
Chase Manhattan Bank, N.A., Brooklyn, New York.

8(b). Form of Custody Agreement between the Registrant and
PNC Bank. (Incorporated herein by reference to
Exhibit 8(b) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

8(c). Custody Agreement between the Registrant and
Bank of New York. (Incorporated herein by reference to
Exhibit 8(c) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)

8(d). Custody Agreement between the Registrant and To be filed by
Barclays Bank PLC. amendment

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). Amendment to Transfer and Recordkeeping Agreement
between the Registrant and The Travelers Insurance Company.
(Incorporated herein by reference to Exhibit 9(b) to Post-
Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

9(c). Transfer Agent Agreement between Fidelity Investments
Institutional Operations Company and the Equity Income
Portfolio and Large Cap Portfolio of the Registrant.
(Incorporated herein by reference to Exhibit 9(c) to Post-
Effective Amendment No. 16 to the Registration Statement
on N-1A filed on July 31, 1996.)

9(d). Administrative Services Agreement between the
Registrant and The Travelers Insurance Company.
(Incorporated herein by reference to Exhibit 9(d) to
Post-Effective Amendment No. 16 to the Registration
Statement on N-1A filed on July 31, 1996.)

9(e). Service Agent Agreement between Fidelity Service
Company and the Equity Income Portfolio and Large
Cap Portfolio of the Registrant. (Incorporated herein by
reference to Exhibit 9(e) to Post-Effective Amendment
No. 16 to the Registration Statement on N-1A filed on
July 31, 1996.)
</TABLE>
<PAGE> 303

<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
9(f). Participation Agreement between the Registrant and Electronically
The Travelers Insurance Company.

10. Opinion and Consent of Counsel. (Incorporated herein by
reference to the Registrant's most recent Rule 24f-2
Notice filing on February 28, 1997.)

11(a). Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants.

Consent of KPMG Peat Marwick, LLP, Independent Electronically
Certified Public Accountants.

Consent of Price Waterhouse, LLP, 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.)

Power of Attorney authorizing Ernest J. Wright or
Kathleen A. McGah as signatory for Lewis E. Daidone.
(Incorporated herein by reference to Exhibit 11(b) to Post-
Effective Amendment No. 18 to the Registration Statement
on Form N-1A filed on February 24, 1997.)

27. Financial Data Schedules. Electronically
</TABLE>

<ARTICLE> 6
<RESTATED>
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 25,663,806
<INVESTMENTS-AT-VALUE> 25,848,463
<RECEIVABLES> 239,298
<ASSETS-OTHER> 268
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,088,029
<PAYABLE-FOR-SECURITIES> 35,299
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,196
<TOTAL-LIABILITIES> 79,495
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,527,392
<SHARES-COMMON-STOCK> 2,393,878
<SHARES-COMMON-PRIOR> 2,267,056
<ACCUMULATED-NII-CURRENT> 1,705,367
<OVERDISTRIBUTION-NII> 2,726
<ACCUMULATED-NET-GAINS> (700,759)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 184,657
<NET-ASSETS> 26,008,534
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,705,367
<OTHER-INCOME> 0
<EXPENSES-NET> 164,980
<NET-INVESTMENT-INCOME> 1,540,387
<REALIZED-GAINS-CURRENT> (704,606)
<APPREC-INCREASE-CURRENT> (612,404)
<NET-CHANGE-FROM-OPS> 223,377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,539,054
<DISTRIBUTIONS-OF-GAINS> 423,418
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 606,114
<NUMBER-OF-SHARES-REDEEMED> 834,803
<SHARES-REINVESTED> 355,511
<NET-CHANGE-IN-ASSETS> (2,183,754)
<ACCUMULATED-NII-PRIOR> 1,520,848
<ACCUMULATED-GAINS-PRIOR> 1,110,792
<OVERDISTRIB-NII-PRIOR> (1,520,848)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 86,625
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 164,980
<AVERAGE-NET-ASSETS> 26,723,392
<PER-SHARE-NAV-BEGIN> 12.43
<PER-SHARE-NII> 00.68
<PER-SHARE-GAIN-APPREC> (00.52)
<PER-SHARE-DIVIDEND> 1.55
<PER-SHARE-DISTRIBUTIONS> .18
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.86
<EXPENSE-RATIO> 00.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 2
<NAME> SOCIAL AWARENESS STOCK PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 8,705,357
<INVESTMENTS-AT-VALUE> 11,154,026
<RECEIVABLES> 33,862
<ASSETS-OTHER> 697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,188,585
<PAYABLE-FOR-SECURITIES> 77,340
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71,250
<TOTAL-LIABILITIES> 148,590
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,594,239
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,913)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,448,669
<NET-ASSETS> 11,039,995
<DIVIDEND-INCOME> 107,312
<INTEREST-INCOME> 42,150
<OTHER-INCOME> 0
<EXPENSES-NET> 112,339
<NET-INVESTMENT-INCOME> 37,123
<REALIZED-GAINS-CURRENT> 400,819
<APPREC-INCREASE-CURRENT> 1,159,056
<NET-CHANGE-FROM-OPS> 1,596,998
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 233,999
<DISTRIBUTIONS-OF-GAINS> 525,148
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 323,694
<NUMBER-OF-SHARES-REDEEMED> 51,251
<SHARES-REINVESTED> 167,210
<NET-CHANGE-IN-ASSETS> 3,985,184
<ACCUMULATED-NII-PRIOR> 55,079
<ACCUMULATED-GAINS-PRIOR> 426,453
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 81,405
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148,706
<AVERAGE-NET-ASSETS> 8,774,003
<PER-SHARE-NAV-BEGIN> 14.32
<PER-SHARE-NII> 00.31
<PER-SHARE-GAIN-APPREC> 02.42
<PER-SHARE-DIVIDEND> 00.43
<PER-SHARE-DISTRIBUTIONS> 00.86
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.76
<EXPENSE-RATIO> 01.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> UTILITIES PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 15,803,802
<INVESTMENTS-AT-VALUE> 17,674,731
<RECEIVABLES> 60,046
<ASSETS-OTHER> 519,418
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,254,195
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,969
<TOTAL-LIABILITIES> 39,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,338,333
<SHARES-COMMON-STOCK> 1,490,143
<SHARES-COMMON-PRIOR> 1,193,707
<ACCUMULATED-NII-CURRENT> 4,943
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,870,929
<NET-ASSETS> 18,214,226
<DIVIDEND-INCOME> 647,584
<INTEREST-INCOME> 209,151
<OTHER-INCOME> 0
<EXPENSES-NET> 185,789
<NET-INVESTMENT-INCOME> 670,946
<REALIZED-GAINS-CURRENT> 829,616
<APPREC-INCREASE-CURRENT> (222,208)
<NET-CHANGE-FROM-OPS> 1,278,354
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,107,160
<DISTRIBUTIONS-OF-GAINS> 974,548
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 590,496
<NUMBER-OF-SHARES-REDEEMED> 463,451
<SHARES-REINVESTED> 169,391
<NET-CHANGE-IN-ASSETS> 3,677,905
<ACCUMULATED-NII-PRIOR> 441,157
<ACCUMULATED-GAINS-PRIOR> 144,953
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 113,601
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 17,303,325
<PER-SHARE-NAV-BEGIN> 12.85
<PER-SHARE-NII> 00.60
<PER-SHARE-GAIN-APPREC> 00.33
<PER-SHARE-DIVIDEND> 00.97
<PER-SHARE-DISTRIBUTIONS> 00.59
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.22
<EXPENSE-RATIO> 01.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 4
<NAME> ZERO COUPON BOND FUND PORTFOLIO SERIES 1998

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,278,969
<INVESTMENTS-AT-VALUE> 1,274,283
<RECEIVABLES> 908
<ASSETS-OTHER> 26,669
<OTHER-ITEMS-ASSETS> 30,897
<TOTAL-ASSETS> 1,332,757
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,187
<TOTAL-LIABILITIES> 30,187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,307,256
<SHARES-COMMON-STOCK> 130,362
<SHARES-COMMON-PRIOR> 99,875
<ACCUMULATED-NII-CURRENT> 65,673
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,686)
<NET-ASSETS> 1,302,570
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67,436
<OTHER-INCOME> 0
<EXPENSES-NET> 1,763
<NET-INVESTMENT-INCOME> 65,673
<REALIZED-GAINS-CURRENT> 1,301
<APPREC-INCREASE-CURRENT> (17,675)
<NET-CHANGE-FROM-OPS> 49,299
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,270
<DISTRIBUTIONS-OF-GAINS> 943
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,525
<NUMBER-OF-SHARES-REDEEMED> 944
<SHARES-REINVESTED> 7,906
<NET-CHANGE-IN-ASSETS> 278,772
<ACCUMULATED-NII-PRIOR> 12,428
<ACCUMULATED-GAINS-PRIOR> (358)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,175
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,175
<AVERAGE-NET-ASSETS> 1,164,210
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> 00.53
<PER-SHARE-GAIN-APPREC> (00.13)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 00.66
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 09.99
<EXPENSE-RATIO> 00.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 5
<NAME> ZERO COUPON BOND FUND PORTFOLIO SERIES 2000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,558,789
<INVESTMENTS-AT-VALUE> 1,552,592
<RECEIVABLES> 53,199
<ASSETS-OTHER> 8,187
<OTHER-ITEMS-ASSETS> 30,775
<TOTAL-ASSETS> 1,644,753
<PAYABLE-FOR-SECURITIES> 49,862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,147
<TOTAL-LIABILITIES> 80,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,573,979
<SHARES-COMMON-STOCK> 157,087
<SHARES-COMMON-PRIOR> 99,876
<ACCUMULATED-NII-CURRENT> 76,115
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,828)
<OVERDISTRIBUTION-GAINS> (3,038)
<ACCUM-APPREC-OR-DEPREC> (6,197)
<NET-ASSETS> 1,564,744
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 78,118
<OTHER-INCOME> 0
<EXPENSES-NET> 2,003
<NET-INVESTMENT-INCOME> 76,115
<REALIZED-GAINS-CURRENT> (1,828)
<APPREC-INCREASE-CURRENT> (25,539)
<NET-CHANGE-FROM-OPS> 48,748
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 88,804
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,040
<NUMBER-OF-SHARES-REDEEMED> 1,710
<SHARES-REINVESTED> 8,881
<NET-CHANGE-IN-ASSETS> 535,277
<ACCUMULATED-NII-PRIOR> 12,592
<ACCUMULATED-GAINS-PRIOR> (1,210)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,335
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,003
<AVERAGE-NET-ASSETS> 1,327,016
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 00.50
<PER-SHARE-GAIN-APPREC> (00.22)
<PER-SHARE-DIVIDEND> 00.63
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 09.96
<EXPENSE-RATIO> 00.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 6
<NAME> ZERO COUPON BOND FUND PORTFOLIO SERIES 2005

