<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. 18
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
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).
____ on __________ pursuant to paragraph (b).
X 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 WILL BE FILED
PRIOR TO MARCH 1, 1997.
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THE TRAVELERS SERIES TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933
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ITEM
NO. CAPTION IN PROSPECTUS
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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 The Travelers Series Trust; Dividends
and Distributions; Shareholder Rights
Net Asset Value
7. Purchase of Securities Being Offered Shareholder Rights
8. Redemption or Repurchase Share Redemption
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
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Advisory Services; Investment
Other Services Subadvisers; 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 Financial Statements
</TABLE>
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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
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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.
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TABLE OF CONTENTS
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<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
THE TRAVELERS SERIES TRUST............................................................ 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
SHARES OF THE SERIES TRUST............................................................ 16
NET ASSET VALUE....................................................................... 16
TAX STATUS............................................................................ 17
DIVIDENDS AND DISTRIBUTIONS........................................................... 17
LEGAL PROCEEDINGS..................................................................... 17
ADDITIONAL INFORMATION................................................................ 17
EXHIBIT A............................................................................. 18
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SERIES-2
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FINANCIAL HIGHLIGHTS
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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 three 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 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.
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JANUARY 24,*
YEAR ENDED DECEMBER 31, TO
-------------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...... $ $ 10.58 $ 11.63 $ 10.79 $10.00
Income from operations
Net investment income..................... 0.65 0.60 0.57 0.53
Net gains on securities (realized and
unrealized)............................. 1.80 (1.23) 0.44 0.26
-------- -------- -------- -------- ------------
Total from investment operations........ 2.45 (0.63) 1.01 0.79
Less distributions
Distributions from net investment income
and
short-term realized gains............... (0.60) (0.39) (0.17) --
Distributions from long-term realized
gains................................... -- (0.03) -- --
-------- -------- -------- -------- ------------
Total distributions..................... $ $ (0.60) $ (0.42) $ (0.17) --
Net asset value, end of period............ $ $ 12.43 $ 10.58 $ 11.63 $10.79
======= ======= ======= ======= ===========
TOTAL RETURN**.............................. $% $ 24.42% (5.64)% 9.48% 7.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)..... $ $ 28,192 $ 24,522 $ 25,520 $9,017
Ratio of expenses to average net
assets+................................. 0.56% 0.71% 0.58% 0.38%***
Ratio of net income to average net
assets.................................. 5.80% 5.56% 5.04% 4.72%***
Portfolio turnover rate................... 214% 16% 51% 25%
* Date operations commenced.
** Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
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.
*** Annualized.
+ 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.
</TABLE>
SERIES-3
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FINANCIAL HIGHLIGHTS
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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
year ended December 31, 1996 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
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.
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FEBRUARY 4,*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1996 1995 1994
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<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $ $ 10.17 $10.00
Income from operations
Net investment income......................................... $ 0.48 0.35
Net losses on securities (realized and unrealized)............ 2.44 (0.18)
-------- -------- ------------
Total from investment operations............................ 2.92 0.17
Less distributions
Distributions from net investment income and short-term
realized gains.............................................. (0.24) --
-------- -------- ------------
Total distributions......................................... (0.24) --
Net asset value, end of period................................ $ $ 12.85 $10.17
======= ======= ===========
TOTAL RETURN**.................................................. 29.29% 1.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)......................... $ $ 15,340 $5,757
Ratio of expenses to average net assets***.................... 1.25% 1.25%#
Ratio of net investment income to average net assets.......... 4.29% 3.86%#
Portfolio turnover rate....................................... 25% 32%
Average Commission Rate Paid****.............................. .0590 --
* Date operations commenced.
** Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
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.
*** 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, 1996,
1995 and the period ended December 31, 1994, respectively.
**** 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.
# Annualized.
</TABLE>
SERIES-4
<PAGE> 8
FINANCIAL HIGHLIGHTS
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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 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.
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YEAR ENDED OCTOBER 11* TO
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------------------- ---------------------------------------
SERIES 1998 SERIES 2000 SERIES 2005 SERIES 1998 SERIES 2000 SERIES 2005
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<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $ $ $ $ 10.00 $ 10.00 $ 10.00
Income from operations
Net investment income........... 0.12 0.13 0.13
Net losses on securities
(realized and unrealized)..... 0.13 0.18 0.35
------------ ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 0.25 0.31 0.48
Net asset value, end of
period........................ $ $ $ $ 10.25 $ 10.31 $ 10.48
========= ========= ========= ========= ========= =========
TOTAL RETURN**.................... 2.50% 3.10% 4.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands)................... $ $ $ $ 1,024 $ 1,029 $ 1,050
Ratio of expenses to average net
assets***..................... 0.15%# 0.15%# 0.15%#
Ratio of net investment income
to average net assets......... 5.55%# 5.61%# 5.89%#
Portfolio turnover rate......... 20% 34% 23%
* Date operations commenced.
** Total return is determined by dividing the increase (decrease) in value of a share during the period, after
reflecting the reinvestment of dividends declared during the period, by the beginning of period share price.
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.
*** 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 %, % and %, respectively.
# Annualized.
</TABLE>
SERIES-5
<PAGE> 9
THE TRAVELERS SERIES TRUST
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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").
U.S. GOVERNMENT SECURITIES PORTFOLIO
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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
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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
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.
