TRAVELERS SERIES TRUST, 485BPOS, 1998-04-23

TRAVELERS SERIES TRUST
485BPOS, 1998-04-23

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<PAGE> 1
Registration Statement No. 33-43628
811-6465

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 23

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23

THE TRAVELERS SERIES TRUST
--------------------------
(Exact name of Registrant)

ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
----------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (860) 277-0111
--------------

ERNEST J. WRIGHT
Secretary to the Board of Trustees
The Travelers Series Trust
One Tower Square
Hartford, Connecticut 06183
----------------------------
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box):

immediately upon filing pursuant to paragraph (b).
- -------
X on May 1, 1998 pursuant to paragraph (b).
- -----
60 days after filing pursuant to paragraph (a)(1).
- -------
on __________ pursuant to paragraph (a)(1)
- -------
75 days after filing pursuant to paragraph (a)(2).
- -------
on __________ pursuant to paragraph (a)(2) of Rule 485.
- -------
on __________ pursuant to paragraph (a)(3) 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.
<PAGE> 2

THE TRAVELERS SERIES TRUST

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

<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
- --- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; The Travelers Series Trust;
Investment Objectives and Policies
5. Management of the Fund Board of Trustees; Investment Manager;
Investment Subadvisers; Securities
Transactions; Fund Expenses; Additional Information
6. Capital Stock and Other Securities Fund Description; Dividends and
Distributions; Shareholder Rights
Net Asset Value
7. Purchase of Securities Being Offered Shareholder Rights
8. Redemption or Repurchase Net Asset Value
9. Legal Proceedings Legal Proceedings

CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
--------------------------------------------

10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and Policies;
Investment Restrictions; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Adviser; Investment Subadvisers;
Other Services Additional Information
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Declaration of Trust
Securities
19. Purchase, Redemption and Pricing Valuation of Securities
of Securities Being Offered
20. Tax Status Distributions and Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Additional Information
</TABLE>
<PAGE> 3

PART A

INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4

THE TRAVELERS SERIES TRUST

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

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

The Travelers Series Trust (the "Series Trust" or "Fund") 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 in this prospectus are
the U.S. Government Securities Portfolio, the Social Awareness Stock Portfolio
and the Utilities Portfolio. All Portfolios described in this prospectus may not
be available under all variable contracts.

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 funding options for variable annuity and variable life insurance
contracts issued by the Company. The term "shareholder" as used in this
prospectus refers to any insurance company separate account that may use shares
of the Portfolios as funding options 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, 1998 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, by calling 1-860-277-0111,
or by accessing the SEC's website (http://www.sec.gov).

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, 1998.

<PAGE> 5

THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 6

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS -- U.S. Government Securities
Portfolio................................................. 4
FINANCIAL HIGHLIGHTS -- Social Awareness Stock Portfolio.... 5
FINANCIAL HIGHLIGHTS -- Utilities Portfolio................. 6
FUND DESCRIPTION............................................ 7
U.S. GOVERNMENT SECURITIES PORTFOLIO........................ 7
Investment Objective and Policies......................... 7
Investment Restrictions................................... 8
Risk Factors.............................................. 8
SOCIAL AWARENESS STOCK PORTFOLIO............................ 8
Investment Objective and Policies......................... 8
Investment Restrictions................................... 9
Risk Factors.............................................. 10
UTILITIES PORTFOLIO......................................... 10
Investment Objective and Policies......................... 10
Investment Restrictions................................... 11
Risk Factors and Special Considerations................... 11
BOARD OF TRUSTEES........................................... 12
INVESTMENT ADVISERS......................................... 13
TAMIC..................................................... 13
Portfolio Manager -- U.S. Government Securities
Portfolio.............................................. 13
Advisory Fees -- U.S. Government Securities Portfolio..... 13
MMC....................................................... 13
Portfolio Manager -- Social Awareness Stock Portfolio..... 13
Advisory Fees -- Social Awareness Stock Portfolio......... 14
Portfolio Manager -- Utilities Portfolio.................. 14
Advisory Fees -- Utilities Portfolio...................... 14
FUND ADMINISTRATION......................................... 14
SECURITIES TRANSACTIONS..................................... 14
FUND EXPENSES............................................... 15
TRANSFER AGENT.............................................. 15
SHARES OF THE SERIES TRUST.................................. 15
NET ASSET VALUE............................................. 16
TAX STATUS.................................................. 17
DIVIDENDS AND DISTRIBUTIONS................................. 17
LEGAL PROCEEDINGS........................................... 17
YEAR 2000 COMPLIANCE........................................ 17
ADDITIONAL INFORMATION...................................... 17
EXHIBIT A................................................... 18
</TABLE>

SERIES-3
<PAGE> 7

FINANCIAL HIGHLIGHTS

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

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO

The following information for the year ended December 31, 1997 has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the financial statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.

<TABLE>
<CAPTION>
JANUARY 24,(1)
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------- --------------
1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period..................... $ 10.86 $ 12.43 $ 10.58 $ 11.63 $ 10.79 $10.00
Income (loss) from operations
Net investment income........ 0.58 0.68 0.65 0.60 0.57 0.53
Net realized and unrealized
gain (loss)................ 0.79 (0.52) 1.80 (1.23) 0.44 0.26
-------- ------- ------- ------- ------- ------
Total income (loss) from
operations............... 1.37 0.16 2.45 (0.63) 1.01 0.79
Less distributions from(2)
Net investment income........ (0.58) (1.55) (0.60) (0.39) (0.17) --
Net realized gains........... -- (0.18) -- (0.03) -- --
-------- ------- ------- ------- ------- ------
Total distributions........ $ (0.58) $ (1.73) $ (0.60) $ (0.42) $ (0.17) --
-------- ------- ------- ------- ------- ------
Net asset value, end of
period....................... $ 11.65 $ 10.86 $ 12.43 $ 10.58 $ 11.63 $10.79
======== ======= ======= ======= ======= ======
TOTAL RETURN(3)................ 12.62% 1.46% 24.42% (5.64)% 9.48% 7.90%
Net assets, end of period
(thousands).................. $ 35,279 $26,009 $28,192 $24,522 $25,520 $9,017
RATIOS TO AVERAGE NET ASSETS
Expenses(4).................. 0.49% 0.62% 0.56% 0.71% 0.58% 0.38%(5)
Net income................... 6.10% 5.68% 5.80% 5.56% 5.04% 4.72%(5)
Portfolio turnover rate........ 208% 501% 214% 16% 51% 25%
(1) Date operations commenced.
(2) Distributions from realized gains include both net realized
short-term and long-term capital gains. Prior to 1996 net
realized short-term capital gains were included in
distributions from net investment income.
(3) Total return is actual and has not been annualized, as it
may not be representative of the total return for the year.
The total return would have been lower if separate account
charges had been reflected.
(4) The ratios of expenses to average net assets for the year
ended December 31, 1993 and the period ended December 31,
1992 reflect an expense reimbursement by The Travelers in
connection with voluntary expense limitations. Without the
expense reimbursement, the ratio of operating expenses to
average net assets would have been 0.77% and 0.72% for the
year ended December 31, 1993 and the period ended December
31, 1992, respectively.
(5) Annualized.
</TABLE>

SERIES-4
<PAGE> 8

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
SOCIAL AWARENESS STOCK PORTFOLIO

<TABLE>
<CAPTION>
MAY 1,(1)
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------- --------------
1997 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................ $ 15.76 $ 14.32 $11.05 $11.64 $10.95 $10.00
Income (loss) from operations
Net investment income(2)... 0.15 0.31 0.12 0.16 0.17 0.16
Net realized and unrealized
gains (loss)............. 4.15 2.42 3.47 (0.45) 0.65 0.79
------- ------- ------ ------ ------ ------
Total income (loss) from
operations............. 4.30 2.73 3.59 (0.29) 0.82 0.95
Less distributions from(6)
Net investment income...... -- (0.43) (0.14) (0.24) (0.13) --
Net realized gains......... -- (0.86) (0.18) (0.06) -- --
------- ------- ------ ------ ------ ------
Total distributions...... -- (1.29) (0.32) (0.30) (0.13) --
------- ------- ------ ------ ------ ------
Net asset value, end of
period................... $ 20.06 $ 15.76 $14.32 $11.05 $11.64 $10.95
======= ======= ====== ====== ====== ======
TOTAL RETURN(7).............. 27.28% 19.98% 33.37% (2.69)% 7.55% 9.50%
Net assets, end of period
(thousands).............. $21,013 $11,040 $7,055 $3,879 $3,361 $1,394
RATIOS TO AVERAGE NET ASSETS
Expenses(2)(5)............. 0.98% 1.25% 1.25% 1.25% 1.05% 0.71%(3)
Net income................. 0.97% 0.43% 0.99% 1.43% 1.50% 2.22%(3)
Portfolio turnover rate...... 19% 26% 73% 137% 60% 56%
Average commission per share
paid on equity
transactions(4)............ $ 0.06 $ 0.06 -- -- -- --
(1) Date operations commenced.
(2) For the year ended December 31, 1996, The Travelers
reimbursed the Portfolio for $25,093 in expenses. If such
fees were not waived and expenses not reimbursed, the per
share decrease of net investment income would have been
$0.06 and the actual expense ratio would have been 1.69%.
(3) Annualized.
(4) For fiscal years beginning after 1995, the SEC instituted
new guidelines requiring the disclosure of average
commissions per share on Funds which held more than 10% of
their assets in commissionable equity securities.
(5) The ratios of expenses to average net assets for the years
ended December 31, 1995, 1994 and 1993 reflect expense
reimbursements by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursements, the
ratios of expenses to average net assets would have been
1.75%, 3.34%, 3.73% and 2.19% for the years ended December
31, 1996, 1995, 1994, 1993 and the period ended December 31,
1992, respectively.
(6) Distributions from realized gains include both net realized
short-term and long-term capital gains. Prior to 1996 net
realized short-term capital gains were included in
distributions from net investment income.
(7) Total return is actual and has not been annualized, as it
may not be representative of the total return for the year.
The total return would have been lower if separate account
charges had been reflected.
</TABLE>