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,022,008
<INVESTMENTS-AT-VALUE> 2,041,435
<RECEIVABLES> 30,400
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 62,184
<TOTAL-ASSETS> 2,134,019
<PAYABLE-FOR-SECURITIES> 49,862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,915
<TOTAL-LIABILITIES> 79,777
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,040,963
<SHARES-COMMON-STOCK> 206,046
<SHARES-COMMON-PRIOR> 100,164
<ACCUMULATED-NII-CURRENT> 94,226
<OVERDISTRIBUTION-NII> 1,326
<ACCUMULATED-NET-GAINS> (7,474)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,427
<NET-ASSETS> 2,054,242
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 96,560
<OTHER-INCOME> 0
<EXPENSES-NET> 2,334
<NET-INVESTMENT-INCOME> 94,226
<REALIZED-GAINS-CURRENT> (5,606)
<APPREC-INCREASE-CURRENT> (17,386)
<NET-CHANGE-FROM-OPS> 71,234
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 106,679
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111,855
<NUMBER-OF-SHARES-REDEEMED> 16,627
<SHARES-REINVESTED> 10,654
<NET-CHANGE-IN-ASSETS> 1,004,321
<ACCUMULATED-NII-PRIOR> 13,259
<ACCUMULATED-GAINS-PRIOR> (1,868)
<OVERDISTRIB-NII-PRIOR> 13,259
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,556
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,556
<AVERAGE-NET-ASSETS> 1,535,767
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> 00.48
<PER-SHARE-GAIN-APPREC> (00.38)
<PER-SHARE-DIVIDEND> 00.61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 09.97
<EXPENSE-RATIO> 00.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 7
<NAME> QUALITY BOND FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,163,204
<INVESTMENTS-AT-VALUE> 5,211,221
<RECEIVABLES> 81,999
<ASSETS-OTHER> 66
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,293,286
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,767
<TOTAL-LIABILITIES> 5,272,519
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,224,502
<SHARES-COMMON-STOCK> 522,059
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48,017
<NET-ASSETS> 5,272,519
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 110,570
<OTHER-INCOME> 0
<EXPENSES-NET> 13,049
<NET-INVESTMENT-INCOME> 97,521
<REALIZED-GAINS-CURRENT> 31,374
<APPREC-INCREASE-CURRENT> 48,017
<NET-CHANGE-FROM-OPS> 176,912
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 98,276
<DISTRIBUTIONS-OF-GAINS> 31,571
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 509,203
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 12,856
<NET-CHANGE-IN-ASSETS> 5,272,519
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,626
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,626
<AVERAGE-NET-ASSETS> 5,122,677
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.19
<PER-SHARE-GAIN-APPREC> 00.16
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 00.25
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.10
<EXPENSE-RATIO> 00.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 8
<NAME> MFS EMERGING GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 12,362,283
<INVESTMENTS-AT-VALUE> 12,343,059
<RECEIVABLES> 335,647
<ASSETS-OTHER> 269,334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,948,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,194
<TOTAL-LIABILITIES> 24,194
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,967,050
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 26,090
<ACCUMULATED-NET-GAINS> 3,166
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (20,280)
<NET-ASSETS> 12,923,846
<DIVIDEND-INCOME> 32,401
<INTEREST-INCOME> 20,837
<OTHER-INCOME> 0
<EXPENSES-NET> 19,843
<NET-INVESTMENT-INCOME> 33,395
<REALIZED-GAINS-CURRENT> 3,166
<APPREC-INCREASE-CURRENT> (20,280)
<NET-CHANGE-FROM-OPS> 16,281
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 59
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,219,525
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5,638
<NET-CHANGE-IN-ASSETS> 1,225,164
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16,919
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 43,169
<AVERAGE-NET-ASSETS> 6,217,309
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.03
<PER-SHARE-GAIN-APPREC> 00.57
<PER-SHARE-DIVIDEND> 00.05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.55
<EXPENSE-RATIO> 00.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 9
<NAME> FEDERATED STOCK PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,986,332
<INVESTMENTS-AT-VALUE> 3,319,605
<RECEIVABLES> 26,131
<ASSETS-OTHER> 55,732
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,401,468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,941
<TOTAL-LIABILITIES> 21,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,048,088
<SHARES-COMMON-STOCK> 304,332
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 17,122
<OVERDISTRIBUTION-NII> 878
<ACCUMULATED-NET-GAINS> 29,045
<OVERDISTRIBUTION-GAINS> 956
<ACCUM-APPREC-OR-DEPREC> 333,273
<NET-ASSETS> 3,379,527
<DIVIDEND-INCOME> 24,496
<INTEREST-INCOME> 3,116
<OTHER-INCOME> 27,612
<EXPENSES-NET> 10,490
<NET-INVESTMENT-INCOME> 17,122
<REALIZED-GAINS-CURRENT> 29,045
<APPREC-INCREASE-CURRENT> 333,273
<NET-CHANGE-FROM-OPS> 379,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,000
<DISTRIBUTIONS-OF-GAINS> 30,001
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 300,008
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4,324
<NET-CHANGE-IN-ASSETS> 3,379,527
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,563
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,490
<AVERAGE-NET-ASSETS> 3,252,900
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.06
<PER-SHARE-GAIN-APPREC> 01.20
<PER-SHARE-DIVIDEND> 00.06
<PER-SHARE-DISTRIBUTIONS> 00.10
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> 00.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 10
<NAME> FEDERATED HIGH YIELD PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,076,152
<INVESTMENTS-AT-VALUE> 5,225,435
<RECEIVABLES> 90,286
<ASSETS-OTHER> 26,647
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,403,571
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,468
<TOTAL-LIABILITIES> 22,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,170,633
<SHARES-COMMON-STOCK> 516,375
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 154,634
<OVERDISTRIBUTION-NII> 2,116
<ACCUMULATED-NET-GAINS> 16,573
<OVERDISTRIBUTION-GAINS> 929
<ACCUM-APPREC-OR-DEPREC> 209,283
<NET-ASSETS> 5,381,103
<DIVIDEND-INCOME> 2,877
<INTEREST-INCOME> 168,489
<OTHER-INCOME> 0
<EXPENSES-NET> 16,732
<NET-INVESTMENT-INCOME> 154,634
<REALIZED-GAINS-CURRENT> 16,573
<APPREC-INCREASE-CURRENT> 209,283
<NET-CHANGE-FROM-OPS> 380,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 152,518
<DISTRIBUTIONS-OF-GAINS> 17,502
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 500,058
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 16,317
<NET-CHANGE-IN-ASSETS> 5,381,103
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,505
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,732
<AVERAGE-NET-ASSETS> 5,186,075
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.31
<PER-SHARE-GAIN-APPREC> 00.46
<PER-SHARE-DIVIDEND> 00.31
<PER-SHARE-DISTRIBUTIONS> 00.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 00.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 11
<NAME> LAZARD INTERNATIONAL EQUITY PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,876,736
<INVESTMENTS-AT-VALUE> 4,187,773
<RECEIVABLES> 28,252
<ASSETS-OTHER> 130,814
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,346,839
<PAYABLE-FOR-SECURITIES> 6,430
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,080
<TOTAL-LIABILITIES> 24,510
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,009,241
<SHARES-COMMON-STOCK> 400,880
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (7,700)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 311,067
<NET-ASSETS> 4,322,329
<DIVIDEND-INCOME> 18,538
<INTEREST-INCOME> 9,753
<OTHER-INCOME> 0
<EXPENSES-NET> 21,207
<NET-INVESTMENT-INCOME> 7,084
<REALIZED-GAINS-CURRENT> (5,063)
<APPREC-INCREASE-CURRENT> 311,067
<NET-CHANGE-FROM-OPS> 306,004
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,009,241
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,322,369
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,997
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 44,689
<AVERAGE-NET-ASSETS> 4,086,955
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.02
<PER-SHARE-GAIN-APPREC> 00.76
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.78
<EXPENSE-RATIO> 01.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 12
<NAME> EQUITY INCOME PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,262,574
<INVESTMENTS-AT-VALUE> 3,574,624
<RECEIVABLES> 46,277
<ASSETS-OTHER> 1,439
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,622,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,943
<TOTAL-LIABILITIES> 21,943
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,275,445
<SHARES-COMMON-STOCK> 324,747
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,902
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 312,050
<NET-ASSETS> 3,600,397
<DIVIDEND-INCOME> 27,559
<INTEREST-INCOME> 8,215
<OTHER-INCOME> 0
<EXPENSES-NET> 10,318
<NET-INVESTMENT-INCOME> 25,456
<REALIZED-GAINS-CURRENT> 13,230
<APPREC-INCREASE-CURRENT> 312,050
<NET-CHANGE-FROM-OPS> 350,736
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,784
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,249,728
<NUMBER-OF-SHARES-REDEEMED> 67
<SHARES-REINVESTED> 25,784
<NET-CHANGE-IN-ASSETS> 324,747
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,203
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50,432
<AVERAGE-NET-ASSETS> 3,260,957
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.08
<PER-SHARE-GAIN-APPREC> 01.09
<PER-SHARE-DIVIDEND> 00.08
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 00.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000880583
<NAME> THE TRAVELERS SERIES TRUST
<SERIES>
<NUMBER> 13
<NAME> LARGE CAP PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,044,938
<INVESTMENTS-AT-VALUE> 3,390,406
<RECEIVABLES> 42,654
<ASSETS-OTHER> 366
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,433,426
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,942
<TOTAL-LIABILITIES> 21,942
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,023,210
<SHARES-COMMON-STOCK> 302,060
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 42,806
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 345,468
<NET-ASSETS> 3,411,484
<DIVIDEND-INCOME> 15,218
<INTEREST-INCOME> 5,702
<OTHER-INCOME> 0
<EXPENSES-NET> 10,316
<NET-INVESTMENT-INCOME> 10,604
<REALIZED-GAINS-CURRENT> 44,241
<APPREC-INCREASE-CURRENT> 345,468
<NET-CHANGE-FROM-OPS> 400,313
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,039
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,011,171
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 12,039
<NET-CHANGE-IN-ASSETS> 3,411,484
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,211
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50,562
<AVERAGE-NET-ASSETS> 3,251,904
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 00.04
<PER-SHARE-GAIN-APPREC> 01.29
<PER-SHARE-DIVIDEND> 00.04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.29
<EXPENSE-RATIO> 00.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE> 1
EXHIBIT 8(a)