In addition, the Portfolio will not purchase restricted securities, illiquid
securities (such as repurchase agreements with maturities in excess of seven
days) or other securities that are not readily marketable if more than 10% of
the total assets of the Portfolio would be invested in such securities.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Utilities Portfolio may involve above-average risk of loss
because of, among other things, the Portfolio's use of strategies and techniques
that may be considered to be speculative. The strategy followed by the Portfolio
and certain of the strategies and techniques used by the Portfolio depend on
forecasts made by Greenwich Street Advisors that may or may not prove to be
correct.
Because the Portfolio concentrates its investments in one sector, its portfolio
may be subject to greater risk and market fluctuations than a portfolio of
securities representing a broader range of investment alternatives. The
Portfolio is particularly subject to risks that are inherent to the utility
industries that make up this sector, including difficulty in obtaining an
adequate return on invested capital, difficulty in financing large construction
programs during an inflationary period, restriction on operations and increased
cost and delays attributable to environmental consideration and regulation,
difficulty in raising capital in adequate amounts on reasonable terms in periods
of high inflation and unsettled capital markets, increased costs and reduced
availability of certain types of fuel, occasional reduced availability and high
costs of natural gas for resale, the effects of energy conservation, the effects
of a national energy policy and lengthy delays and greatly increased costs and
other problems associated with the design, construction, licensing, regulation
and operation of nuclear facilities for electric generation, including, among
other considerations, the problems associated with the use of radioactive
materials and disposal of radioactive wastes. There are substantial differences
between the regulatory practices and policies of various jurisdictions, and any
given regulatory agency may make major shifts in policy from time to time. There
is no assurance that regulatory authorities will grant rate increases in the
future or that such increases will be adequate to permit the payment of
dividends on common stocks. Additionally, existing and possible future
regulatory legislation may make it even more difficult for these utilities to
obtain adequate relief. Certain of the issuers of securities held by the
Portfolio may own or operate nuclear generating facilities. Governmental
authorities may from time to time review existing policies, and impose
additional requirements governing the licensing, construction and operation of
nuclear power plants.
Each of the risks referred to above could adversely affect the ability and
inclination of public utilities to declare or pay dividends and the ability of
holders of common stock to realize any value from the assets of the issuer upon
liquidation or bankruptcy. All of the utilities which are issuers of the
securities held by the Portfolio have been experiencing one or more of these
problems in varying
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)
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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 10% 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
TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. TAMIC is an indirect wholly owned
subsidiary of Travelers Group Inc., a financial services holding company, and
its principal offices are located at One Tower Square, Hartford, Connecticut
06183. In addition to serving as the investment adviser for the U.S. Government
Securities Portfolio, TAMIC acts as investment adviser for other investment
companies used to fund variable products issued by The Travelers and The
Travelers Life and Annuity Company; as well as for individual and pooled pension
and profit-sharing accounts and for offshore insurance companies affiliated with
The Travelers.
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 % and %, respectively, of
their average net assets in expenses. For the Utilities Portfolio, these
expenses would have been % of the Portfolio's average net assets if the
Company had not paid for any of its expenses. For the U.S. Government Securities
Portfolio, there was no expense reimbursement 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, %, % and %, 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.
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.
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
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DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE PORTFOLIOS
The following types of investments and investment techniques are available to
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, in an
identifiable manner, an amount of cash and cash equivalents, such as liquid high
grade debt 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.
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
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.
As evidence of its hedging intent, the Portfolios expect that on seventy-five
percent (75%) or more of the occasions on which they purchase a long futures
contract, they will effect the purchase of securities in the cash market or take
delivery as they close out a futures position. In particular cases, however,
when it is economically advantageous, a long futures position may be terminated
without the corresponding purchase of securities.
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 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.
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
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");
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 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 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
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 30
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 860-277-0111. This SAI should be read in conjunction with the
accompanying 1996 Annual Reports for the Portfolios.
<PAGE> 31
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>
2
<PAGE> 32
<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>
3
<PAGE> 33
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
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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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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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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);
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(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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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;
(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
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payment of initial or variation margin in connection with futures
contracts or related options will not be deemed to be a purchase
of securities on margin by a Portfolio;
(4) make short sales of securities or maintain a short position,
except to the extent of 5% of each Portfolio's net assets and
except that a Portfolio may engage in such activities without
limit if, at all times when a short position is open, the
Portfolio owns an equal amount of the securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issuer as, and at least
equal in amount to, the securities sold short;
(5) borrow money, including reverse repurchase agreements, except that
each Portfolio may borrow from banks for temporary or emergency
(not leveraging) purposes including the meeting of redemption
requests that might otherwise require the untimely disposition of
securities, in an amount not exceeding 20% of the value of the
Portfolio's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings exceed 5% of the
value of a Portfolio's total assets, the Portfolio will not make
any additional investments;
(6) pledge, hypothecate, mortgage or otherwise encumber more than 10%
of the value of a Portfolio's total assets as security for any
indebtedness. For purposes of this restriction (a) the deposit of
assets in escrow in connection with the writing of covered put or
call options and the purchase of securities on a when-issued or
delayed-delivery basis and (b) collateral arrangements with
respect to (i) the purchase and sale of stock options, options on
foreign currencies and options on stock indexes and (ii) initial
or variation margin for futures contracts will not be deemed to be
pledges of a Portfolio's assets;
(7) invest in commodities, except that each Portfolio may purchase or
write futures contracts and options on futures contracts;
(8) make loans to others, except through the purchase of qualified
debt obligations, loans of portfolio securities and the entry into
repurchase agreements; and
(9) concentrate in any industry.