SERIES-5
<PAGE> 9

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO

<TABLE>
<CAPTION>
FEBRUARY 4,(1)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
-------------------------------- --------------
1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................ $ 12.22 $ 12.85 $ 10.17 $10.00
Income from operations
Net investment income............................... 0.46 0.47 0.48 0.35
Net realized and unrealized gain (loss)............. 2.63 0.47 2.44 (0.18)
------- ------- ------- ------
Total from operations............................. 3.09 0.94 2.92 0.17
Less Distributions From(6)
Net investment income............................... (0.01) (0.84) (0.24) --
Net realized gains.................................. (0.01) (0.73) -- --
------- ------- ------- ------
Total distributions................................. (0.02) (1.57) (0.24) --
------- ------- ------- ------
Net asset value, end of period........................ $ 15.29 $ 12.22 $ 12.85 $10.17
======= ======= ======= ======
TOTAL RETURN(2)....................................... 25.29% 7.47% 29.29% 1.70%
Net assets, end of period (thousands)................. $21,413 $18,214 $15,340 $5,757
RATIOS TO AVERAGE NET ASSETS
Expenses(3)......................................... 1.06% 1.07% 1.25% 1.25%(5)
Net investment income............................... 3.58% 3.88% 4.29% 3.86%(5)
Portfolio turnover rate............................... 68% 39% 25% 32%
Average commission per share paid on equity
transactions(4)..................................... $ 0.06 $ 0.06 -- --
(1) Date operations commenced.
(2) Total return is actual and has not been annualized, as it
may not be representative of the total return for the year.
The total return would have been lower if separate account
charges had been reflected.
(3) The ratio of expenses to average net assets for the year
ended December 31, 1995 and the period ended December 31,
1994 reflect expense reimbursements by The Travelers in
connection with voluntary expense limitations. Without the
expense reimbursements, the ratios of operating expenses to
average net assets would have been 1.27% and 3.49%
(annualized), respectively.
(4) For fiscal years beginning after 1995 the SEC instituted new
guidelines requiring the disclosure of average commissions
per share on Funds which held more than 10% of their assets
in commissionable equity securities.
(5) Annualized.
(6) Distributions from realized gains include both net
short-term and long-term capital gains. Prior to 1996 net
realized short-term capital gains were included in
distributions from net investment income.
</TABLE>

SERIES-6
<PAGE> 10

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

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

The Series Trust is currently divided into 21 series (the "Portfolios") each
with its own investment objective and policies, all of which are diversified
portfolios under the Investment Company Act of 1940, as amended ("1940 Act").
Three Portfolios, as described below, are contained in this prospectus. The
other portfolios are described in other prospectuses.

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

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

SERIES-7
<PAGE> 11

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

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

INVESTMENT RESTRICTIONS

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

RISK FACTORS

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

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

SERIES-8
<PAGE> 12

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

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

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

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

INVESTMENT RESTRICTIONS

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

SERIES-9
<PAGE> 13

RISK FACTORS

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

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

SERIES-10
<PAGE> 14

INVESTMENT RESTRICTIONS

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

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

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

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

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

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

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

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

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

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

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

RISK FACTORS AND SPECIAL CONSIDERATIONS

SERIES-11
<PAGE> 15

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

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

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

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

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

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

SERIES-12
<PAGE> 16

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 Mutual Management Corp.
("MMC") (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 MANAGER -- U.S. GOVERNMENT SECURITIES PORTFOLIO

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

ADVISORY FEES -- U.S. GOVERNMENT SECURITIES PORTFOLIO

MMC

MMC is located at 388 Greenwich Street, New York, New York and has been in the
investment counseling business since 1968. MMC renders investment advice to a
wide variety of individual, institutional and investment company clients with
aggregate assets under management in excess of $85 billion. MMC is a wholly
owned subsidiary of Travelers Group Inc.

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

PORTFOLIO MANAGER -- SOCIAL AWARENESS STOCK PORTFOLIO

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

SERIES-13
<PAGE> 17

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

ADVISORY FEES -- SOCIAL AWARENESS STOCK PORTFOLIO

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

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

PORTFOLIO MANAGER -- UTILITIES PORTFOLIO

The Utilities Portfolio is managed by a team of investment professionals from
MMC. Jack S. Levande is a Managing Director and Portfolio Manager. Prior to
joining MMC 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
MMC Investment Policy Committee. George Mueller is a Senior Vice President of
Taxable Fixed-Income Management, 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 MMC Investment Policy Committee.

ADVISORY FEES -- UTILITIES PORTFOLIO

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

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

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

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

SERIES-14
<PAGE> 18

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

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

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

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

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

For the fiscal year ended December 31, 1997, the U.S. Government Securities
Portfolio, the Social Awareness Stock Portfolio and the Utilities Portfolio paid
0.49%, 0.98% and 1.06%, respectively, of their average net assets in expenses.
For these Portfolios, there were no expense reimbursements for the fiscal year
ended December 31, 1997.

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

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

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

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

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

SERIES-15
<PAGE> 19

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

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

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

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

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

The net asset value of a Portfolio share is computed as of the close of trading
on each day on which the New York Stock Exchange is open for trading. The net
asset value per share is arrived at by determining the value of the Portfolio's
assets, subtracting its liabilities, and dividing the result by the number of
shares outstanding.

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

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

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

SERIES-16
<PAGE> 20

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.

YEAR 2000 COMPLIANCE

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

Generally, computer programs were designed without considering the impact of the
upcoming change in the century. As a result, software and computer systems may
need to be upgraded or replaced in order to comply with "Year 2000"
requirements. If not corrected, these computer applications could fail or create
erroneous results by or at the Year 2000. The business, financial condition, and
results of operations of a company; investment advisor; separate account and/or
a mutual fund could be materially and adversely affected by the failure of its
systems and applications (or those either provided or operated by third-parties)
to properly operate or manage dates beyond the year 1999.

Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing exiting systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our prinicpal systems will be Year
2000 compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of the Series Trust.

ADDITIONAL INFORMATION

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

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

SERIES-17
<PAGE> 21

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

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

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

REPURCHASE AGREEMENTS

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

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

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

SERIES-18
<PAGE> 22

WHEN-ISSUED SECURITIES

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

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

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

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

CERTIFICATES OF DEPOSIT

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

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

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

BANKERS' ACCEPTANCES

SERIES-19
<PAGE> 23

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

FUTURES CONTRACTS

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

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

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

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

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

SERIES-20
<PAGE> 24

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

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

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

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

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

WRITING COVERED CALL OPTIONS

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

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

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

SERIES-21
<PAGE> 25

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

BUYING PUT AND CALL OPTIONS

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

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

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

SHORT SALES AGAINST THE BOX

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

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

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

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

SERIES-22
<PAGE> 26

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

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

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

LENDING PORTFOLIO SECURITIES

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

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

SERIES-23
<PAGE> 27

THE TRAVELERS SERIES TRUST

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

TIC Ed. 5-97
L-11788-U Printed in U.S.A.
<PAGE> 28

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 860-277-0111

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

The Travelers Series Trust (the "Series Trust" or "Fund") 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 in this prospectus are
the U.S. Government Securities Portfolio, the Utilities Portfolio, and the Zero
Coupon Bond Fund Portfolios (Series 1998, 2000 and 2005). All Portfolios
described in this prospectus may not be available under all variable contracts.

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, 1998 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, by calling 860-277-0111, or
by accessing the SEC's website (http://www.sec.gov).

THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.

<PAGE> 29

TABLE OF CONTENTS

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

SERIES-2
<PAGE> 30

FINANCIAL HIGHLIGHTS

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

THE TRAVELERS SERIES TRUST

U.S. GOVERNMENT SECURITIES PORTFOLIO

SERIES-3
<PAGE> 31

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE TRAVELERS SERIES TRUST
UTILITIES PORTFOLIO

The following information for the year ended December 31, 1997 has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the Financial Statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.