CHASE

GLOBAL CUSTODY AGREEMENT

This Agreement is effective December 6, 1996 and is between THE CHASE
MANHATTAN BANK ("Bank") and each of the investment companies listed on Exhibit
I hereto, as amended from time to time, each acting on its own behalf and not
on behalf of any other investment company and each being solely responsible for
its obligations (each, a "Customer").

1. CUSTOMER ACCOUNTS.

Bank shall establish and maintain the following accounts ("Accounts"):

(a) A custody account in the name of Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3) for the account of Customer ("Securities"), and

(b) A deposit account in the name of Customer ("Deposit Account")
for any and all cash in any currency received by Bank or its Subcustodian for
the account of Customer, which cash shall not be subject to withdrawal by draft
or check

Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Bank may deliver securities of
the same class in place of those deposited in the Custody Account.

Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.

2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.

Unless Instructions specifically require another location acceptable
to Bank:

(a) Securities shall be held in the country or other jurisdiction
in which the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such Securities are
acquired, and
<PAGE> 2
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.

Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by,
or under common control with Bank.

If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by Bank and Customer.

3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.

Bank may act hereunder through the subcustodians listed in Schedule A
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.

Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
A. Upon request by Customer, Bank shall identify the name, address and
principal place of business of any Subcustodian of Customer's Assets and the
name and address of the governmental agency or other regulatory authority that
supervises or regulates such Subcustodian.

4. USE OF SUBCUSTODIAN.

(a) Bank shall identify the Assets on its books as belonging to
Customer.

(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
Subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank.

(c) Any Assets in the Accounts held by a Subcustodian shall be
subject only to the instructions of Bank or its agent. Any Securities held in
a securities depository for the account of a Subcustodian shall be subject only
to the instructions of such Subcustodian.

(d) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide that such assets shall not be subject to
any right, charge, security interest, lien or claim of any kind in favor of
such Subcustodian, except for safe custody or administration, and that the
beneficial ownership of such assets shall be freely transferable without the
payment of money or value other than for safe custody or administration. The
<PAGE> 3
foregoing shall not apply to the extent of any special agreement or arrangement
made by Customer with any particular Subcustodian.

5. DEPOSIT ACCOUNT TRANSACTIONS.

(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.

(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion,
may advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.

(c) If Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that
such amount has not been received in the ordinary course of business or (ii)
that such amount was incorrectly credited. If Customer does not promptly
return any amount upon such notification, Bank shall be entitled, upon oral or
written notification to Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim
or proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for Customer upon
Instructions after consultation with Customer.

6. CUSTODY ACCOUNT TRANSACTIONS.

(a) Securities shall be transferred, exchanged or delivered by
Bank or its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made 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 a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.

(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions shall be
credited or debited to the Accounts on the date cash or Securities are actually
received by Bank and reconciled to the Account.

(i) Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to settle
within a reasonable period, determined by Bank in its discretion,
after the contractual settlement date for the related transaction.
<PAGE> 4
(ii) If any Securities delivered pursuant to this Section
6 are returned by the recipient thereof, Bank may reverse the credits
and debits of the particular transaction at any time.

7. ACTIONS OF BANK

Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:

(i) Present for payment any Securities which are called,
redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation, to the
extent that Bank or Subcustodian is actually aware of such
opportunities.

(ii) Execute in the name of Customer such ownership and
other certificates as may be required to obtain payments in respect of
Securities.

(iii) Exchange interim receipts or temporary Securities for
definitive Securities.

(iv) Appoint brokers and agents for any transaction
involving the Securities, including, without limitation, Affiliates of
Bank or are Subcustodian.

(v) Issue statements to Customer, at times mutually
agreed upon, identifying the Assets in the Accounts.

Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any
such statement, Bank shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters set forth in such statement
or reasonably implied therefrom as though it had been settled by the decree of
a court of competent jurisdiction in an action where Customer and all persons
having or claiming an interest in Customer or Customer's Accounts were parties.

All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of
Customer. Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which Bank has agreed to take any action hereunder.

8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.

(a) Corporate Actions. Whenever Bank receives information
concerning the Securities which requires discretionary action by the beneficial
owner of the Securities (other than a proxy), such as subscription rights,
bonus issues, stock repurchase plans and rights offerings, or legal notices or
other material intended to be transmitted to securities holders
<PAGE> 5
("Corporate Actions"), Bank shall give Customer notice of such Corporate
Actions to the extent that Bank's central corporate actions department has
actual knowledge of a Corporate Action in time to notify its customers.

When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, Bank shall endeavor to obtain
Instructions from Customer or its Authorized Person, but if Instructions are
not received in time for Bank to take timely action, or actual notice of such
Corporate Action was received too late to seek Instructions, Bank is authorized
to sell such rights entitlement or fractional interest and to credit the
Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.

(b) Proxy Voting Bank shall provide proxy voting services, if
elected by Customer, in accordance with the terms of the proxy voting services
rider hereto. Proxy voting services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be Affiliates
of Bank).

(i) Subject to the provisions hereof, Bank shall apply
for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of Customer which Bank believes
may be available to such Customer

(ii) The provision of tax reclaim services by Bank is
conditional upon Bank receiving from the beneficial owner of
Securities (A) a declaration of its identity and place of residence
and (B) certain other documentation (pro forma copies of which are
available from Bank). Customer acknowledges that, if Bank does not
receive such declarations, documentation and information, additional
United Kingdom taxation shall be deducted from all income received in
respect of Securities issued outside the United Kingdom and that U.S.
non-resident alien tax or U.S. backup withholding tax shall be
deducted from U.S. source income. Customer shall provide to Bank such
documentation and information as it may require in connection with
taxation, and warrants that, when given, this information shall be
true and correct in every respect, not misleading in any way, and
contain all material information. Customer undertakes to notify Bank
immediately if any such information requires updating or amendment.

(iii) Bank shall not be liable to Customer or any third
party for any tax, fines or penalties payable by Bank or Customer, and
shall be indemnified accordingly, whether these result from the
inaccurate completion of documents by Customer or any third party, or
as a result of the provision to Bank or any third party of inaccurate
or misleading information or the withholding of material information
by Customer or any other third party, or as a result of any delay of
any revenue authority or any other matter beyond the control of Bank.
<PAGE> 6

(iv) Customer confirms that Bank is authorized to deduct
from any cash received or credited to the Deposit Account any taxes or
levies required by any revenue or governmental authority for whatever
reason in respect of the Securities or Cash Accounts.