In addition, the Portfolios will not purchase illiquid securities (such
as repurchase agreements with maturities in excess of seven days) or other
securities that are not readily marketable if more than 10% of the total assets
of a Portfolio would be invested in such securities.
TRAVELERS QUALITY BOND PORTFOLIO ("TRAVELERS BOND PORTFOLIO")
INVESTMENT OBJECTIVES AND POLICIES
The basic investment objective of Travelers Bond Portfolio is to seek current
income, moderate capital volatility and total return.
The assets of Travelers Bond Portfolio will be primarily invested in money
market obligations, including, but not limited to:
- - treasury bills;
- - repurchase agreements;
- - 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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These securities may carry certain equity features such as conversion or
exchange rights or warrants for the acquisition of stocks of the same or
different issuer, or participation based on revenues, sales or profits. It is
currently anticipated that the market value-weighted average maturity of the
portfolio will not exceed five years. (In the case of mortgage-backed
securities, the estimated average life of cash flows will be used instead of
average maturity.) Investment in longer term obligations may be made if the
Investment Adviser concludes that the investment yields justify a longer term
commitment. No more than 25% of the value of Travelers Bond Portfolio's assets
will be invested in any one industry.
The Portfolio will be actively managed and investments may be sold prior to
maturity if deemed advantageous in light of factors such as market conditions or
brokerage costs. While the investments of Travelers Bond Portfolio are generally
not listed securities, there are firms which make markets in the type of debt
instruments that Travelers Bond Portfolio holds. No problems of liquidity are
anticipated with regard to the investments of Travelers Bond Portfolio.
From time to time, Travelers Bond Portfolio may commit to purchase new-issue
government or agency securities on a "when-issued" basis (referred to throughout
as "when-issued securities"). Travelers Bond Fund may also purchase and sell
interest rate futures contracts to hedge against changes in interest rates that
might otherwise have an adverse effect upon the value of the Travelers Bond
Portfolios securities. See Exhibit A to the prospectus for a more complete
description of these investment techniques.
INVESTMENT RESTRICTIONS
The Travelers Bond Portfolio is subject to certain investment restrictions.
Specifically, the Investment Adviser, on behalf of Travelers Bond Portfolio may:
- - invest up to 15% of the value of its assets in the securities of any one
issuer (exclusive of obligations of the United States government and its
instrumentalities, for which there is no limit);
- - borrow from banks in amounts of up to 5% of its assets, but only for
emergency purposes;
- - purchase interests in real estate represented by securities for which
there is an established market;
- - make loans through the acquisition of a portion of a privately placed
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors;
- - acquire up to 10% of the voting securities of any one issuer (it is the
present practice of Travelers Bond Portfolio not to exceed 5% of the
voting securities of any one issuer);
- - make purchases on margin in the form of short-term credits which are
necessary for the clearance of transactions; and place up to 5% of its net
asset value in total margin deposits for positions in futures contracts;
and
- - invest up to 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 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).
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 affiliates, Lazard Freres &
Cie. in Paris, Lazard Brothers & Co. Ltd. in London, and Lazard Freres K.K. in
Japan, for information concerning current business trends, as well as for a
better understanding of the management of local businesses. The information
supplied by these affiliates will be limited to statistical and factual
information, advice regarding economic factors and trends or advice as to
occasional transactions in specific securities.
The Lazard International Stock Portfolio may enter into foreign currency forward
exchange contracts in order to protect against anticipated changes in foreign
currency exchange rates.
When, in the judgment of the Subadviser, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in the equity securities of U.S. Companies or short-term money
market instruments or hold its assets in cash.
In addition, the Lazard International Stock Portfolio may engage in the
following additional investment activities described in greater detail in
Exhibit A to the prospectus: (i) trading of short term money market instruments;
(ii) lending of Portfolio securities; (iii) floating and variable rate
instruments; (iv) letters of credit; (v) purchase and sales of restricted
securities; (vi) investments in emerging or unseasoned companies.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of the Lazard
International Stock Portfolio. The Lazard International Stock Portfolio may not:
- - issue senior securities, borrow money or pledge or mortgage its assets,
except that the Portfolio may borrow from banks for temporary purposes,
including the meeting of redemption requests which might require the
untimely disposition of securities. For purposes of this investment
restriction, the Portfolio's 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 is aggressively managed and, therefore, the value of its
shares is subject to greater fluctuation and investments in its shares involve
the assumption of a higher degree of risk than would be the case with an
investment in a conservative equity fund or a growth fund investing entirely in
proven growth equities.
The MFS Portfolio will invest primarily in common stocks. Other investments are
allowed, including, but not limited to those described below. (Refer to Exhibit
A to the prospectus for a discussion of these investment techniques.) MFS may
invest in, or write (as applicable), the following:
- - foreign or convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types
of securities in certain economic environments (see Exhibit A);
- - foreign currency and forward foreign currency exchange contracts for the
purchase or sale of foreign currency for hedging purposes and non-hedging
purposes, including transactions entered into for the purpose of profiting
from anticipated changes in foreign currency exchange rates, as well as
options on foreign currencies;
- - 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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<PAGE> 43
- - 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.