<TABLE>
<CAPTION>
FEBRUARY 4,(1)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
-------------------------------- --------------
1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................ $ 12.22 $ 12.85 $ 10.17 $10.00
Income from operations
Net investment income............................... 0.46 0.47 0.48 0.35
Net realized and unrealized gain (loss)............. 2.63 0.47 2.44 (0.18)
------- ------- ------- ------
Total from operations............................. 3.09 0.94 2.92 0.17
Less Distributions From(6)
Net investment income............................... (0.01) (0.84) (0.24) --
Net realized gains.................................. (0.01) (0.73) -- --
------- ------- ------- ------
Total distributions................................. (0.02) (1.57) (0.24) --
------- ------- ------- ------
Net asset value, end of period........................ $ 15.29 $ 12.22 $ 12.85 $10.17
======= ======= ======= ======
TOTAL RETURN(2)....................................... 25.29% 7.47% 29.29% 1.70%
Net assets, end of period (thousands)................. $21,413 $18,214 $15,340 $5,757
RATIOS TO AVERAGE NET ASSETS
Expenses(3)......................................... 1.06% 1.07% 1.25% 1.25%(5)
Net investment income............................... 3.58% 3.88% 4.29% 3.86%(5)
Portfolio turnover rate............................... 68% 39% 25% 32%
Average commission per share paid in equity
transactions(4)..................................... $ 0.06 $ 0.06 -- --
(1) Date operations commenced.
(2) Total return is actual and has not been annualized, as it
may not be representative of the total return for the year.
The total return would have been lower if separate account
charges had been reflected.
(3) The ratios of expenses to average net assets for the year
ended December 31, 1995 and the period ended December 31,
1994, reflect expense reimbursements by The Travelers in
connection with voluntary expense limitations. Without the
expense reimbursements, the ratios of operating expenses to
average net assets would have been 1.27% and 3.49%
(annualized), respectively.
(4) For the fiscal years beginning after 1995, the SEC
instituted new guidelines requiring the disclosure of
average commissions per share on Funds which held more than
10% of their assets in commissionable equity securities.
(5) Annualized.
(6) Distributions from realized gains include both net
short-term and long-term capital gains. Prior to 1996 net
realized short-term capital gains were included in
distributions from net investment income.
</TABLE>

SERIES-4
<PAGE> 32

FINANCIAL HIGHLIGHTS

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

THE TRAVELERS SERIES TRUST

ZERO COUPON BOND FUND PORTFOLIOS

The following information for the year ended December 31, 1997 has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the Financial Statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------------ -------------------------------
SERIES 1998 SERIES 2000 SERIES 2005 SERIES 1998 SERIES 2000
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $ 9.99 $ 9.96 $ 9.97 $ 10.25 $ 10.31
Income from operations
Net investment income........... 0.57 0.59 0.60 0.53 0.50
Net realized and unrealized gain
(loss)........................ 0.04 0.13 0.56 (0.13) (0.22)
----------- ----------- ----------- ----------- -----------
Total income from
operations.................. 0.61 0.72 1.16 0.40 0.28
Less Distributions From:
Net investment income........... (0.56) (0.59) (0.60) (0.65) (0.63)
Net realized gains.............. (0.01) -- -- (0.01) --
----------- ----------- ----------- ----------- -----------
Total Distributions............... (0.57) (0.59) (0.60) (0.66) (0.63)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD.... $ 10.03 $ 10.09 $ 10.53 $ 9.99 $ 9.96
=========== =========== =========== =========== ===========
TOTAL RETURN(2)................... 6.13% 7.20% 11.63% 3.94% 2.76%
Net assets, end of period
(thousands)................... $ 1,403 $ 1,757 $ 2,357 $ 1,303 $ 1,565
RATIOS TO AVERAGE NET ASSETS
Expenses(3)(5).................. 0.15% 0.15% 0.15% 0.15% 0.15%
Net investment income........... 5.55% 5.88% 6.11% 5.64% 5.74%
Portfolio turnover rate......... 17% 29% 9% 19% 33%

<CAPTION>
YEAR ENDED OCTOBER 11(1) TO
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------- ------------------------------------------------
SERIES 2005 SERIES 1998 SERIES 2000 SERIES 2005
- ----------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $ 10.48 $ 10.00 $ 10.00 $ 10.00
Income from operations
Net investment income........... 0.48 0.12 0.13 0.13
Net realized and unrealized gain
(loss)........................ (0.38) 0.13 0.18 0.35
----------- ----------- ----------- -----------
Total income from
operations.................. 0.10 0.25 0.31 0.48
Less Distributions From:
Net investment income........... (0.61) -- -- --
Net realized gains.............. -- -- -- --
----------- ----------- ----------- -----------
Total Distributions............... (0.61) -- -- --
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD.... $ 9.97 $ 10.25 $ 10.31 $ 10.48
=========== =========== =========== ===========
TOTAL RETURN(2)................... 0.90% 2.50% 3.10% 4.80%
Net assets, end of period
(thousands)................... $ 2,054 $ 1,024 $ 1,029 $ 1,050
RATIOS TO AVERAGE NET ASSETS
Expenses(3)(5).................. 0.15% 0.15%(4) 0.15%(4) 0.15%(4)
Net investment income........... 6.14% 5.55%(4) 5.61%(4) 5.89%(4)
Portfolio turnover rate......... 17% 20% 34% 23%
</TABLE>

(1) Date operations commenced.

(2) Total return is actual and has not been annualized, as it may not be
representative of the total return for the year. The total return would have
been lower if separate account charges had been reflected.

(3) For the years ended December 31, 1997 and 1996 and the period ended December
31, 1995, Travelers Insurance reimbursed the Portfolios for the amounts
listed below. If expenses were not reimbursed, the per share decrease of net
investment income and actual expense ratios would have been as follows:

<TABLE>
<CAPTION>
AMOUNT OF EXPENSES
REIMBURSED
------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO
Series 1998....................................... $ 27,937 $ 31,112 $ 14,257
Series 2000....................................... 27,177 31,032 14,257
Series 2005....................................... 28,361 30,922 14,256

<CAPTION>
PER SHARE DECREASE IN
NET INVESTMENT INCOME
------------------------------------------------
1997 1996 1995
- ----------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO
Series 1998....................................... $ 0.20 $ 0.24 $ 0.14
Series 2000....................................... 0.16 0.20 0.14
Series 2005....................................... 0.13 0.15 0.14

<CAPTION>
EXPENSE RATIOS WITHOUT
FEE WAIVERS AND REIMBURSEMENTS
------------------------------------------------
1997 1996 1995
- ----------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO
Series 1998....................................... 2.21% 2.82% 6.51%(4)
Series 2000....................................... 1.80 2.49 6.51(4)
Series 2005....................................... 1.52 2.17 6.48(4)
</TABLE>

(4) Annualized.

(5) The expense ratios for the years ended December 31, 1997 and 1996 and for
the periods ended December 31, 1995 reflect expense reimbursements by The
Travelers in connection with voluntary expense limitations.

SERIES-5
<PAGE> 33

FUND DESCRIPTION

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

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

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

INVESTMENT OBJECTIVE AND POLICIES

SERIES-6
<PAGE> 34

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

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

INVESTMENT RESTRICTIONS

RISK FACTORS

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

INVESTMENT OBJECTIVE AND POLICIES

SERIES-7
<PAGE> 35

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.)

INVESTMENT RESTRICTIONS

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

SERIES-8
<PAGE> 36

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;

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

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

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

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

RISK FACTORS AND SPECIAL CONSIDERATIONS

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

SERIES-9
<PAGE> 37

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

ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The objective of each of the three Zero Coupon Bond Portfolios is to provide as
high an investment return as is consistent with the preservation of capital.
Each Portfolio's investment objective may be changed only with the approval of a
majority of the Portfolio's outstanding shares. There can be no assurance that a
Portfolio will achieve its investment objective.

Each Portfolio seeks to return a reasonably assured targeted dollar amount,
predictable at the time of investment, on a specific target date in the future
by investing in primarily zero coupon securities that pay no cash income but are
acquired by the Portfolio at substantial discounts from their values at
maturity. The Zero Coupon Bond Portfolios may not be appropriate for contract
owners who do not plan to allocate their premiums to the Portfolios for the
long-term or until maturity.

Under normal circumstances, each Zero Coupon Bond Portfolio will invest at least
65% of its net assets in "Stripped Securities," a term used collectively for
Stripped Treasury Securities, Stripped Government Securities, Stripped Corporate
Securities and Stripped Eurodollar Obligations and other stripped securities,
all described in Exhibit A to this prospectus.

The remaining 35% of each Zero Coupon Bond Portfolio's assets may be invested in
non-zero coupon securities such as common stock and other equity securities,
bonds and other debt securities, and money market instruments.

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

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

INVESTMENT RESTRICTIONS

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

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

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

(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

SERIES-10
<PAGE> 38

contracts or related options will not be deemed to be a purchase of securities
on margin by a Portfolio;

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

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

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

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

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

(9) concentrate in any industry.