(v) Bank shall perform tax reclaim services only with
respect to taxation levied by the revenue authorities of the countries
notified to Customer from time to time and Bank may, by notification
in writing, at its absolute discretion, supplement or amend the
markets in which the tax reclaim services are offered. Other than as
expressly provided in this sub-clause, Bank shall have no
responsibility with regard to Customer's tax position or status in any
jurisdiction.

(vi) Customer confirms that Bank is authorized to disclose
any information requested by any revenue authority or any governmental
body in relation to Customer or the Securities and/or Cash held for
Customer.

(vii) Tax reclaim services may be provided by Bank or, in
whole or in part, by one or more third parties appointed by Bank
(which may be Affiliates of Bank); provided that Bank shall be liable
for the performance of any such third party to the same extent as Bank
would have been if it performed such services itself.

9. NOMINEES

Securities which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, Bank may allot
the called portion to the respective beneficial holders of such class of
security in any manner Bank deems to be fair and equitable. Customer shall
hold Bank, Subcustodians, and their respective nominees harmless from any
liability arising directly or indirectly from their status as a mere record
holder of Securities in the Custody Account.

10. AUTHORIZED PERSONS.

As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank
receives Instructions from Customer or its designated agent that any such
employee or agent is no longer an Authorized Person.

11. INSTRUCTIONS.

The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
<PAGE> 7
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded.

Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time. Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.

12. STANDARD OF CARE; LIABILITIES.

(a) Bank shall be responsible for the performance of only such
duties as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:

(i) Bank shall use reasonable care with respect to its
obligations hereunder and the safekeeping of Assets. Bank shall be
liable to Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to
the safekeeping of such Assets to the same extent that Bank would be
liable to Customer if Bank were holding such Assets in New York. In
the event of any loss to Customer by reason of the failure of Bank or
its Subcustodian to utilize reasonable care, Bank shall be liable to
Customer only to the extent of Customer's direct damages, to be
determined based on the market value of the property which is the
subject of the loss at the date of discovery of such loss and without
reference to any special conditions or circumstances. Bank shall have
no liability whatsoever for any consequential, special, indirect or
speculative loss or damages (including, but not limited to, lost
profits) suffered by Customer in connection with the transactions
contemplated hereby and the relationship established hereby even if
Bank has been advised as to the possibility of the same and regardless
of the form of the action. Bank shall not be responsible for the
insolvency of any Subcustodian which is not a branch or Affiliate of
Bank.

(ii) Bank shall not be responsible for any act, omission,
default or the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made negligently or
in bad faith.

(iii) Bank shall be indemnified by, and without liability
to Customer for any action taken or omitted by Bank whether pursuant
to Instructions or otherwise within the scope hereof if such act or
omission was in good faith, without negligence. In performing its
obligations hereunder, Bank may rely on the genuineness of any
document which it believes in good faith to have been validly
executed.
<PAGE> 8
(iv) Customer shall pay for and hold Bank harmless from
any liability or loss resulting from the imposition or assessment of
any taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.

(v) Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for Customer) on all matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.

(vi) Bank need not maintain any insurance for the benefit
of Customer.

(vii) Without limiting the foregoing, Bank shall not be
liable for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular country
including, but not limited to, losses resulting from malfunction,
interruption of or error in the transmission of information caused by
any machines or system or interruption of communication facilities,
abnormal operating conditions, nationalization, expropriation or other
governmental actions; regulation of the banking or securities
industry, currency restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.

(viii) Neither party shall be liable to the other for any
loss due to forces beyond their control including, but not limited to
strikes or work stoppages, acts of war (whether declared or
undeclared) or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.

(b) Consistent with and without limiting the first paragraph of
this Section 12, it is specifically acknowledged that Bank shall have no duty
or responsibility to:

(i) question Instructions or make any suggestions to
Customer or an Authorized Person regarding such Instructions;

(ii) supervise or make recommendations with respect to
investments or the retention of Securities;

(iii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) hereof;

(iv) evaluate or report to Customer or an Authorized
Person regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made pursuant
hereto; and

(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons (as defined in Section
10) issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by
Bank.
<PAGE> 9
(c) Customer authorizes Bank to act hereunder notwithstanding that
Bank or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.

13. FEES AND EXPENSES.

Customer shall pay Bank for its services hereunder such amounts as may
be agreed upon in writing, together with Bank's reasonable out-of-pocket or
incidental expenses, including, but not limited to, legal fees. Bank shall
have a lien on and is authorized to charge any Accounts of Customer for any
amount owing to Bank under any provision hereof

14. MISCELLANEOUS.

(a) Foreign Exchange Transactions. To facilitate the
administration of Customer's trading and investment activity, Bank is
authorized to enter into spot or forward foreign exchange contracts with
Customer or an Authorized Person for Customer and may also provide foreign
exchange through its subsidiaries, Affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but Bank may establish rules or limitations concerning any foreign exchange
facility made available. In all cases where Bank, its subsidiaries, Affiliates
or Subcustodians enter into a foreign exchange contract related to Accounts,
the terms and conditions of the then current foreign exchange contract of Bank,
its subsidiary, Affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.

(b) Certification of Residency, etc. Customer certifies that it
is a resident of the United States and shall notify Bank of any changes in
residency. Bank may rely upon this certification or the certification of such
other facts as may be required to administer Bank's obligations hereunder.
Customer shall indemnify Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.

(c) Access to Records. Bank shall allow Customer's independent
public accountant reasonable access to the records of Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to Customer's affairs. Subject to restrictions under applicable
law, Bank shall also obtain an undertaking to permit Customer's independent
public accountants reasonable access to the records of any Subcustodian which
has physical possession of any Assets as may be required in connection with the
examination of Customer's books and records.

(d) Governing Law. Successors and Assigns. Captions THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by
either party, but shall bind the successors in interest of Customer and Bank.
The
<PAGE> 10
captions given to the sections and subsections of this Agreement are for
convenience of reference only and are not to be used to interpret this
Agreement.

(e) Entire Agreement; Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (Check one):

Employee Benefit Plan or other assets subject to the Employee
-----
Retirement Income Security Act of 1974, as amended ("ERISA");

X Investment Company assets subject to certain U.S. Securities
-----
and Exchange Commission rules and regulations;

Neither of the above.
-----

This Agreement consists exclusively of this document together with Schedule A,
Exhibit I and the following Rider(s) [Check applicable rider(s)]:

ERISA
- ---------

X INVESTMENT COMPANY
- ---------

X PROXY VOTING
- ---------

X SPECIAL TERMS AND CONDITIONS
- ---------

There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both Parties.

(f) Severability. In the event that one or more provisions hereof
are held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.

(g) Waiver. Except as otherwise provided herein, no failure or
delay on the part of either party in exercising any power or right hereunder
operates as a waiver, nor does any single or partial exercise of any power or
right preclude any other or further exercise, or the exercise of any other
power or right. No waiver by a party of any provision hereof, or waiver of any
breach or default, is effective unless in writing and signed by the party
against whom the waiver is to be enforced.

(h) Representations and Warranties. (i) Customer hereby
represents and warrants to Bank that: (A) it has full authority and power to
deposit and control the Securities and cash deposited in the Accounts; (B) it
has all necessary authority to use Bank as its custodian; (C) this Agreement is
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange
<PAGE> 11
transactions; and (E) it has not relied on any oral or written representation
made by Bank or any person on its behalf, and acknowledges that this Agreement
sets out to the fullest extent the duties of Bank. (ii) Bank hereby represents
and warrants to Customer that: (A) it has the power and authority to perform
its obligations hereunder; (B) this Agreement constitutes a legal, valid and
binding obligation on it, enforceable in accordance with its terms; and (C)
that it has taken all necessary action to authorize the execution and delivery
hereof.

(i) Notices. All notices hereunder shall be effective when
actually received. Any notices or other communications which may be required
hereunder are to be sent to the parties at the following addresses or such
other addresses as may subsequently be given to the other party in writing:
(a) Bank: The Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, NY
11245, Attention: Global Custody Division; and (b) Customer: C/O Smith Barney
Inc., 388 Greenwich Street, 22nd Floor, New York, New York 10013, Attn: Lewis
E. Daidone or Christina T. Sydor.

(j) Termination. This Agreement may be terminated by Customer or
Bank by giving sixty (60) days written notice to the other, provided that such
notice to Bank shall specify the names of the persons to whom Bank shall
deliver the Assets in the Accounts. If notice of termination is given by Bank,
Customer shall, within sixty (60) days following receipt of the notice, deliver
to Bank Instructions specifying the names of the persons to whom Bank shall
deliver the Assets. In either case Bank shall deliver the Assets to the
persons so specified, after deducting any amounts which Bank determines in good
faith to be owed to it under Section 13. If within sixty (60) days following
receipt of a notice of termination by Bank, Bank does not receive Instructions
from Customer specifying the names of the persons to whom Bank shall deliver
the Assets, Bank, at its election, may deliver the Assets to a bank or trust
company doing business in the State of New York to be held and disposed of
pursuant to the provisions hereof, or to Authorized Persons, or may continue to
hold the Assets until Instructions are provided to Bank.

(k) Imputation of Certain Information. Bank shall not be held
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a "Chinese Wall" arrangement. If Bank becomes aware of confidential
information which in good faith it feels inhibits it from effecting a
transaction hereunder Bank may refrain from effecting it.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above written.