The Federated High Yield Portfolio will invest primarily in fixed rate corporate
debt obligations. The fixed rate corporate debt obligations in which the
Federated High Yield Portfolio intends to invest are expected to be lower-rated.
Permitted investments currently include, but are not limited to, the following:
- - corporate debt obligations having fixed or floating rates of interest and
which are rated BBB or lower by nationally recognized statistical rating
organizations;
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<PAGE> 44
- - 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.
The corporate debt obligations in which the Federated High Yield Portfolio may
invest are generally rated BBB or lower by Standard & Poor's Ratings Group
("S&P") or Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or are
not rated but are determined by the Federated High Yield Portfolio's investment
Subadviser to be of comparable quality.
The Federated High Yield Portfolio is aggressively managed and, therefore, the
value of its shares is subject to greater fluctuation and investments in its
shares involve the assumption of a higher degree of risk than would be the case
with an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities.
In addition to the investment techniques described above, the Federated High
Yield Portfolio may also engage in the following investment techniques described
in greater detail in Exhibit A to the prospectus: (i) restricted securities;
(ii) when-issued securities; (iii) temporary investments; (iv) repurchase
agreements; (v) put and call options; and (vi) lending of portfolio securities.
INVESTMENT RESTRICTIONS
The Federated High Yield Portfolio will not:
- - borrow money directly or through reverse repurchase agreements
(arrangements in which the Federated High Yield Portfolio sells a
portfolio instrument for a percentage of its cash value with an agreement
to buy it back on a set date) except, under certain circumstances, the
Federated High Yield Portfolio may borrow up to one-third of the value of
its net assets;
- - sell securities short except, under strict limitations, the Federated High
Yield Portfolio may maintain open short positions so long as not more than
10% of the value of its net assets is held as collateral for those
positions or
- - pledge assets except to secure permitted borrowing.
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> 45
- - 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:
16
<PAGE> 46
- - 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> 47
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> 48
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.
- - 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 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 ("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> 49
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 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.
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:
- - 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;
20
<PAGE> 50
- - 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.
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
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<PAGE> 51
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
The current values for the portfolio securities of the Portfolios are
determined as follows. Securities that are traded on an established exchange are
valued on the basis of the last sales price on the exchange where primarily
traded prior to the time of valuation. Securities traded in the over-the-counter
market, for which complete quotations are readily available, are valued at the
mean of the bid and asked prices at the time of valuation. Short-term money
market instruments having maturities of sixty days or less are valued at
amortized cost (original purchase price as adjusted for amortization of premium
or accretion of discount) which, when combined with accrued interest,
approximates market. Short-term money market instruments having maturities of
more than sixty days, for which complete quotations are readily available, are
valued at current market value. The Board of Trustees of the Series Trust values
the following at prices it deems in good faith to be fair: (1) securities,
including restricted securities, for which complete quotations are not readily
available, (2) listed securities if in the Board's opinion the last sales price
does not reflect a current market value or if no sale occurred, and (3) other
assets.
The Series Trust believes that reliable market quotations generally are
not readily available for purposes of valuing fixed income securities. As a
result, depending on the particular securities owned by either Portfolio, it is
likely that most of the valuations for such securities will be based upon their
fair value determined under procedures which have been approved by the Board of
Trustees. The Board of Trustees has authorized the use of a pricing service to
determine the fair value of the Portfolios' securities. Securities for which
market quotations are readily available are valued on a consistent basis at that
price quoted which, in the opinion of the Trustees or the person designated by
the Trustees to make the determination, most nearly represents the market value
of the particular security. Any securities for which market quotations are not
readily available or other assets are valued on a consistent basis at fair value
as determined in good faith using methods prescribed by the Trustees or by a
committee appointed by the Trustees. The procedures set forth above need not be
used to determine the value of the securities owned by the Portfolios if, in the
opinion of the Trustees or the Committee, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded off an
exchange) would more accurately reflect the fair market value of such
securities.
DISTRIBUTIONS AND TAXES
It is the Series Trust's intention to distribute dividends from net
investment income and all net realized capital gains from the Portfolios
annually in shares or, at the option of the shareholder, in cash. All of the
Portfolios have qualified, and intend to qualify in the future, as a regulated
investment company under Subchapter M of the Internal Revenue Code. Thus the
Portfolios are relieved of any federal income tax liability by distributing all
of their net investment income and net capital gains, if any, to its
shareholders.
When any Portfolio makes a distribution, it intends to distribute only
its net capital gains and such income as has been predetermined to the best of
the Portfolio's ability to be taxable as ordinary income. Therefore, net
investment income distributions will not be made on the basis of distributable
income as computed on the Portfolio's books, but will be made on a federal
taxation basis.