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

RISK FACTORS AND SPECIAL CONSIDERATIONS RELATING TO MATURITY

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

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

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

SERIES-11
<PAGE> 39

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 Travelers Money Market Portfolio, 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 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.

SERIES-12
<PAGE> 40

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

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 Mutual Management Corp.
(MMC) (collectively, the "investment advisers") provide investment advice and,
in general, supervise the management and investment programs of the Portfolios
of the Series Trust.

TAMIC

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

The 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 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.

SERIES-13
<PAGE> 41

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 0.10% 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 0.10% management fee to TAMIC, but excludes brokerage commissions
and interest charges).

MMC

MMC (formerly Smith Barney Mutual Funds Management Inc.) is located at 388
Greenwich Street, New York, New York and has been in the investment counseling
business since 1968. MMC renders investment advice to a wide variety of
individual, institutional and investment company clients with aggregate assets
under management in excess of $85 billion. MMC is a wholly owned subsidiary of
Travelers Group Inc.

MMC 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, MMC 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 MMC. Jack S. Levande is a Managing
Director and Portfolio Manager. Prior to joining MMC 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 Investment Policy Committee. George
Mueller is a Senior Vice President of Taxable Fixed-Income Management,
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 Investment Policy Committee.

ADVISORY FEES -- UTILITIES PORTFOLIO

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.

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

SERIES-14
<PAGE> 42

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.

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

Pursuant to Management Agreements dated May 1, 1993 (and its subsequent
amendments) 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 0.15%

For the fiscal year ended December 31, 1997, the U.S. Government Securities
Portfolio, and the Utilities Portfolio paid 0.49% and 1.06%, respectively, of
their average net assets in expenses. For the U.S. Government Securities
Portfolio and the Utilities Portfolio, there were no expense reimbursements for
the fiscal year ended December 31, 1997.

For the fiscal year ended December 31, 1997, Zero Coupon Bond Fund Portfolio
Series 1998 paid 0.15%, Series 2000 paid 0.15% and Series 2005 paid 0.15% of
their average assets in expenses. These expenses would have been, on an
annualized basis, 2.21%, 1.80% and 1.52%, 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.

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

SERIES-15
<PAGE> 43

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.

SERIES-16
<PAGE> 44

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

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

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

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

YEAR 2000 COMPLIANCE

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

Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our principal systems will be Year
2000 compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of the Series Trust.

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

SERIES-17
<PAGE> 45

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

REPURCHASE AGREEMENTS

SERIES-18
<PAGE> 46

WHEN-ISSUED SECURITIES

CERTIFICATES OF DEPOSIT

BANKERS' ACCEPTANCES

SERIES-19
<PAGE> 47

FUTURES CONTRACTS

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

SERIES-20
<PAGE> 48

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

WRITING COVERED CALL OPTIONS

SERIES-21
<PAGE> 49

BUYING PUT AND CALL OPTIONS

SHORT SALES AGAINST THE BOX

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

SERIES-22
<PAGE> 50

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

LENDING PORTFOLIO SECURITIES

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

STRIPPED SECURITIES

(1) debt obligations issued by the U.S. Treasury that have been stripped of
their unmatured interest coupons; interest coupons that have been
stripped from debt obligations issued by the U.S. Treasury; and
receipts and certificates for stripped debt obligations and stripped
coupons, including U.S. government trust certificates (collectively,
"Stripped Treasury Securities") (but currently not anticipated to be in
excess of 55% of the Funds' assets);

(2) other zero coupon securities issued by the U.S. government and its
agencies and instrumentalities, by a variety of tax-exempt issuers such
as state and local governments and their agencies and instrumentalities
and by "mixed-ownership government corporations" (collectively,
"Stripped Government Securities");

SERIES-23
<PAGE> 51

(3) zero coupon securities issued by domestic corporations which consist of
corporate debt obligations without interest coupons, and, if available,
interest coupons that have been stripped from corporate debt
obligations, and receipts and certificates for such stripped debt
obligations and stripped coupons (collectively, "Stripped Corporate
Securities");

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

(5) stripped Eurodollar obligations, which are debt securities denominated
in U.S. dollars that are issued by foreign issuers, often subsidiaries
of domestic corporations ("Stripped Eurodollar Obligations").

SERIES-24
<PAGE> 52

THE TRAVELERS SERIES TRUST

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

TIC Ed. 5-98

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

THE TRAVELERS SERIES TRUST

MFS EMERGING GROWTH PORTFOLIO

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

Shares of the Portfolio are currently offered without a sales charge to certain
separate accounts of The Travelers Insurance Company and Travelers Life and
Annuity Company (collectively, "Company" or "Travelers"). The Portfolio serves
as a funding option for variable annuity and variable life insurance contracts
issued by Travelers. The term "shareholder" as used in this prospectus refers to
any insurance company separate account that may use shares of the Portfolio as a
funding option now or in the future.

This Prospectus concisely sets forth the information about the Series Trust and
the Portfolio that you should know before investing. Please read it and retain
it for future reference. Additional information about the Series Trust and the
Portfolio is contained in a Statement of Additional Information ("SAI") dated
May 1, 1998 has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into this Prospectus. A copy may be obtained,
without charge, by writing to The Travelers Insurance Company, Annuity Services,
One Tower Square, Hartford, Connecticut 06183-5030, by calling 860-277-0111, or
by accessing the SEC's website (http://www.sec.gov).

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

THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.

<PAGE> 54

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS........................................ 3
FUND DESCRIPTION............................................ 4
FUNDAMENTAL INVESTMENT POLICIES............................. 4
MFS EMERGING GROWTH PORTFOLIO............................... 4
PORTFOLIO TURNOVER.......................................... 9
BOARD OF TRUSTEES........................................... 9
INVESTMENT MANAGER.......................................... 9
INVESTMENT SUBADVISER....................................... 10
FUND ADMINISTRATION......................................... 10
SECURITIES TRANSACTIONS..................................... 11
FUND EXPENSES............................................... 11
TRANSFER AGENT.............................................. 11
SHARES OF THE SERIES TRUST.................................. 11
NET ASSET VALUE............................................. 12
TAX STATUS.................................................. 13
DIVIDENDS AND DISTRIBUTIONS................................. 13
LEGAL PROCEEDINGS........................................... 13
YEAR 2000 COMPLIANCE........................................ 13
ADDITIONAL INFORMATION...................................... 13
EXHIBIT A................................................... 14
EXHIBIT B................................................... 25
</TABLE>

MFS-2
<PAGE> 55

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

MFS EMERGING GROWTH PORTFOLIO

The following information for the periods ended December 31, 1997 and 1996 has
been audited by KPMG Peat Marwick, LLP, independent auditors, whose report
thereon appears in the Fund's Annual Report dated December 31, 1997. The
information set out below should be read in conjunction with the financial
statements and related notes that also appear in the Fund's 1997 Annual Report,
which is incorporated by reference into the SAI.

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDING AUGUST 30, 1996(1) TO
1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.55 $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (loss)(2)........................... (0.03) 0.03
Net realized and unrealized gains......................... 2.26 0.57
- -------------------------------------------------------------------------------------------------
Total Income From Operations................................ 2.23 0.60
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... -- (0.03)
Net realized gains........................................ (0.21) (0.01)
Capital................................................... (0.01) (0.01)
- -------------------------------------------------------------------------------------------------
Total Distributions......................................... (0.22) (0.05)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............................. $ 12.56 $ 10.55
- -------------------------------------------------------------------------------------------------
TOTAL RETURN++.............................................. 21.15% 6.00%
- -------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........................... $70,347 $12,924
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses(2)............................................... 0.95% 0.95%
Net investment income (loss).............................. (0.40) 0.55
- -------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE+.................................... 94% 49%
- -------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON EQUITY TRANSACTIONS... $ 0.06 $ 0.03
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) Commencement of operations.

(2) An expense reimbursement agreement was in place for MFS Emerging Growth
Portfolio totaling $16,407 and $40,739 of the Portfolio's expenses for the
periods ended December 31, 1996 and December 31, 1997, respectively. If such
fees were not waived or reimbursed, the per share effect on net investment
income and the expense ratios would have been $0.06 and 2.09%, respectively
for 1996, and $0.01 and 1.05% respectively for 1997.

++ Total return is actual and has not been annualized, as it may not be
representative of the total return for the year. The total return would have
been lower had expenses not been reduced during the period shown, or if
separate account charges had been reflected.

+ Annualized for periods of less than one year.

MFS-3
<PAGE> 56

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

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

The Series Trust is currently divided into 21 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").
The MFS Emerging Growth Portfolio is described in this prospectus. The other
Portfolios are described in a separate prospectus. While there is no assurance
that the Portfolio will achieve its objective, it endeavors to do so by
following its investment policies as described below.