CUSTOMER
By: Lewis E. Daidone
Title: Senior Vice President and Treasurer
Date: December 6, 1996

THE CHASE MANHATTAN BANK
By: Mary Ellen Costello
Title: Vice President
Date: December 6, 1996
<PAGE> 12
EXHIBIT I
Dated December 6, 1996

Smith Barney World Funds, Inc.
Emerging Market Portfolio
European Portfolio
Global Government Bond Portfolio
International Balanced Portfolio
International Equity Portfolio
Pacific Portfolio

Smith Barney Natural Resources Fund Inc.

Smith Barney Income Funds
Smith Barney Diversified Strategic Income Fund

Consulting Group Capital Markets Funds (TRAK)
International Equity Investments
International Fixed Income Investments
Emerging Markets Equity Investments

The Italy Fund

Travelers Series Fund Inc. (Vintage)
GT Global Strategic Income Portfolio
Smith Barney International Equity Portfolio
Smith Barney Pacific Basin Portfolio

Travelers Series Trust (Architect)
Lazard International Stock Portfolio

Smith Barney Series Trust (Symphony)
Diversified Strategic Income Fund
International Equity Fund
<PAGE> 13
Investment Company Rider to Global Custody Agreement

Between The Chase Manhattan Bank and

Each of the Investment Companies listed on Exhibit l to said Global Custody
Agreement

effective December 6, 1996

Customer represents that the Assets being placed in Bank's custody
are subject to the Investment Company Act of 1940, as amended (the "1940 Act"),
as the same may be amended from time to time.

Except to the extent that Bank has specifically agreed to comply with
a condition of a rule, regulation interpretation promulgated by or under the
authority of the Securities and Exchange Commission ("SEC") or the Exemptive
Order applicable to accounts of this nature issued to Bank (1940 Act, Release
No. 12053, November 20, 1981), as amended, or unless Bank has otherwise
specifically agreed, Customer shall be solely responsible to assure that the
maintenance of Assets hereunder complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.

The following modifications are made to the Agreement:

Section 3. Subcustodians and Securities Depositories.

Add the following language to the end of Section 3:

The terms Subcustodian and securities depositories as used herein
shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are
further defined as follows:

(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as
defined in Rule 17f-5 under the 1940 Act,

(b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company, incorporated or organized under the
laws of a country other than the United States, that is regulated as
such by that country's government or an agency thereof and that has
shareholders' equity in excess of S200 million in U.S. currency (or a
foreign currency equivalent thereof) as of the close of its fiscal
year most recently completed prior to the date hereof, (ii) a
majority owned direct or indirect subsidiary of a qualified U.S. bank
or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has
shareholders' equity in excess of S100 million in U.S. currency (or a
foreign currency equivalent thereof) as of the close of its fiscal
year most recently completed prior to the date hereof, (iii) a
banking institution or trust company incorporated or organized under
the laws of a country other than the United States or a majority
owned direct or indirect subsidiary of a qualified U.S. bank or bank
<PAGE> 14
holding company that is incorporated or organized under the laws of a
country other than the United States which has such other
qualifications as shall be specified in Instructions and approved by
Bank, or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and

(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i)
the central system for handling securities or equivalent book-entries
in that country, or (ii) a transnational system for the central
handling of securities or equivalent book-entries.

Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A hereto, and further represents that its
Board has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Fund(s) and
its (their) shareholders. Bank shall supply Customer with any amendment to
Schedule A for approval. Customer has supplied or shall supply Bank with
certified copies of its Board of Directors resolution(s) with respect to the
foregoing prior to placing Assets with any Subcustodian so approved.

Section 11. Instructions.

Add the following language to the end of Section 11:

Deposit Account Payments and Custody Account Transactions made
pursuant to Section 5 and 6 hereof may be made only for the purposes
listed below. Instructions must specify the purpose for which any
transaction is to be made and Customer shall be solely responsible to
assure that Instructions are in accord with any limitations or
restrictions applicable to Customer by law or as may be set forth in
its prospectus.

(a) In connection with the purchase or sale of Securities at prices
as confirmed by Instructions;

(b) When Securities are called, redeemed or retired, or otherwise
become payable;

(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization recapitalization or readjustment;

(d) Upon conversion of Securities pursuant to their terms into other
securities;

(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;

(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses;
<PAGE> 15
(g) In connection with any borrowings by Customer requiring a pledge
of Securities, but only against receipt of amounts borrowed;

(h) In connection with any loans, but only against receipt of
adequate collateral as specified in Instructions which shall reflect
any restrictions applicable to Customer;

(i) For the purpose of redeeming shares of the capital stock of
Customer and the delivery to, or the crediting to the account of,
Bank, its Subcustodian or Customer's transfer agent, such shares to be
purchased or redeemed;

(j) For the purpose of redeeming in kind shares of Customer against
delivery to Bank, its Subcustodian or Customer's transfer agent of
such shares to be so redeemed;

(k) For delivery in accordance with the provisions of any agreement
among Customer, Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by Customer;

(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to Bank of monies for the premium due and a
receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, Bank shall receive from
brokers the Securities previously deposited. Bank shall act strictly
in accordance with Instructions in the delivery of Securities to be
held in escrow and shall have no responsibility or liability for any
such Securities which are not returned promptly when due other than to
make proper request for such return;

(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions,

(n) For other proper purposes as may be specified in Instructions
issued by an officer of Customer which shall include a statement of
the purpose for which the delivery or payment is to be made, the
amount of the payment or specific Securities to be delivered, the name
of the person or persons to whom delivery or payment is to be made,
and a certification that the purpose is a proper purpose under the
instruments governing Customer, and

(o) Upon the termination hereof as set forth in Section 14(j).

Section 12. Standard of Care: Liabilities.

Add the following at the end of Section as 12:

(d) Bank hereby warrants to Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified
<PAGE> 16
U.S. Bank, each eligible foreign custodian and each eligible foreign
securities depository holding Customer's Securities pursuant hereto
afford protection for such Securities at least equal to that afforded
by Bank's established procedures with respect to similar securities
held by Bank and its securities depositories in New York.

Section 14. Access to Records.

Add the following language to the end of Section 14(c):

Upon reasonable request from Customer, Bank shall furnish Customer
such reports (or portions thereof) of Bank's system of internal
accounting controls applicable to Bank's duties hereunder. Bank shall
endeavor to obtain and furnish Customer with such similar reports as
it may reasonably request with respect to each Subcustodian and
securities depository holding Assets.
<PAGE> 17
Schedule A

<TABLE>
<CAPTION>
COUNTRY NAME OF BRANCH, AFFILIATE OR SUBCUSTODIAN
<S> <C>
Argentina The Chase Manhattan Bank, Buenos Aires
Australia The Chase Manhattan Bank, Sydney
Austria Creditanstalt Bankverein, Vienna
Bangladesh Standard Chartered Bank, Dhaka
Belgium Generale Bank, Brussels
Botswana Barclays Bank of Botswana Limited, Gabarone (guaranteed by
Barclays plc)
Brazil Banco Chase Manhattan, S.A., Sao Paulo
Canada Canada Trust, Toronto
Royal Bank of Canada, Toronto
CEDEL CEDEL, S.A., Luxembourg
Chile Chase Manhattan Bank, Santiago
China (Shanghai) The Hongkong and Shanghai Banking Corporation Limited, Shanghai
China (Shenzhen) The Hongkong and Shanghai Banking Corporation Limited, Shenzhen
Colombia Cititrust Colombia S.A. Sociedad Fiduciaria, Bogota
Cyprus Barclays Bank Plc. Micosia
Czech Republic Ceskoslovenka Obchodni Banka, S.A., Praha
Denmark Den Danske Bank, Copenhagen
Ecuador Citibank, N.A., Quito
Egypt National Bank of Egypt, Cairo
Estonia HansaBank, Tallinn
Eurobonds CEDEL, S.A., Luxembourg
EuroCDs First Chicago Clearing Centre, London (First Chicago Corp.)
Finland Merita Bank, Helsinki
France Banque Paribas, Paris
Germany Chase Bank A.G., Frankfurt
Ghana Barclays Bank of Ghana, Accra (guaranteed by Barclays PLC)
Greece Barclays Bank, PLC, Athens
Hong Kong The Chase Manhattan Bank, Hong Kong
Hungary Citibank Budapest Rt., Budapest
lndia The Hongkong and Shanghai Banking Corporation Limited, Bombay
Deutsche Bank A.G., Bombay
Indonesia The Hongkong and Shanghai Banking Corporation Limited, Jakarta
Ireland Bank of Ireland, Dublin
lsrael Bank Leumi Le-lsrael B.M., Tel Aviv
Italy The Chase Manhattan Bank, Milan
Japan The Chase Manhattan Bank, Tokyo
Jordan Arab Bank Limited, Amman (Arab Banking Corp.)
Kenya Barclays Bank of Kenya Ltd. Nairobi (guaranteed by Barclays PLC)
Lebanon The British Bank of the Middle East, Ras-Beirut
Luxembourg Banque Generale du Luxembourg, S.A., Luxembourg
Malaysia The Chase Manhattan Bank, Kuala Lumpur
Mauritius The Hongkong and Shanghai Banking Corporation Limited
</TABLE>
<PAGE> 18
Schedule A (continued)