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TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Present Position and Principal
Name Occupation During Last Five Years
- ---- --------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith
Chairman and Member Barney Inc. ("Smith Barney"); Chairman
388 Greenwich Street (1993-present), Smith Barney Strategy
New York, New York Advisors, Inc.; President
Age 63 (1994-present), Smith Barney Mutual
Funds Management Inc.; Chairman and
Director of forty-one investment
companies associated with Smith Barney;
Chairman, Board of Trustees, Drew
University; Trustee, The East New York
Savings Bank; Advisory Director, First
Empire State Corporation; Chairman,
Board of Managers, seven Variable
Annuity Separate Accounts of The
Travelers Insurance Company+; Chairman,
Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance
Company++; prior to July 1993, Senior
Executive Vice President of Shearson
Lehman Brothers Inc.
Knight Edwards Of Counsel (1988-present), Edwards &
Member Angell, Attorneys; Member, Advisory
2700 Hospital Trust Tower Board (1973-1994), thirty-one mutual
Providence, Rhode Island funds sponsored by Keystone Group,
Age 73 Inc.; Member, Board of Managers, seven
Variable Annuity Separate Accounts of
The Travelers Insurance Company+;
Trustee, five Mutual Funds sponsored by
The Travelers Insurance Company.++
Robert E. McGill, III Retired manufacturing executive.
Member Director (1983-1995), Executive Vice
295 Hancock Street President (1989-1994) and Senior Vice
Williamstown, Massachusetts President, Finance and Administration
Age 65 (1983-1989), The Dexter Corporation
(manufacturer of specialty chemicals
and materials); Director (1983-1995),
Life 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
Member Administration (1995-present),
Dean 606 N. 13th Street Marquette University; Professor of
Milwaukee, WI 53233 Finance (1980-1995) and Associate
Age 54 (1993-1995), School of Business
Administration, and Director, Center
for Research and Development in
Financial Services (1980-1995),
University of Connecticut; Director
(1992-present), GZA Geoenvironmental
Tech, Inc. (engineering services);
Member, Board of Managers, seven
Variable Annuity Separate Accounts of
The Travelers Insurance Company+;
Trustee, five Mutual Funds sponsored b
The Travelers Insurance Company.++
Frances M. Hawk Portfolio Manager (1992-present), HLM
Member Management Company, Inc. (investment
222 Berkeley Street management); Assistant Treasurer,
Boston, Massachusetts Pensions and Benefits. Management
Age 49 (1989-1992), United Technologies
Corporation (broad-based designer and
manufacturer of high technology
products); Member, Board of Managers,
seven Variable Annuity Separate
Accounts of The Travelers Insurance
Company+; Trustee, five Mutual Funds
sponsored by The Travelers Insurance
Company.++
</TABLE>
23
<PAGE> 53
<TABLE>
<S> <C>
Ernest J. Wright Assistant Secretary (1994-present),
Secretary to the Board Counsel (1987-present), The Travelers
One Tower Square Insurance Company; Secretary, Board of
Hartford, Connecticut Managers, seven Variable Annuity
Age 56 Separate Accounts of The Travelers
Insurance Company+; Secretary, Board of
Trustees, five Mutual Funds sponsored
by The Travelers Insurance Company.++
Kathleen A. McGah Assistant Secretary and Counsel
Assistant Secretary to the Board (1995-present), The Travelers Insurance
One Tower Square Company; Assistant Secretary, Board of
Hartford, Connecticut Managers, seven Variable Annuity
Age 46 Separate Accounts of The Travelers
Insurance Company+; Assistant
Secretary, Board of Trustees, five
Mutual Funds sponsored by The Travelers
Insurance Company.++ Prior to January
1995, Counsel, ITT Hartford Life
Insurance Company.
Lewis E. Daidone Managing Director of Smith Barney,
Treasurer Senior Vice President and Treasurer of
388 Greenwich Street 41 investment companies associated with
New York, New York Smith Barney, and Director and Vice
Age 38 President of SBMFM and TIA; Treasurer,
Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance
Company.++
Irving David Vice President of Smith Barney, Asset
Controller Management Division (March
388 Greenwich Street 1994-present); Controller, Board of
New York, NY Trustees, five Mutual Funds sponsored
Age 35 by The Travelers Insurance Company.++
Thomas M. Reynolds Director of Smith Barney, Asset
Controller Management Division; Controller and
388 Greenwich Street Assistant Secretary of 35 investment
New York, NY companies associated with Smith Barney,
Age 36 (September 1991-present); Controller,
Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance
Company.++
</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> 54
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:
25
<PAGE> 55
(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. 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 $ , respectively. For the Travelers Quality
Bond Portfolio, the fee paid to TAMIC for the year ended December 31, 1996 was $
. For the Zero Coupon Bond Fund Portfolios, the fees paid for Series 1998, 2000
and 2005 were $_______, $______, and $______, 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.
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.
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<PAGE> 56
LAZARD INTERNATIONAL STOCK PORTFOLIO
SUBADVISER: LAZARD FRERES ASSET MANAGEMENT
Lazard Freres Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New
York 10020, has entered into an investment Subadvisory agreement (the "Lazard
Subadvisory Agreement") on behalf of the Portfolio with TAMIC to provide
Subadvisory services to the Lazard International Stock Portfolio. Pursuant to
the Lazard Subadvisory Agreement, Lazard will regularly provide the Portfolio
with investment research, advice and supervision and furnish continuously an
investment program for the Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.
Lazard Freres Asset Management is a division of Lazard Freres, & Co. LLC 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 Freres provides its clients with a wide variety of investment
banking, brokerage and related services.