FUNDAMENTAL INVESTMENT POLICIES

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

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

INVESTMENT OBJECTIVE

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

INVESTMENT POLICY

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

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

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

MFS-4
<PAGE> 57

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

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

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

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

- - emerging market securities;

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

- - corporate asset-backed securities;

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

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

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

- - loan participations.

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

The nature of investing in emerging growth companies involves greater risk than
is customarily associated with investments in more established companies.
Emerging growth companies often have limited product lines, markets or financial
resources, and they may be dependent on one-person management. In addition,
there may be less research available on many promising small and medium sized
emerging growth companies making it more difficult to find and analyze these
companies. The securities of emerging growth companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established growth companies or the market averages
in general. Shares of the MFS Portfolio, therefore, are subject to greater
fluctuation in value than shares of a conservative equity portfolio or of a
growth portfolio which invests entirely in proven growth stocks.

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

In addition, please see Exhibit A for a discussion of the following investment
activities in which MFS Portfolio may engage: (i) lending of Portfolio
securities; (ii) repurchase agreements; (iii) purchase

MFS-5
<PAGE> 58

and sales of restricted securities; (iv) when-issued securities; (v) corporate
asset-backed securities; (vi) loan participation and other direct indebtedness;
(vi) foreign securities; (vii) ADRs; (viii) emerging market securities; (ix)
various futures and option trading techniques; and (x) lending of Portfolio
securities.

INVESTMENT RESTRICTIONS

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

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

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

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

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

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

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

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

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

- purchase any securities or evidences of interest therein on margin,
except that the Portfolio may obtain such short-term credit as may be
necessary for the clearance of any transaction and

MFS-6
<PAGE> 59

except that the Portfolio may make margin deposits in connection with any
type of swap, option, futures contracts and forward contracts;

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

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

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

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

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

RISK FACTORS

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

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

Changes in the value of securities subsequent to their acquisition will not
affect cash income or yield to maturity to MFS Portfolio but will be reflected
in the net asset value of shares of MFS Portfolio. The market for these lower
rated fixed-income securities may be less liquid than the market for investment
grade fixed-income securities. Furthermore, the liquidity of these lower rated
securities

MFS-7
<PAGE> 60

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

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

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

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

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

In addition, MFS Portfolio may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by MFS Portfolio is exercised or
MFS Portfolio is unable to close out a forward contract. MFS Portfolio may hold
foreign currency in anticipation of purchasing foreign securities. MFS Portfolio
may also elect to take delivery of the currencies underlying options or forward
contracts if, in the judgment of the Subadviser, it is in the best interest of
MFS Portfolio to do so. In such instances as well, MFS Portfolio may promptly
convert the foreign currencies to dollars at the then current exchange rate, or
may hold such currencies for an indefinite period of time.

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

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

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

MFS-8
<PAGE> 61

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

PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------

Although the Portfolio does not intend to invest for the purpose of seeking
short-term profits, securities held by the Portfolio will be sold whenever the
Portfolio's investment adviser or Subadviser believes it is appropriate to do so
in light of the Portfolio's investment objective, without regard to the length
of time a particular security may have been held. For 1997, the Portfolio
turnover rate for MFS Emerging Growth Portfolio was 94%.

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

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

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

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

(2) reviewing from time to time the investment policies and restrictions of
the Portfolio 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 Portfolio by the
Subadviser;

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

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

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

TAMIC is a registered investment adviser which has provided investment advisory
services since its incorporation in 1978. TAMIC is an indirect wholly owned
subsidiary of Travelers Group, Inc., and its principal offices are located at
One Tower Square, Hartford, Connecticut, 06183. TAMIC also acts as investment
adviser for other investment companies used to fund variable insurance products.
TAMIC also provides investment advice to individual and pooled pension and
profit-sharing accounts and non-affiliated insurance companies. For serving as
investment adviser to the Trust, TAMIC receives a fee, equal to the average
daily net asset value of 0.375% of the MFS Emerging Growth Portfolio. The
Investment Advisory fee is computed daily and paid monthly. The fee does not
reflect the Subadvisory fee paid to the Subadviser.

MFS-9
<PAGE> 62

INVESTMENT SUBADVISER
- --------------------------------------------------------------------------------

GENERAL

Under the terms of the Investment Advisory and Subadvisory Agreement, the
Subadviser provides an investment program for the Portfolio. The Subadviser
makes 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. MFS only places the orders for TAMIC to
execute.

For services rendered to the Portfolio, the Subadviser charges a fee to TAMIC.
The Portfolio does not pay the Subadviser's fee nor any part thereof, nor will
it have any obligation or responsibility to do so. The Subadvisory fee that
TAMIC pays to the Subadviser is not dependent on the Portfolio's performance.

MFS PORTFOLIO
SUBADVISER: MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS")

The subadviser to the Portfolio is Massachusetts Financial Services Company, a
registered investment adviser that, along with its predecessor organizations has
provided investment advisory services since 1924. Its principal offices are
located at 500 Boylston St., Boston, Massachusetts. It is a subsidiary of Sun
Life of Canada (U.S.) Financial Services Holdings, Inc., a wholly owned
subsidiary of Sun Life Assurance Company of Canada. MFS also acts as investment
adviser or subadviser for other investment companies used to fund variable
products.

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

MANAGEMENT OF MFS PORTFOLIO

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

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

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

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

MFS-10
<PAGE> 63

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

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

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

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

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

Pursuant to a Management Agreement originally executed on May 1, 1993 (and its
subsequent amendments) between the Series Trust and the Company, the Company
agreed to reimburse the Series Trust for the amount by which the Portfolio's
aggregate annual expenses, including investment advisory fees but excluding
brokerage commissions, interest charges and taxes, exceed 0.95% of the
Portfolio's average net assets for any fiscal year. This agreement will remain
in effect until terminated by either party upon sixty days' notice.

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.

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

The Series Trust currently issues one class of shares divided into 21 separate
series. Under the Declaration of Trust, the Board of Trustees is authorized to
create new series of shares without the necessity of a vote of shareholders of
the Series Trust. All shares of each series of the Series Trust have equal
voting, dividend and liquidation rights. When issued and paid for, the shares
will be fully paid and nonassessable by the Series Trust and will have no
preference, conversion, exchange or preemptive rights.

MFS-11
<PAGE> 64

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

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

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

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

MFS-12
<PAGE> 65

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

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

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

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

YEAR 2000 COMPLIANCE

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

Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our principal systems will be Year
2000 compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of the Series Trust.

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

MFS-13
<PAGE> 66

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

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND

INVESTMENT TECHNIQUES

The following types of investments and investment techniques are available to
the Portfolio as set forth herein or in the prospectus. Please refer to the
investment objective and policies of the Portfolio for a list of available
investments.

CASH INSTRUMENTS

The Portfolio may invest temporarily in cash and cash items during times of
unusual market conditions for defensive purposes and to maintain liquidity. Cash
items may include, but are not limited to, obligations such as: commercial paper
(generally lower-rated); short-term notes; obligations issued or guaranteed as
to principal and interest by the U.S. government or any of its agencies or
instrumentalities (see "U.S. Government Obligations" below).

U.S. GOVERNMENT OBLIGATIONS

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

DEBT SECURITIES

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

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

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

MFS-14
<PAGE> 67

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

REPURCHASE AGREEMENTS

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

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

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

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

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

WHEN-ISSUED SECURITIES

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

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The prices of such securities will be fixed at the time the commitment to
purchase is made, and may be expressed in either dollar price or yield
maintenance terms. Such commitment to purchase be viewed as a senior security,
and generally will be marked to market and reflected in the Portfolio's
Accumulation Unit Value daily from the commitment date. Delivery and payment may
be at a future date beyond customary settlement time.

While it is the intention of the Portfolio to take physical delivery of these
securities, offsetting transactions may be made prior to settlement, if it is
advantageous to do so.

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

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

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

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

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

FUTURES CONTRACTS

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

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 Portfolio's futures trading
transactions be employed for speculative purposes.

Stock index futures may be used, to a limited extent, to hedge specific common
stocks with respect to market (systematic) risk (involving the market's
assessment of overall economic prospects) as

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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 Portfolio will set aside, in an
identifiable manner, an amount of cash and cash equivalents equal to the total
market value of the futures contract, less the amount of the initial margin.

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

TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS: The MFS Portfolio may
enter into transactions in options, futures and forward contracts on a variety
of instruments and indices, in order to protect against declines in the value of
portfolio securities or increases in the cost of securities or other assets to
be acquired and, subject to applicable law, to increase the Portfolio's gross
income.

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 Portfolio 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 Portfolio than if
it had not entered into such futures contracts. Moreover, in the event of an
imperfect correlation between the futures position and the portfolio position
which is intended to be protected, the desired protection may not be obtained
and the Portfolio 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

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cause temporary price distortions. Due to the possibility of such price
distortion, and also because of the imperfect correlation discussed above, even
a correct forecast of general market trends by the investment advisers may not
result in a successful hedging transaction in the futures market over a short
time period.