<TABLE>
<CAPTION>
COUNTRY NAME OF BRANCH,:AFFILIATE OR SUBCUSTODIAN
<S> <C>
Mexico The Chase Manhattan Bank (Equities)
Banco de Nacional de Mexico (Govt bonds)
Morocco Banque Commerciale du Maroc
Namibia Standard Bank Namibia Ltd, Windhoek
Netherlands ABN AMRO N.V., De Breda
New Zealand National Australia Bank Limited, Auckland
Norway Den Norske Bank, Oslo
Oman The British Bank of the Middle East, Muscat
Pakistan Citibank N.A., Karachi
Deutsche Bank A.G., Karachi
Peru Citibank, N.A., Lirna
Philippines The Hongkong and Shanghai Banking Corporation Limited, Manila
Poland Bank Handlowy W. Warzawie, S.A., Warsaw
Bank Polska Kasa Opieki S.A., Warsaw
Portugal Banco Espirito Santo and Commercial de Lisboa, Lisbon
Russia The Chase Manhattan Bank International. Moscow
Singapore The Chase Manhattan Bank, Singapore
Slovak Republic Ceskosloveneska Obchodni Banka, S.A., Bratislava
South Africa Standard Bank of South Africa, Johannesburg
South Korea The Hongkong and Shanghai Banking Corporation Limited, Seoul
Spain The Chase Manhattan Bank, Madrid
Sri Lanka The Hongkong and Shanghai Banking Corporation, Limited, Colombo
Swaziland Stanbic Bank Swaziland Ltd., Mbabane
Sweden Skandinaviska Enskilda Banken, Stockholm
Switzerland Union Bank of Switzerland, Zurich
Taiwan The Chase Manhattan Bank, Taiwan
Thailand The Chase Manhattan Bank, Bangkok
Tunisia Banque Internationale Arabe de Tunisie
Turkey The Chase Manhattan Bank, Istanbul
United Kingdom The Chase Manhattan Bank, London
United States The Chase Manhattan Bank, New York
Uruguay The First National Bank of Boston, N.A., Montevideo
Venezuela Citibank N.A., Caracas
Zambia Barclays Bank of Zambia, Lusaka (guaranteed by Barclays PLC)
Zimbabwe Barclays Bank of Zimbabwe, Harare (guaranteed by Barclays PLC)
</TABLE>

2
<PAGE> 19
GLOBAL PROXY SERVICE RIDER

To Global Custody Agreement

Between

THE CHASE MANHATTAN BANK

AND

Each of the Investment Companies Listed on Exhibit I to said Global Custody
Agreement

Dated December 6, 1996.

1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time to
time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.

2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by
Bank to Customer of the dates of pending Shareholder meetings,
resolutions to be voted upon and the return dates as may be received
by Bank or provided to Bank by its Subcustodians or third parties, and
(b) voting by Bank of proxies based on Customer Directions. Original
proxy materials or copies thereof shall not be provided.
Notifications shall generally be in English and, where necessary,
shall be summarized and translated from such non-English materials as
have been made available to Bank or its Subcustodian. In this respect
Bank's only obligation is to provide information from sources it
believes to be reliable and/or to provide materials summarized and/or
translated in good faith. Bank reserves the right to provide
Notifications, or parts thereof, in the language received. Upon
reasonable advance request by Customer, backup information relative to
Notifications, such as annual reports, explanatory material concerning
resolutions, management recommendations or other material relevant to
the exercise of proxy voting rights shall be provided as available,
but without translation.

3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be liable for
any losses or other consequences that may result from reliance by
Customer upon Notifications where Bank prepared the same in good
faith.

4. Notwithstanding the fact that Bank may act in a fiduciary capacity
with respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer and shall not exercise any discretion with
regard to such Proxy Services.
<PAGE> 20
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Securities are: (i) on loan, (ii) at registrar for registration or
reregistration; (iii) the subject of a conversion or other corporate
action, (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations
or practices or restrictions by the issuer, or (vi) held in a margin
or collateral account.

6. Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a
net basis (e.g., a net yes or no vote given the voting instructions
received from all customers).

7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall
in no event sell, license, give or otherwise make the information
provided hereunder available, to any third party, and shall not
directly or indirectly compete with Bank or diminish the market for
Proxy Services by provision of such information, in whole or in part,
for compensation or otherwise, to any third party.

8. The names of Authorized Persons for Proxy Services shall be furnished
to Bank in accordance with Section 10 of the Agreement. Proxy
Services fees shall be as set forth in Section 13 of the Agreement or
as separately agreed.

2
<PAGE> 21

DOMESTIC AND GLOBAL

SPECIAL TERMS AND CONDITIONS RIDER

Domestic Corporate Actions and Proxies

With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:

Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of
Bank's nominee or the nominee of a central; depository) and
communications with respect to Securities in the Custody Account as
call for voting or relate to legal proceedings within a reasonable
time after sufficient copies are received by Bank for forwarding to
its customers. In addition, Bank shall follow coupon payments,
redemptions, exchanges or similar matters with respect to Securities
in the Custody Account and advise Customer or the Authorized Person
for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of
which Bank has received notice from the issuer of the Securities, or
as to which notice is published in publications routinely utilized by
Bank for this purpose.

<PAGE> 1
EXHIBIT 9(f)

FUND PARTICIPATION AGREEMENT

This Agreement is entered into as of the 31st day of July, 1996, between The
Travelers Insurance Company, and its affiliate The Travelers Life and Annuity
Company (collectively, "Travelers"), both life insurance companies organized
under the laws of the State of Connecticut, and Travelers Series Trust (the
"Fund"), a trust organized under the laws of the State of Massachusetts.

ARTICLE I

DEFINITIONS

1.1 "Act" shall mean the Investment Company Act of 1940, as amended.

1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.

1.3 "Business Day" shall mean a day on which both Travelers and the New
York Stock Exchange are open for business.

1.4 "Commission" shall mean the Securities and Exchange Commission.

1.5 "Contract" shall mean a variable annuity contract or a variable life
insurance contract that uses the Fund as an underlying investment
medium. Individuals who participate under a group Contract are
"Participants".

1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.

1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined
by the Act.

1.8 "TAMIC" shall mean Travelers Asset Management International
Corporation.

1.9 "Participating Companies" shall mean any insurance company (including
Travelers), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund similar hereto for the purpose of making Fund
shares available to serve as the underlying investment medium for the
aforesaid Contracts.

1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE> 2
1.11 "Separate Account" shall mean the applicable variable life or variable
annuity separate account established by Travelers in accordance with
the laws of the State of Connecticut. The Separate Accounts are listed
in Schedule A to the Agreement.

1.12 "Software Program"' shall mean the software program used by the Fund
for providing Fund and account balance information including net asset
value per share. In situations where the Software Program used by the
Fund is not available, such information may be provided by telephone.
Any such software shall be provided to Travelers at no charge.

1.13 "Travelers' General Account(s)" shall mean the general account(s) of
Travelers and its affiliates which invest in the Fund

ARTICLE II

REPRESENTATIONS

2.1 Travelers represents and warrants that: (a) it is an insurance company
duly organized and in good standing under applicable law; (b) it has
legally and validly established the Separate Account pursuant to the
Connecticut Insurance Code for the purpose of offering to the public
certain group and individual variable annuity contracts; and (c) it
has registered the Separate Account as a unit investment trust under
the Act to serve as the segregated investment account for the
Contracts.

2.2 Travelers represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act
of 1933, as amended ("1933 Act"); (b) the Contracts will be issued and
sold in compliance in all material respects with all applicable
federal and state laws; and (c) the sale of the Contracts shall comply
in all respects with state insurance law requirements.

2.3 Travelers represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to the Separate Account
are, in accordance with the applicable Contracts, to be credited to or
charged against such Separate Account without regard to other income,
gains or losses from assets allocated to any other accounts of
Travelers. Travelers represents and warrants that the assets of the
Separate Account are and will be kept separate from Traveler's General
Accounts and any other separate accounts Travelers may have, and will
not be charged with liabilities from any business that Travelers may
conduct or the liabilities of any companies affiliated with Travelers.

2.4(a) Fund represents that the Fund is registered with the Commission under
the Act as an open-end, non-diversified management investment company
and possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies. Fund further respresents and warrants that it is registered
as a

2
<PAGE> 3
non-diversified, open-end management company under the Investment
Company Act of 1940 ("1940 Act") and that it does and will comply in
all material respects with the 1940 Act.

2.4(b) Fund represents and warrants that any charges assessed against the
Fund are, in the aggregate, reasonable in relation to the services
rendered, and the expenses incurred or expected to be incurred.

2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify Travelers immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.

2.6 Travelers represents that the Contracts are currently treated as life
insurance policies or annuity contracts, under applicable provisions
of the Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.

2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the
Code.

2.8 Fund agrees to establish one account in the name of Travelers and its
affiliates and to make its shares available to such account. The
shares shall be offered to the Separate Account and to Travelers'
General Account at the net asset value of such shares.

2.9 Travelers and Fund agree that (1) Travelers shall be permitted
(subject to the other terms of this Agreement) to utilize and employ
other management investment companies as underlying investment media
for the Separate Account, and (2) Fund shall be permitted (subject to
the other terms of this Agreement) to make Fund shares available to
other Participating Companies and contractholders.