Lazard Freres performs such brokerage services in conformity with Rule 17e-1
under the 1940 Act and procedures adopted by the Board of Trustees.
TAMIC pays the Subadviser an investment Subadvisory fee at the annual rate of
0.475% of the average daily net asset value of the Portfolio. The fee is accrued
daily and paid monthly. For the year ended December 31, 1996, the fee paid to
TAMIC was $ __________.
MANAGEMENT OF LAZARD PORTFOLIO
Herbert Gullquist is primarily responsible for the day-to-day management of the
assets of the Portfolio. Mr. Gullquist is a Managing Director of Lazard Freres,
and has been with the Subadviser since 1982 He has also acted as the Managing
Director of the Lazard International Equity Fund, a publicly traded mutual fund
offered by Lazard Freres since that fund's inception in 1992.
MFS PORTFOLIO
SUBADVISER: MFS
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $43.9 billion on behalf of approximately 1.9 million investor
accounts as of February 29, 1996. As of such date, the MFS organization managed
approximately $20 billion of assets invested in equity securities and
approximately $20 billion of assets invested in fixed income securities.
Approximately $3.8 billion of the assets managed by MFS are invested in
securities of foreign issuers and non-U.S. dollar denominated securities of U.S.
issuers. MFS 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 $ .
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.
27
<PAGE> 57
FEDERATED HIGH YIELD PORTFOLIO
SUBADVISER: FEDERATED INVESTMENT COUNSELING
Federated Investment Counseling. ("Federated") a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the 1940
Act. It is a subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.
Federated and other subsidiaries of Federated Investors serve as investment
advisers to a number of investment companies and private accounts. Certain other
subsidiaries also provide administrative services to a number of investment
companies. With over $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December 31, 1995,
Federated Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,800 employees, Federated continues to be led by
the management who founded the company in 1955. Federated funds are presently at
work in and through 4,000 financial institutions nationwide.
Pursuant to an investment subadvisory agreement between TAMIC and Federated ,
Federated acts as the Subadviser for the Federated High Yield Portfolio. In its
capacity as Subadviser, Federated continually conducts investment research and
supervision for the Federated Portfolio and is responsible for the purchase or
sale of portfolio instruments, for which it receives an annual fee from the
investment adviser.
Under its Subadvisory Agreement with TAMIC, Federated is paid an amount
equivalent on an annual basis to 0.40% of the average daily net assets of the
Portfolio. The fee is accrued daily and paid monthly. For the year ended
December 31, 1996, the fee paid to TAMIC was $ .
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.)
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 $ .
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.
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<PAGE> 58
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 to TAMIC was $ ___________.
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.
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 to TAMIC was $ __________.
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.
29
<PAGE> 59
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 $ 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 $___________ respectively.
SECURITIES TRANSACTIONS
The Subadviser for the Large Cap and Equity Income Portfolios is
authorized to use research services provided by and to place portfolio
transactions with brokerage firms that have provided assistance in the
distribution of shares of the Portfolios or shares of other funds advised by the
Subadviser to the extent permitted by law. The Subadviser may use research
services provided by and place transactions through Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Serviced (FBS), subsidiaries of FMR Corp., if
the commissions are fair and reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services.
The Subadviser for the Large Cap and Equity Income Portfolios may
allocate brokerage transactions to broker-dealers who have entered into
arrangements with the Subadviser under which the broker-dealer allocates a
portion of the commissions paid by the portfolio toward payment of the
portfolio's expenses, such as transfer agent fees or custodian fees. The
transaction quality must, however, be comparable to those of Section 11(a) of
the Securities Act of 1934, as amended, which prohibit members of national
securities exchanges from executing exchange transactions for account which they
or their affiliates managed, unless certain requirements are satisfied.
Pursuance to such requirements, the Subadviser's Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
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<PAGE> 60
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 terminated
by TAMIC without prior approval of a new investment advisory agreement by a vote
of a majority of the outstanding voting securities of the Portfolios.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay
for all redemptions in cash, the Fund may authorize payment to be made in
portfolio securities or other property.
However, the Fund has obligated itself under the 1940 Act to redeem for
cash all shares presented for redemption by any one shareholder up to $250,000,
or 1% of the Fund's net assets if that is less, in any 90-day period. Securities
delivered in payment of redemptions would be valued at the same value assigned
to them in computing the net asset value per share. Shareholders receiving such
securities would incur brokerage costs when these securities are sold.
BROKERAGE
Subject to approval of the Board of Trustees, it is the policy of
TAMIC, TIMCO, Lazard, MFS, Federated, FMR and SBMFM (collectively, the "
advisers"), in executing transactions in portfolio securities of the Portfolios,
to seek best execution of orders at the most favorable prices. The determination
of what may constitute best
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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.
The total brokerage commissions paid by the U.S. Government Securities
Portfolio to TAMIC for the years ended December 31, 1994, 1995 and 1996 were
$13,363, $119,817 and $_______, respectively. 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 Social Awareness Stock
Portfolio to TIMCO and SBMFM for the years ended December 31, 1994, 1995 and
1996 were $6,302, $14,657 and, respectively. (SBMFM became the investment
adviser on May 1, 1995.) For the year ended December 31, 1996, portfolio
transactions in the amount of $_____ were placed with certain brokers because of
research services, of which $_____ 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. Commissions in the
amount of $____ and $___ were paid to Smith Barney Inc. and The Robinson
Humphrey Company, Inc., respectively, both affiliates of TIMCO, which equals,
for each, ____% and ___% of Social Awareness Stock Portfolio's aggregate
brokerage commissions paid to such brokers during 1965. The percentage of the
Social Awareness Stock Portfolio's aggregate dollar amount of transactions
involving the payment of commissions effected through Smith Barney and Robinson
Humphrey was __% and ___%, respectively.