Successful use of futures contracts for hedging purposes is also subject to the
investment advisers' ability to predict correctly movements in the direction of
the market. The Investment Adviser and Subadvisers believe that over time the
value of the investments of the Portfolio 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 MFS Portfolio may write (i.e., sell) covered call options. By writing a call
option, the Portfolio becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price.

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

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

The Portfolio 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.

BUYING PUT AND CALL OPTIONS

The MFS Portfolio 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 Portfolio 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 Portfolio, 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 Portfolio 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

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the option premium paid and the risk of depreciation in value of securities on
which it has written call options. By writing a call option on a security,
however, a Portfolio limits its opportunity to profit from any increase in the
market value of the underlying security, since the holder will usually exercise
the call option when the market value of the underlying security exceeds the
exercise price of the call.

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

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

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

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

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

OPTIONS ON STOCK INDICES -- The MFS Portfolio may write (sell) covered call and
put options and purchase call and put options on stock indices. The Portfolio
may write options on stock indices for the purpose of increasing its gross
income and to protect its portfolio against declines in the value of securities
it owns or increases in the value of securities to be acquired. When such
Portfolio writes an option on a stock index, and the value of the index moves
adversely to the holder's position, the option will not be exercised, and the
Portfolio will either close out the option at a profit or allow it to expire
unexercised. The Portfolio writing the covered call or put option will thereby
retain the amount of the premium, less related transaction costs, which will
increase its gross income and offset part of the reduced value of portfolio
securities or the increased cost of securities to be acquired. Such
transactions, however, will constitute only partial hedges against adverse price
fluctuations, since any such fluctuations will be offset only to the extent of
the premium received by the Portfolio for the writing of the option, less
related transaction costs. In addition if the value of an underlying index moves
adversely to the Portfolios' option position, the option may be exercised, and
the Portfolios will experience a loss which may only be partially offset by the
amount of the premium received.

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The MFS Portfolio may also purchase put or call options on stock indices in
order, respectively, to hedge its investments against a decline in value or to
attempt to reduce the risk of missing a market or industry segment advance.

INDEX FUTURES CONTRACTS

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

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

FORWARD CONTRACTS ON FOREIGN CURRENCY -- MFS Portfolio may enter into contracts
for the purchase or sale of a specific currency at a future date at a price set
at the time of the contract (a "Forward Contract"). The Portfolio will enter
into Forward Contracts for hedging and non-hedging purposes, including
transactions entered into for the purpose of profiting from anticipated changes
in foreign currency exchange rates. Transactions in Forward Contracts entered
into for hedging purposes may include forward purchases or sales of foreign
currencies for the purpose of protecting the dollar value of securities
denominated in a foreign currency or protecting the dollar equivalent of
interest or dividends to be paid on such securities. The Portfolio may also
enter into Forward Contracts for "cross hedging" purposes, e.g., the purchase or
sale of a Forward Contract on one type of currency as a hedge against adverse
fluctuations in the value of a second type of currency. By entering into such
transactions, however, the Portfolio may be required to forgo the benefits of
advantageous changes in exchange rates. The Portfolio may also enter into
transactions in Forward Contracts for other than hedging purposes. For example,
if the Subadviser believes that the value of a particular foreign currency will
increase or decrease relative to the value of the U.S. dollar, the Portfolio may
purchase or sell such currency, respectively, through a Forward Contract. If the
expected changes in the value of the currency occur, the Portfolio will realize
profits which will increase its gross income. Such transactions, however, may be
considered speculative and could involve significant risk of loss, as set forth
below. The Portfolio has established procedures consistent with statements of
the SEC and its staff regarding the use of Forward Contracts by registered
investment companies, which requires use of segregated assets or "cover" in
connection with the purchase and sale of such Contracts.

Forward Contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments,

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and their use involves certain risks beyond those associated with transactions
in the Futures and Options contracts described above.

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

RESTRICTED AND ILLIQUID SECURITIES

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

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

The Portfolio currently limits the amount of net assets that may be invested in
illiquid securities to 15% of its net assets.

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

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

Subject to the limitation on investments in illiquid investments, the Portfolio
may also invest in restricted securities that may not be sold under Rule 144A,
which presents certain risks. As a result, the Portfolio might not be able to
sell these securities when the Subadviser wishes to do so, or might have to sell
them at less than fair value. In addition, market quotations are less readily
available. Therefore, the judgment of the Subadviser may at times play a greater
role in valuing these securities than in the case of unrestricted securities.

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

The MFS 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

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with the bank of a security of a foreign issuer. ADRs are publicly traded on
exchanges or over the counter in the United States.

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

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

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

AMERICAN DEPOSITORY RECEIPTS

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

EMERGING MARKET SECURITIES

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

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

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

LENDING PORTFOLIO SECURITIES

The MFS Portfolio is authorized to lend its portfolio securities to brokers,
dealers and other financial organizations. The purpose of this lending activity
is to generate additional income. The primary risk associated with lending
portfolio securities, as with other extensions of credit, consists of possible
loss of rights in the collateral should the borrower fail financially.

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

The Portfolio engaging in securities lending will follow certain guidelines in
determining whether a particular potential securities borrower is appropriate.
For example, MFS will usually only make loans to member banks of the Federal
Reserve System and member firms (and subsidiaries thereof) of the New York Stock
Exchange (the "Exchange") and would be required to be secured continuously by
collateral in cash, cash equivalents or U. S. Government securities maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. MFS Portfolio would continue to collect the equivalent of the
interest on the securities loaned and would also receive either interest
(through investment of cash collateral) or a fee (if the collateral is U. S.
Government securities or a letter of credit).

MFS-23
<PAGE> 76

and, in the event of a default by the borrower, the Portfolio will, if permitted
by law, dispose of such collateral except for such part thereof that is a
security in which the Portfolio is permitted to invest. During the time
securities are on loan, the borrower will pay the Portfolio any accrued income
on those securities and the Portfolio may invest the cash collateral and earn
additional income or receive an agreed upon fee from a borrower that has
delivered cash equivalent collateral. The Portfolio will not lend securities
having a value that exceeds 10% of the current value of its total assets. Loans
of securities will be subject to termination at the Portfolio's or the
borrower's option. The Portfolio may pay reasonable administrative and custodial
fees in connection with a securities loan and may pay a negotiated portion of
the interest or fee earned with respect to the collateral to the borrower or the
placing broker.

TEMPORARY BANK BORROWING

The Portfolio may borrow from banks for temporary purposes, including the
meeting of redemption requests which might require the untimely disposition of
securities.

The MFS Portfolio's policies permit borrowing of up to 33 1/3% of total assets.

CORPORATE ASSET-BACKED SECURITIES

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

ASSET-BACKED MORTGAGE SECURITIES

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

LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS

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

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

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

MFS-24
<PAGE> 77

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MFS-25
<PAGE> 78

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

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

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

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

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

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

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

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

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

MFS-26
<PAGE> 79

THE TRAVELERS SERIES TRUST
MFS EMERGING GROWTH PORTFOLIO

5-98

L-21252 Printed in U.S.A.

<PAGE> 80

THE TRAVELERS SERIES TRUST

ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)

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

The Travelers Series Trust (the "Series Trust" or "Fund") 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 in this prospectus are
the Zero Coupon Bond Fund Portfolios (Series 1998, 2000 and 2005). All
Portfolios described in this prospectus may not be available under all variable
contracts.

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, 1998 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, by calling 860-277-0111, or
by accessing the SEC's website (http.//www.sec.gov).

THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.

<PAGE> 81

TABLE OF CONTENTS

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS........................................ 3
FUND DESCRIPTION............................................ 4
ZERO COUPON BOND FUND PORTIFOLIOS (SERIES 1998, 2000,
2005)..................................................... 4
Investment Objective and Policies......................... 4
Investment Restrictions................................... 5
Risk Factors and Special Considerations Relating to
Maturity............................................... 5
Tax Considerations........................................ 7
BOARD OF TRUSTEES........................................... 7
INVESTMENT ADVISERS......................................... 7
TAMIC..................................................... 7
Portfolio Manager......................................... 7
Advisory Fees............................................. 8
FUND ADMINISTRATION......................................... 8
SECURITIES TRANSACTIONS..................................... 8
FUND EXPENSES............................................... 8
TRANSFER AGENT.............................................. 9
SHARES OF THE SERIES TRUST.................................. 9
NET ASSET VALUE............................................. 9
TAX STATUS.................................................. 10
DIVIDENDS AND DISTRIBUTIONS................................. 10
LEGAL PROCEEDINGS........................................... 10
YEAR 2000 COMPLIANCE........................................ 10
ADDITIONAL INFORMATION...................................... 11
EXHIBIT A................................................... 12
</TABLE>

ZERO-2
<PAGE> 82

FINANCIAL HIGHLIGHTS

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

THE TRAVELERS SERIES TRUST

ZERO COUPON BOND FUND PORTFOLIOS

The following information for the year ended December 31, 1997 has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the Financial Statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.

(1) Date operations commenced.