2.10 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who
deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less
than that required by Rule 17g-1 under the Act. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.

2.11 Travelers represents and warrants that all of its employees and agents
who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required

3
<PAGE> 4
to be maintained by the Fund. The aforesaid Bond shall include
coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.

2.12 If the Travelers issues variable life insurance policies through a
Separate Account or the Fund enters into a participation agreement
with a Participating Company (including Travelers) offering variable
life insurance policies through a separate account investing in the
Fund, Travelers and the Fund will promptly amend this Agreement to add
any provisions, conditions or undertakings required by an exemptive
order under the Act on which the Fund is then relying.

ARTICLE III

FUND SHARES

3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the shares of the Fund.

3.2 Fund agrees to make its shares available for purchase at the
applicable net asset value per share by Travelers and the Separate
Account on those days on which the Fund calculates its net asset value
pursuant to rules of the Commission and the Fund shall use all
reasonable efforts to calculate such net asset value on each Business
Day. Notwithstanding the foregoing, the Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of the
Fund's shares if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Board, acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary and in the best
interests of the Fund's shareholders.

3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates. No Fund shares
will be sold to the general public.

3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information on a per-share and Fund basis to
Travelers by 6:00 p.m. Eastern Time on each Business Day. Any material
errors in the calculation of net asset value, dividend and capital
gain information shall be reported immediately upon discovery to
Travelers. Non-material errors will be corrected in the next Business
Day's net asset value per share.

3.5 At the end of each Business Day, Travelers will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account
unit values for the day. Using this unit value, Travelers will process
the day's Separate Account transactions received by it by the close of
trading on the floor of the New York Stock Exchange (currently 4:00
p.m. Eastern time) to determine the net dollar amount of Fund shares
which will be purchased or redeemed at that day's closing net asset
value per share. The net purchase or redemption orders will be
transmitted to the Fund by Travelers by 11:00 a.m. Eastern

4
<PAGE> 5
Time on the Business Day next following Travelers' receipt of that
information. Subject to Section 3.6, all purchase and redemption
orders for Travelers' General Accounts shall be effected at the net
asset value per share next calculated after receipt of the order by
the Fund or its Transfer Agent.

3.6 Fund appoints Travelers as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for
the Separate Account. Fund will execute orders at the net asset value
per share determined as of the close of trading on the day of receipt
of such orders by Travelers acting as agent ("effective trade date"),
provided that the Fund receives notice of such orders by 11:00 a.m.
Eastern Time on the next following Business Day.

3.7 Travelers will make its best efforts to notify Fund in advance of any
unusually large purchase or redemption orders.

3.8 If Travelers' order requests the purchase of Fund shares, Travelers
will pay for such purchases by wiring Federal Funds to Fund or its
designated custodial account on the day the order is transmitted. If
payment in Federal Funds for any purchase is received by the Fund
after 12:00 noon on the business day on which the applicable purchase
request was received by the Fund pursuant to Section 3.5, Travelers
shall promptly upon the Fund's request, reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred by the Fund
in connection with any advances to, or borrowings or overdrafts by,
the Fund as a result of portfolio transactions effected by the Fund
based upon such purchase request. If Travelers' order requests the
redemption of Fund shares valued at or greater than $1 million
dollars, the Fund will wire such amount to Travelers within seven days
of the order.

3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.

3.10 Fund will confirm each purchase or redemption order made by Travelers.
Transfer of Fund shares will be by book entry only. No stock
certificates will be issued to Travelers. Travelers will record shares
ordered from Fund in an appropriate title for the corresponding
account.

3.11 Fund shall credit Travelers with the appropriate number of shares.

3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Travelers the
amount of dividend and capital gain, if any, per share. All dividends
and capital gains shall be automatically reinvested in additional
shares of the Fund at the net asset value per share of the Fund on the
ex-dividend date. Fund shall, on the day after the ex-dividend date
or, if not a Business Day, on the first Business Day thereafter,
notify Travelers of the number of shares so issued.

5
<PAGE> 6
ARTICLE IV

STATEMENTS AND REPORTS

4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Travelers' accounts by the fifteenth (15th) Business
Day of the following month.

4.2 Fund shall distribute to Travelers copies of the Fund's Prospectuses,
proxy materials, notices, periodic reports and other printed materials
(which the Fund customarily provides to its shareholders) in
quantities as Travelers may, reasonably request for distribution to
each Contractholder and Participant.

4.3 Fund will provide to Travelers at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Commission or other
regulatory authorities.

4.4 Travelers will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Contracts or the Separate Account,
contemporaneously with the filing of such document with the
Commission.

ARTICLE V

EXPENSES

5.1 The charge to the Fund for all expenses and costs of the Fund,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of
the Fund's daily net asset value per share so as to accumulate to an
annual charge at the rate set forth in the Fund's Prospectus. Excluded
from the expense limitation described herein shall be brokerage
commissions and transaction fees and extraordinary expenses.

5.2 Except as provided in this Article V and, in particular in the next
sentence, Travelers shall not be required to pay directly any expenses
of the Fund or expenses relating to the distribution of its shares.
Travelers shall pay the following expenses or costs:

a. Such amount of the production expenses of any Fund materials or
marketing materials for prospective Travelers Contractholders
and Participants as TAMIC and Travelers shall agree from time to
time.

6
<PAGE> 7
b. Distribution expenses of any Fund materials or marketing
materials for prospective Travelers Contractholders and
Participants.

c. Distribution expenses of Fund materials or marketing materials
for Travelers Contractholders and Participants.

Except as provided herein, all other Fund expenses shall not be borne
by Travelers.

ARTICLE VI

EXEMPTIVE RELIEF

6.1 Travelers has reviewed a copy of the order dated August 23, 1989 of
the Securities and Exchange Commission under Section 6(c) of the Act
and, in particular, has reviewed the conditions to the relief set
forth in the related Notice. As set forth therein, Travelers agrees to
report any potential or existing conflicts promptly to the Board, and
in particular whenever contract voting instructions are disregarded,
and recognizes that it will be responsible for assisting the Board in
carrying out its responsibilities under such application. Travelers
agrees to carry out such responsibilities with a view to the interests
of existing Contractholders.

6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in the Fund, the Board shall
give prompt notice to all Participating Companies. If the Board
determines that Travelers is responsible for causing or creating said
conflict, Travelers shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the
Disinterested Board Members), take such action as is necessary to
remedy or eliminate the irreconcilable material conflict. Such
necessary action may include, but shall not be limited to:

a. Withdrawing the assets allocable to the Separate Account from
the Fund and reinvesting such assets in a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote or all affected Contractholders;
and/or

b. Establishing a new registered management investment company.

6.3 If a material irreconcilable conflict arises as a result of a decision
by Travelers to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority
vote by all Contractholders having an interest in the Fund, Travelers
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund.

7
<PAGE> 8
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will
the Fund be required to bear the expense of establishing a new funding
medium for any Contract. Travelers shall not be required by this
Article to establish a new funding medium for any Contract if an offer
to do so has been declined by vote of a majority of the
Contractholders materially adversely affected by the irreconcilable
material conflict.

6.5 No action by Travelers taken or omitted, and no action by the Separate
Account or the Fund taken or omitted as a result of any act or failure
to act by Travelers pursuant to this Article VI shall relieve
Travelers of its obligations under, or otherwise affect the operation
of, Article V.

ARTICLE VII

VOTING OF FUND SHARES

7.1 Fund shall provide Travelers with copies at no cost to Travelers, of
the Fund's proxy material, reports to stockholders and other
communications to stockholders in such quantity as Travelers shall
reasonably require for distributing to Contractholders or
Participants.

Travelers shall:

(a) solicit voting instructions from Contractholders or Participants
on a timely basis and in accordance with applicable law;

(b) vote the Fund shares in accordance with instructions received
from Contractholders or Participants; and

(c) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares for which instructions have
been received.

Travelers agrees at all times to votes its General Account shares in
the same proportion as Fund shares for which instructions have been
received from Contractholders or Participants.

8
<PAGE> 9
ARTICLE VIII

MARKETING AND REPRESENTATIONS

8.1 The Fund or its underwriter shall periodically furnish Travelers with
the following documents, in quantities as Travelers may reasonably
request:

a. Current Prospectus and any supplements thereto;

b. other marketing materials.

Expenses for the production of such documents may be borne by
Travelers in accordance with Section 5.2 of this Agreement.

8.2 Travelers shall designate certain persons or entities which shall have
the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Travelers. Travelers shall make
reasonable efforts to market the Contracts and shall comply with all
applicable federal and state laws in connection therewith.

8.3 Travelers shall furnish, or shall cause to be furnished, to the Fund,
each piece of sales literature or other promotional material in which
the Fund, its investment adviser or the administrator is named, at
least fifteen Business Days prior to its use. No such material shall
be used unless the Fund approves such material. Such approval (if
given) must be in writing and shall be presumed not given if not
received within ten Business Days after receipt of such material. The
Fund shall use all reasonable efforts to respond within ten days of
receipt.

8.4 Travelers shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information
or representations contained in the registration statement or
Prospectus, as may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund.