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 $____. For the year ended
32
<PAGE> 62
December 31, 1996, no portfolio transactions in the amount of $_____ were placed
with certain brokers because of research services, of which $_________ 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, and for the year ended December
31, 1996, the totals were $____, $___ and $____, respectively. 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 Travelers Quality Bond
Portfolio for the period ended December 31, 1996 was $____. 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 $____. 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 $____. 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 High Yield
Portfolio for the period ended December 31, 1996 was $____. 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 $____. 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 Large Cap Portfolio for the
period ended December 31, 1996 was $____. 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 Equity Income Portfolio for
the period ended December 31, 1996 was $____. 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.
33
<PAGE> 63
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 year ended December 31, 1996, the total amount
paid for fund administration was $____________.
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. will serve 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 Series Trust and its Portfolios, with the exception of Large
Cap, Equity Income, Federated Stock, Federated High Yield, MFS Emerging Growth,
Travelers Quality Bond and Lazard International Stock Portfolios. The services
provided by Coopers & Lybrand L.L.P., include primarily the audit of the
applicable Series Trust's financial statements and financial highlights. The
financial statements 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.
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
34
<PAGE> 64
Bond and Lazard International Stock Portfolios. Beginning on January 1, 1997,
KPMG Peat Marwick LLP became the auditors for all the Portfolios except Large
Cap and Equity Income.
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
are the auditors for Large Cap and Equity Income Portfolios.
Except as otherwise stated in its prospectus or as required by law, the
Series Trust reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Series Trust's
prospectus, this SAI or any supplemental sales literature issued by the Series
Trust, and no person is entitled to rely on any information or representation
not contained therein.
The Series Trust's prospectus and this SAI omit certain information
contained in the Series Trust's registration statement filed with the Securities
and Exchange Commission which may be obtained from the Commission's principal
office in Washington, D.C. upon payment of the fee prescribed by the Rules and
Regulations promulgated by the Commission.
35
<PAGE> 65
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.
<PAGE> 66
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
TIC Ed. 5-97
L-11788S-A Printed in U.S.A.
37
<PAGE> 67
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(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.)
5(c). Investment Advisory Agreement between the Utilities Portfolio and
Smith Barney Mutual Fund Management Inc. (Incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A filed on April 25, 1995.)
5(d). Form of Investment Advisory Agreement between the Zero Coupon Bond
Fund Portfolios of The Trust and Travelers Asset Management
International Corporation. (Incorporated herein by reference to
Exhibit 5(d) to Post-Effective Amendment No. 12 to the
Registration Statement on N-1A filed on June 2, 1995.)
5(e). Form of Investment Advisory Agreement between MFS Emerging Growth
Portfolio of the Registrant and Travelers Asset Management
International Corporation. (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). Form of 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.)
5(g). Form of 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). Form of Investment Advisory Agreement between Lazard International
Stock Portfolio of the Registrant and Travelers Asset Management
International Corporation.
<PAGE> 68
(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). Form of 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). Form of 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). Form of 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). Form of 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). Form of 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.)
5(n). Form of 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). Form of 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). Form of Sub-Advisory Agreement between Travelers Asset Management
International Corporation and Fidelity Management & Research
Company as Subadviser to Equity Income Portfolio and Large Cap
Portfolio. (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). Form of 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). Form of 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.)
<PAGE> 69
5(s). Form of 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). Form of 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.)
8(a). Form of Custody Agreement between the Registrant and Chase
Manhattan Bank, N.A., Brooklyn, New York. (To be filed by
amendment.)
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). Form of 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). Form of Custody Agreement between the Registrant and Barclays Bank
PLC. (To be filed by amendment.)
8(e). Form of Custody Agreement between the Registrant and Brown
Brothers Harriman & Co. (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.)
9(a). Transfer and Recordkeeping Agreement between the Registrant and
The Travelers Insurance Company. (Incorporated herein by reference
to Exhibit 9 to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed April 3, 1996.)
9(b). Form of Amendment to Transfer and Recordkeeping Agreement between
the Registrant and The Travelers Insurance Company. (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). Form of 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). Form of 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). Form of 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.)
10. Opinion and Consent of Counsel. To be filed by amendment.
<PAGE> 70
11(a). Consent of Coopers & Lybrand L.L.P., Certified Public Accountants.
To be filed by amendment.
Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants. To be filed by amendment. Consent of Price Waterhouse
LLP, Independent Accountants. To be filed by amendment.
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.