<TABLE>
<CAPTION>
AMOUNT OF EXPENSES
REIMBURSED
------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 1998....................................... $ 27,937 $ 31,112 $ 14,257
Series 2000....................................... 27,177 31,032 14,257
Series 2005....................................... 28,361 30,922 14,256

Annualized.

ZERO-3
<PAGE> 83

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

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"). Three Portfolios, as described below, are contained in this
prospectus. The other Portfolios are described in a separate prospectus.

ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

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.

ZERO-4
<PAGE> 84

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
each Zero Coupon Bond Portfolio, as defined in the 1940 Act. Each of the Zero
Coupon Bond Portfolios will not:

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

(7) invest in commodities, except that 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.

RISK FACTORS AND SPECIAL CONSIDERATIONS RELATING TO MATURITY

ZERO-5
<PAGE> 85

economic conditions, interest rates and the market's perception of the
underlying securities of the Portfolios.

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

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

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) provides investment advice
and, in general, supervises the management and investment programs of the
Portfolios of the Series Trust.

TAMIC

PORTFOLIO MANAGER

ZERO-7
<PAGE> 87

tive 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

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).

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

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.

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

Pursuant to Management Agreements dated May 1, 1996 (and its subsequent
amendments) 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

ZERO-8
<PAGE> 88

Portfolio's average net assets for any fiscal year. For the three Zero Coupon
Bond Fund Portfolios, the amount is .15%

For the year ended December 1997, Series 1998 paid .15%, Series 2000 paid .15%
and Series 2005 paid .15% of their average assets in expenses. These expenses
would have been, on an annualized basis, 2.21%, 1.80% and 1.52%, 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.

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

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

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.

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

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

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

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

YEAR 2000 COMPLIANCE

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

ZERO-10
<PAGE> 90

condition, and result of operations of a company; investment advisor; separate
account and/or a mutual fund could be materially and adversely affected by the
failure of its systems and applications (or those either provided or operated by
third-parties) to properly operate or manage dates beyond the year 1999.

Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our principal systems will be Year
2000 compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of the Series Trust.

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

ZERO-11
<PAGE> 91

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

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

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

VARIABLE AMOUNT MASTER DEMAND NOTES

REPURCHASE AGREEMENTS

ZERO-12
<PAGE> 92

CERTIFICATES OF DEPOSIT

BANKERS' ACCEPTANCES

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

When a futures contract is purchased, the Portfolios will set aside securities
equal to the total market value of the futures contract, less the amount of the
initial margin. The Portfolios will not purchase or

ZERO-13
<PAGE> 93

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.

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

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

ZERO-14
<PAGE> 94

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

BUYING PUT AND CALL OPTIONS

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

ZERO-15
<PAGE> 95

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:

ZERO-16
<PAGE> 96

THE TRAVELERS SERIES TRUST

ZERO COUPON BOND FUND PORTFOLIOS
(SERIES 1998, 2000, 2005)

TIC Ed. 5-98

L-11788-Z Printed in U.S.A.

<PAGE> 97

THE TRAVELERS SERIES TRUST

MFS RESEARCH PORTFOLIO

STRATEGIC STOCK PORTFOLIO

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

Shares of the Portfolios are currently offered without a sales charge to certain
separate accounts of The Travelers Insurance Company and Travelers Life and
Annuity Company (collectively, "Company" or "Travelers"). The Portfolios serve
as funding options for variable annuity and variable life insurance contracts
issued by Travelers. The term "shareholder" as used in this prospectus refers to
any insurance company separate account that may use shares of the Portfolios as
funding options now or in the future.

This Prospectus concisely sets forth the information about the Series Trust and
the Portfolio 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, 1998 which has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. A copy may be
obtained, without charge, by writing to The Travelers Insurance Company, Annuity
Services, One Tower Square, Hartford, Connecticut 06183-5030, by calling
1-860-277-0111 or by accessing the SEC's website (http://www.sec.gov).

THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.

<PAGE> 98

TABLE OF CONTENTS

<TABLE>
<S> <C>
FUND DESCRIPTION............................................ 3
FUNDAMENTAL INVESTMENT POLICIES............................. 3
MFS RESEARCH PORTFOLIO...................................... 3
STRATEGIC STOCK PORTFOLIO................................... 5
PORTFOLIO TURNOVER.......................................... 8
BOARD OF TRUSTEES........................................... 8
INVESTMENT ADVISER.......................................... 8
FUND ADMINISTRATION......................................... 9
SECURITIES TRANSACTIONS..................................... 9
FUND EXPENSES............................................... 10
TRANSFER AGENT.............................................. 10
SHARES OF THE SERIES TRUST.................................. 10
NET ASSET VALUE............................................. 11
TAX STATUS.................................................. 11
DIVIDENDS AND DISTRIBUTIONS................................. 12
LEGAL PROCEEDINGS........................................... 12
YEAR 2000 COMPLIANCE........................................ 12
ADDITIONAL INFORMATION...................................... 12
EXHIBIT A................................................... 13
EXHIBIT B................................................... 30
</TABLE>

TST-2
<PAGE> 99

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

The Series Trust is currently divided into 21 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").
Two portfolios, as described below, are contained in this prospectus. The other
Portfolios are described in a separate prospectus. While there is no assurance
that a Portfolio will achieve its objective, it endeavors to do so by following
its investment policies as described below.

FUNDAMENTAL INVESTMENT POLICIES

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

MFS RESEARCH PORTFOLIO

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

INVESTMENT OBJECTIVE

The basic investment objective of MFS Research Portfolio is to provide long-term
growth of capital and future income.

INVESTMENT POLICIES

The Portfolio's securities are selected by a committee of investment research
analysts from the sub-adviser and from MFS International (U.K.) Limited. The
Portfolio's assets are allocated among industries by the committee. Individual
analysts are then responsible for selecting what they view as the securities
best suited to meet the Portfolio's investment objective within their assigned
industry responsibility.

The Portfolio's policy is to invest a substantial proportion of its assets in
the common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. A
smaller proportion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic is
income production rather than growth. Such securities may also offer
opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies.

Other investments are allowed, including, but not limited to, those described
below. The description of these techniques and the associated risks appears in
Exhibit A. Subject to the investment restrictions set forth below, the MFS
Research Portfolio may invest in or engage in the following:

TST-3
<PAGE> 100

- - repurchase agreements

- - American Depository Receipts

- - emerging market securities (not more than 20% of the Portfolio's net assets)

- - restricted securities

- - securities lending (not more than 30% of the Portfolio's net assets)

- - "investment grade" securities (rated Baa or better by Moody's Investor
Service, Inc. ("Moody's") or BBB or better by Standard and Poor's Ratings
Services ("S&P") or Fitch Investors Service, Inc. ("Fitch"))

- - lower rated securities, commonly known as junk bonds (rated Ba or lower by
Moody's or BB or lower by S&P or Fitch) or securities which the Subadviser
believes to be of similar quality to these lower rated securities (not more
than 30% of the Portfolio's net assets)

- - warrants (not more than 5% of the Portfolio's net assets)

The investment objective and policies of the MFS Research Portfolio are not
fundamental and may be changed without a vote of the majority of the outstanding
voting securities of the Portfolio, as defined in the Investment Company Act of
1940 ("1940 Act"). See attached Exhibit A for a more complete description of
these investment techniques.

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
MFS Research Portfolio, as defined in the 1940 Act. The MFS Research Portfolio
may not:

1. invest more than 5% of its total assets, computed at market value, in the
securities of any one issuer (excluding U.S. Government Securities);

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

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

4. borrow amounts in excess of 5% of its gross assets (taken at the lower of
cost or market value), and then only as a temporary measure for
extraordinary or emergency purposes;

5. pledge, mortgage or hypothecate an amount of assets which (taken at market
value) exceeds 15% of its gross assets (taken at the lower of cost or market
value);

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

7. 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;

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

9. make margin purchases or short sales of securities, except for short-term
credits which are necessary for the clearance of transactions;

10. make loans, except that the MFS Research 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 Portfolio's investment objective and policies;

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

12. purchase the securities of any other investment company, or investment
trust, except in the open market and at customary brokerage rates, provided
however, that the Portfolio shall not purchase such securities if the
purchase would cause more than 10% of the Portfolio's total assets (taken at
market value) to be invested in the securities of such issuer, and provided
that the Portfolio shall not purchase securities issued by any open-end
investment company;

TST-4
<PAGE> 101

13. sell any security which the Portfolio does not own unless, at the time of
sale, the Portfolio owns other securities which give it the right to obtain
securities without further payment and provided that, if such right is
conditional, the sale is made upon the same conditions.

14. purchase or sell any put or call options or any combination thereof,
provided that this shall not prevent the purchase, ownership, holding or
sale of warrants where the grantor of the warrants is the issuer of the
underlying securities; or

15. invest in securities which are subject to legal or contractual restrictions
on resale, or for which there is no readily available market (e.g., trading
in the security is suspended, or, in the case of unlisted securities, market
makers do not exist or will not entertain bids or offers), unless the Board
of Trustees has determined that such securities are liquid based upon
trading markets for the specific security if more than 10% of the
Portfolio's assets (taken at market value) would be invested in such
illiquid securities.