8.5 Fund shall furnish, or shall cause to be furnished, to Travelers, each
piece of the Fund's sales literature or other promotional material in
which Travelers or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Travelers approves such material. Such approval (if given) must be in
writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Travelers shall use all
reasonable efforts to respond within ten days of receipt.

8.6 Fund shall not, in connection with the sale of Fund shares, give any
information or make any representations on behalf of Travelers or
concerning Travelers, the Separate Account, or the Contracts other
than the information or representations contained in a registration

9
<PAGE> 10
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the
Separate Account which are in the public domain or approved by
Travelers for distribution to Contractholders or Participants, or in
sales literature or other promotional material approved by Travelers.

ARTICLE IX

INDEMNIFICATION

9.1 Travelers agrees to indemnify and hold harmless the Fund, TAMIC, the
Fund's investment adviser, and their affiliates, and each of their
directors, officers, employees, agents and each person, if any, who
controls any of the foregoing entities or persons within the meaning
of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of Section 9.1), against any losses, claims, damages or liabilities
for which the Indemnified Parties may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in information furnished by Travelers for use
in the registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account or
Contracts, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in
the Prospectus and sales literature or advertisements of the Fund) of
Travelers or its agents, with respect to the sale and distribution of
Contracts for which Fund shares are an underlying investment; and
Travelers will reimburse any Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Travelers will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission or
alleged omission made in such registration statement, prospectus,
sales literature, or advertisement in conformity with written
information furnished to Travelers by the Fund specifically for use
therein. This indemnity agreement will be in addition to any liability
which Travelers may otherwise have.

9.2 The Fund agrees to indemnify and hold harmless Travelers and each of
its directors, officers, employees, agents and each person, if any,
who controls Travelers within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Travelers or any such
director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (1)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or Prospectus or sales literature or advertisements of the Fund; (2)
arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the Fund any material fact required to be stated
therein or

10
<PAGE> 11
necessary to make the statements therein not misleading; or (3) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or Prospectus or sales literature or advertisements with respect to
the Separate Account or the Contracts and such statements were based
on information provided to Travelers by the Fund; and the Fund will
reimburse any legal or other expenses reasonably incurred by Travelers
or any such director, officer, employee, agent or controlling person
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Fund will not
be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such Registration Statement,
Prospectus, sales literature or advertisements in conformity with
written information furnished to the Fund by Travelers specifically
for use therein. This indemnity agreement will be in addition to any
liability which the Fund may otherwise have.

9.3 The Fund shall indemnify and hold Travelers harmless against any and
all liability, loss, damages, costs or expenses which Travelers may
incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital
gain distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the Fund shall have no
obligation to indemnify and hold harmless Travelers if the incorrect
calculation or incorrect or untimely reporting was the result of
incorrect information furnished by Travelers or information furnished
untimely by Travelers.

9.4 Travelers shall indemnify and hold the Fund harmless against any and
all liability, loss, damages, costs or expenses which the Fund may
incur, suffer or be required to pay due to Travelers' incorrect
calculation and/or untimely reporting of net purchase or redemption
orders.

9.5 Promptly after receipt by an indemnified party under this Article of
notices of the commencement of action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof; but the omission to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Article. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such
indemnified party, and to the extent that the indemnifying party has
given notice to such effect to the indemnified party and is performing
its obligations under this Article, the indemnifying party shall not
be liable for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, other
than reasonable costs of investigation.

11
<PAGE> 12
9.6 Travelers shall indemnify and hold the Fund and the Fund's investment
adviser harmless against any tax liability incurred by the Fund under
Section 851 of the Code arising from purchases or redemptions by
Travelers' General Accounts or the account of its affiliates.

ARTICLE X

COMMENCEMENT AND TERMINATION

10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.

10.2 This Agreement shall terminate without penalty:

a. At the option of Travelers or the Fund at any time from the date
hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;

b. At the option of Travelers, if any of the Fund's shares are not
reasonably available to meet the requirements of the Contracts
as determined by Travelers. Prompt notice of election to
terminate shall be furnished by Travelers, said termination to
be effective ten days after receipt of notice unless the Fund
makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;

c. At the option of Travelers, upon the institution of formal
proceedings against the Fund by the Commission, National
Association of Securities Dealers or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which
would, in Travelers' reasonable judgment, materially impair the
Fund's ability to meet and perform the Fund's obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by Travelers with said termination to be effective
upon receipt of notice

d. At the option of the Fund, upon the institution of formal
proceedings against Travelers by the Commission, National
Association of Securities Dealers or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which
would, in the Fund's reasonable judgment, materially impair
Travelers' ability to meet and perform Travelers obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by the Fund with said termination to be effective
upon receipt of notice;

e. At the option of the Fund, if the Fund shall determine, in its
sole judgment reasonably exercised in good faith, that Travelers
has suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operation of the Fund, the Fund shall notify Travelers in
writing of such determination and its intent to terminate this

12
<PAGE> 13
Agreement, and after considering the actions taken by Travelers
and any other changes in circumstances since the giving of such
notice, such determination of the Fund shall continue to apply
on the sixtieth (60th) day following the giving of such notice,
which sixtieth day shall be the effective date of termination:

f. Upon termination of the Management Agreement between the Fund
and Wells Fargo Nikko Investment Advisors or its successors
unless Travelers specifically approves the selection of a new
Fund manager. The Fund shall promptly furnish notice of such
termination to Travelers;

g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Travelers.
Termination shall be effective immediately upon such occurrence
without notice;

h. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal law; or

I. Upon assignment of this-Agreement, unless made with the written
consent of the non-assigning party.

Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2h herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.

ARTICLE XI

AMENDMENTS

11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Travelers and Fund.

13
<PAGE> 14
ARTICLE XII

NOTICE

12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:

Travelers: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
Attn: William D. Wilcox

Fund: The Travelers Series Trust
One Tower Square
Hartford, CT 06183
Attn: Kathleen A. McGah

Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.

ARTICLE XIII

MISCELLANEOUS

13.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.

14
<PAGE> 15
ARTICLE XIV

LAW

14.1 This Agreement shall be construed in accordance with the internal laws
of the State of New York without giving effect to principles of
conflict of laws.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement (or
amendment thereto) to be duly executed and attested as of the date first above
written.

Company:

THE TRAVELERS INSURANCE COMPANY, on
behalf of itself and its affiliate,
Travelers Life and Annuity Company,
By its authorized officer,

Attest
----------------------
William D. Wilcox

THE TRAVELERS SERIES TRUST:

By its authorized officer,

--------------------------
Attest Kathleen A. McGah

15
<PAGE> 16
Schedule A:

<TABLE>
<CAPTION>
DATE THE SEPARATE ACCOUNT WAS ESTABLISHED
BY TRAVELERS INSURANCE COMPANY (TIC) OR
NAME OF ACCOUNT TRAVELERS LIFE AND ANNUITY COMPANY (TLAC)
--------------- -----------------------------------------
<S> <C> <C>
1. The Travelers Fund U for Variable Annuities September 2, 1982 (TIC)

2. The Travelers Fund UL November 10, 1983 (TIC)

3. The Travelers Fund UL II October 17, 1995 (TLAC)

4. The Travelers Fund VA for Variable Annuities August 18, 1994 (TIC)

5. The Travelers Separate Account QP December 26, 1995 (TIC)

6. The Travelers Separate Account QP II February 19, 1996 (TLAC)

7. The Travelers Separate Account Two
for Variable Life Insurance October 16, 1996 (TLAC)

8. The Travelers Separate Account Four
for Variable Life Insurance October 16, 1996 (TIC)

9. The Travelers Fund ABD for Variable Annuities October 17, 1995 (TIC)

10. The Travelers Fund ABD for Variable Annuities October 17, 1995 (TIC)
</TABLE>

16
<PAGE> 17
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of July 31, 1996.

Company:

THE TRAVELERS INSURANCE COMPANY, on
behalf of itself and its affiliate,
Travelers Life and Annuity Company,
By its authorized officer,

Attest

Fund:

FUND
-----------
By its authorized officer,

Attest

<PAGE> 1
EXHIBIT 11(A)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Post-Effective Amendment
No. 19 to the Registration Statement of The Travelers Series Trust on Form N-1A
(File Nos. 33-43628; 811-6465) of our reports dated February 24, 1997, on our
audits of the financial statements and financial highlights of the U.S.
Government Securities Portfolio, Social Awareness Stock Portfolio, Utilities
Portfolio and the Zero Coupon Bond Fund Portfolios (Series 1998, 2000, 2005),
which reports are included in the applicable Annual Reports of The Travelers
Series Trust for the year ended December 31, 1996 which are incorporated by
reference in this Post-Effective Amendment to the Registration Statement 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.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
April __, 1997
<PAGE> 2

Independent Auditors' Consent

To the Shareholders and Board of Trustees of
Travelers Series Trust

We consent to the use of our report on the Travelers Quality Bond, Lazard
International Stock, MFS Emerging Growth, Federated High Yield, and Federated
Stock Portfolios of the Travelers Series Trust dated February 19, 1997
incorporated herein by reference and to the references to our Firm under the
headings "Financial Highlights" in the Prospectus and "Additional Information"
in the Statement of Additional Information.

KPMG Peat Marwick LLP

New York, New York

April __, 1997