27. Financial Data Schedule. To be filed by amendment.
<PAGE> 71
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, Seven (7)
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> 72
Item 28. Business and Other Connections of Investment Advisers
U.S. GOVERNMENT SECURITIES PORTFOLIO
ZERO COUPON BOND PORTFOLIOS
LARGE CAP PORTFOLIO
EQUITY INCOME PORTFOLIO
TRAVELERS QUALITY BOND PORTFOLIO
LAZARD INTERNATIONAL STOCK PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
FEDERATED HIGH YIELD PORTFOLIO
FEDERATED STOCK PORTFOLIO
Officers and Directors of Travelers Asset Management International Corporation
(TAMIC), the Investment Adviser for the above Portfolios of The Travelers Series
Trust, are set forth in the following table:
<TABLE>
<CAPTION>
Name Position with TAMIC Other Business
- ---- ------------------- --------------
<S> <C> <C>
Marc P. Weill Director and Chairman Senior Vice President **
Chief Investment Officer
David A. Tyson Director, President and Senior Vice President *
Chief Investment Officer
Joseph E. Rueli, Jr. Director, Vice President 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*
Phillip A. Duncan Vice President Second Vice President*
Edward Hinchliffe III Vice President and Cashier Cashier*
Kathryn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
</TABLE>
<PAGE> 73
<TABLE>
<S> <C> <C>
Emil J. Molinaro Vice President Vice President*
Jordan M. Stitzer Vice President Vice President*
William H. White Treasurer Vice President and Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George C. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
Marla A. Berman Assistant Secretary Assistant Secretary**
Patricia A. Uzzel Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
</TABLE>
* Positions are held with The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc., 388 Greenwich Street, New
York, N.Y. 10013.
<PAGE> 74
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> 75
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> 76
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> 77
<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> 78
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> 79
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> 80
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> 81
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> 82
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, The Travelers Series Trust, 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 February 24,
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 February 24, 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> 83
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(b). Investment Advisory Agreement between the
Social Awareness Stock Portfolio and Smith Barney
Mutual Fund Management Inc. (Incorporated herein
by reference to Exhibit 5(b) to Post-Effective
Amendment No. 11 to the Registration Statement on
Form N-1A filed on April 25, 1995.)
5(c). Investment Advisory Agreement between the
Utilities Portfolio and Smith Barney Mutual Fund
Management Inc. (Incorporated herein by reference
to Exhibit 5(c) to Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A filed on
April 25, 1995.)
5(d). Form of Investment Advisory Agreement between the
Zero Coupon Bond Fund Portfolios of The Trust and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5(d) to Post-
Effective Amendment No. 12 to the Registration
Statement on Form N-1A filed on June 2, 1995.)
5(e). Form of Investment Advisory Agreement between
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). Form of 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> 84
5(g). Form of 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). Form of 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). Form of 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). Form of 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). Form of 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). Form of 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). Form of 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.)
5(n). Form of 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
<PAGE> 85
<TABLE>
<S> <C> <C>
July 31, 1996.)
5(o). Form of Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Lazard Freres
Asset Management as Subadviser to Lazard International
Stock Portfolio. (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). Form of Sub-Advisory Agreement between Travelers Asset
Management International Corporation and Fidelity
Management & Research Company as Subadviser to
Equity Income Portfolio and Large Cap Portfolio.
(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). Form of 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). Form of 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). Form of 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). Form of 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.)
8(a). Form of Custody Agreement between the Registrant and To be filed by
Chase Manhattan Bank, N.A., Brooklyn, New York. amendment
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). Form of Custody Agreement between the Registrant and
Bank of New York. (Incorporated herein by reference to
</TABLE>
<PAGE> 86
<TABLE>
<S> <C> <C>
Exhibit 8(c) to Post-Effective Amendment No. 16 to the
Registration Statement on N-1A filed on July 31, 1996.)
8(d). Form of Custody Agreement between the Registrant and To be filed by
Barclays Bank PLC. amendment
8(e). Form of Custody Agreement between the Registrant and
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.)
9(a). Transfer and Recordkeeping Agreement between the
Registrant and The Travelers Insurance Company.
(Incorporated herein by reference to Exhibit 9 to
Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed April 3, 1996.)
9(b). Form of Amendment to Transfer and Recordkeeping
Agreement between the Registrant and The Travelers
Insurance Company. (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). Form of 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). Form of 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). Form of 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.)
10. Opinion and Consent of Counsel. To be filed by
amendment
11(a). Consent of Coopers & Lybrand L.L.P., Certified Public To be filed by
Accountants. amendment
Consent of KPMG Peat Marwick, LLP, Independent To be filed by
Certified Public Accountants. amendment
Consent of Price Waterhouse, LLP, Independent To be filed
Accountants. amendment
</TABLE>
<PAGE> 87
<TABLE>
<S> <C> <C>
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 Electronically
Kathleen A. McGah as signatory for Lewis E. Daidone.
27. Financial Data Schedule. To be filed by
amendment
</TABLE>
<PAGE> 1
EXHIBIT 11(b)
THE TRAVELERS SERIES TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis E. Daidone of Holmdel, New Jersey, Treasurer of The
Travelers Series Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Trust, and KATHLEEN A. McGAH, Assistant Secretary of said
Trust, either one of them acting alone, my true and lawful attorney-in-fact, for
me, and in my name, place and stead, to sign registration statements of said
Trust on Form N-1A or other applicable form under the Securities Act of 1933 for
the registration of Shares of Beneficial Interest of The Travelers Series Trust
and to sign any and all amendments, including post-effective amendments thereto,
that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day of
February, 1997.
Lewis E. Daidone
Treasurer
The Travelers Series Trust