The MFS Research Portfolio 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 TAMIC have a substantial interest.

RISK FACTORS

LOWER RATED FIXED INCOME SECURITIES: These securities are considered
speculative and, while generally providing greater income than investments in
higher rated securities, will involve greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of the
security).

FOREIGN SECURITIES: Risks include changes in currency rates, exchange control
regulations, governmental administrative or economic or monetary policy (in the
U.S. or abroad) or circumstances in dealings between nations. Costs may be
incurred in connection with conversions between currencies. Risks may also
include limited information about issuers, higher brokerage costs, different
accounting standards and thinner trading markets. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than in the U.S.

EMERGING MARKETS: The risks of investing in foreign securities may be
intensified in the case of investment in emerging markets. Securities of many
issuers in emerging markets may be less liquid and more volatile than those of
comparable domestic issuers. Investment in emerging markets may be subject to
delays in settlement, resulting in periods when a portion of the Portfolio's
assets is uninvested and no return is earned thereon. Certain markets may
require payment for securities before delivery, and in such markets the
Portfolio bears the risk that the securities will not be delivered and that the
payment will not be returned.

STRATEGIC STOCK PORTFOLIO

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

INVESTMENT OBJECTIVE

The investment objective of the Strategic Stock Portfolio is to provide
investors with an above-average total return through a combination of potential
capital appreciation and dividend income.

INVESTMENT POLICIES

The Portfolio attempts to achieve its investment objective by investing
primarily in a portfolio of actively traded equity securities comprised of (i)
high dividend yield stocks periodically selected from the companies included in
the Dow Jones Industrial Average (the "DJIA") and (ii) high dividend yield
stocks periodically selected from a pre-screened subset of the companies
included in the Standard & Poor's 100 Stock Index (the "S&P 100").

TST-5
<PAGE> 102

The Strategic Stock Portfolio invests primarily in dividend paying equity
securities of companies included in the DJIA or in the S&P 100. The Portfolio is
not designed to parallel or correlate with, nor is the share price expected to
parallel or correlate with any movements in the DJIA or the S&P 100. The
Portfolio will initially invest approximately equally in 20 securities
identified by the Subadviser according to the Strategic Selection Policies
listed below.

The "STRATEGIC SELECTION POLICIES." A security's dividend yield is a primary
factor in the security selection process. "Dividend yield" is calculated for
each security by annualizing the last quarterly or semiannual ordinary dividend
declared on each security and dividing the result by the security's closing sale
price on the applicable date. This yield is historical and there can be no
assurance that any dividends will be declared or paid in the future. The ten
highest dividend yielding securities in the DJIA will be identified for
investment. In addition, the Subadviser will identify the ten highest dividend
yielding securities in the S&P 100 for investment after excluding the securities
comprising the DJIA. The 20 securities so identified (the "Strategic
Securities") will represent the Portfolio's initial investment.

Periodically, the Subadviser will employ the same Strategic Selection Policies
to identify a new list of 20 Strategic Securities. The Subadviser will review
and rebalance a portion of all of the Portfolio's assets as to invest that
portion of the Portfolio's assets approximately equally in the new list of 20
Strategic Securities. In this manner, the Subadviser expects that, beginning
with the reevaluation in month thirteen, each security in the Portfolio will be
reviewed and rebalanced approximately annually, although reviews and adjustments
may be made more frequently.

Application of the Strategic Selection Policies will be subject to and limited
by certain of the Portfolio's other investment policies and restrictions. This
includes restrictions and limitations required for the Portfolio to maintain its
status as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended, and those required by the Investment Company
Act of 1940, as amended (such as investment diversification requirements and
industry concentration limitations). Although each new list of Strategic
Securities will include only 20 securities, the Subadviser expects that the
number of securities held by the Portfolio will over time increase and that the
Portfolio may eventually hold 40 or more different securities since only a
portion of the Portfolio's assets may be reviewed and adjusted at any given
time. The Portfolio ordinarily will not sell securities or reevaluate its
portfolio investments except as periodically determined by the Subadviser. As a
result, the adverse financial condition of a company will not result in its
elimination from the Portfolio, except under extraordinary circumstances.

The Subadviser intends to maintain the ratio of shares of Strategic Securities
by purchasing and/or selling approximately proportionate amounts of securities
from the Portfolio in response to purchases made or redemptions requested.

Other investments are allowed, including, but not limited to, those described
below. Subject to the investment restrictions set forth below, the Strategic
Stock Portfolio may invest in or engage in the following:

- - up to 5% of its total assets in the aggregate initial margin and premiums
required to establish positions in options on equity securities indices,
futures contracts on such indices and options on such futures contracts, after
taking into account unrealized profits and unrealized losses on such
contracts, for both hedging purposes and in an attempt to enhance gain

- - up to 5% of its total assets in securities of other registered investment
companies that seek to provide investment results that generally correspond to
the performance of securities included in one or more broad market indices

- - pending investment and for temporary defensive purposes the Portfolio may
invest without limit in short-term, high quality fixed income securities and
in money-market instruments.

The Portfolio follows a "buy and hold" strategy. The Portfolio may at times
acquire securities of companies that the market and the Subadviser believe are
more susceptible to financial difficulty and

TST-6
<PAGE> 103

corresponding adverse market performance than are other companies with
securities included in the DJIA or in the S&P 100. Except to raise cash for
operational purposes, the Portfolio ordinarily will not sell securities or
reevaluate its portfolio investments except as periodically determined by the
Subadviser. Only a portion of the Portfolio's assets may be reviewed and
adjusted for any given period. As a result, although the Portfolio may dispose
of a security in certain events (e.g., defaulting on payments; a decline in the
security's price), a company's adverse financial condition will not result in
its elimination from the Portfolio prior to scheduled review except under
extraordinary circumstances. Similarly, securities held in the Portfolio
ordinarily will not be sold by the Portfolio for the purpose of taking advantage
of market fluctuations or changes in anticipated rate of appreciation.

RISK FACTORS

Risk factors associated with an investment in the Portfolio include the possible
deterioration of either the financial condition of the issuers or the general
condition of the stock market, and general price volatility. The relatively high
dividend yield (calculated based on the current stock price and the annualized
most recent dividend payment amount) of certain securities that the Portfolio
will acquire may reflect the market's assessment of the risk that the company
may reduce or eliminate the dividend in the current period or in the future, or
otherwise reflect the market's unfavorable assessment of the company's
performance outlook. The Subadviser generally will not take these considerations
into account in implementing the Strategic Selection Policies.

Use of options, futures contracts and related options may include additional
risks. Investment in securities of other investment companies will subject the
Portfolio to additional and potentially duplicate costs and expenses, including
investment management fees charged by such registered investment companies. See
Exhibit A, Investment Techniques at a Glance and Description of Certain Types of
Investment for more information regarding risk factors.

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 Portfolio may not:

1. invest 25% or more of its total assets in any one industry;

2. borrow amounts in excess of 33 1/3% of its gross assets (taken at the lower
of cost or market value), except that as a temporary measure for
extraordinary or emergency purposes, the portfolio may borrow up to 5% more;

3. issue senior securities;

4. make loans, except that the Portfolios may purchase debt securities, may
enter into repurchase agreements, and may lend its securities;

5. underwrite the securities of other issuers, except insofar as the Portfolio
may technically be deemed to be an underwriter, as defined in the Securities
Act of 1933 (the "1933 Act") in the disposition of a portfolio security;

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

7. purchase real estate or interests in real estate, other than securities
secured by real estate, participation therein or real estate investment
trusts and similar instruments;

8. purchase or sell commodities or commodities contracts except for hedging
purposes;

9. make any short sales of securities, except in conformity with applicable
laws, rules and regulations and unless, giving effect to such sale, the
market value of all securities sold short does not exceed 25% of the value
of the Portfolio's total assets and the Portfolio's aggregate short sales of
a particular class of an issuer's securities to not exceed 25% of the then
outstanding securities of that class of the issuer's securities; or

TST-7
<PAGE> 104

10. purchase any security (other than U.S. obligations) such that (a) more than
25% of the Portfolio's total assets would be invested in securities of a
single issuer or (b) as to 75% of the Portfolio's total assets (i) more than
5% of the Portfolio's total assets would be then invested in securities of a
single issuer or (ii) the Portfolio would own more than 10% of the voting
securities of a single issuer.

Note: The S&P 100 Stock Index is the property of Standard & Poors (S&P). The
DJIA is the property of Dow Jones & Company, Inc. Dow Jones & Company, Inc. has
not granted to the Strategic Stock Portfolio a license to use the DJIA. Neither
S&P nor Dow Jones & Company, Inc. has participated in any way in the creation of
the Strategic Stock Portfolio or in the selection of the stocks included in such
Portfolio and neither has approved any information herein relating thereto.

PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------

Although the Portfolios do not intend to invest for the purpose of seeking
short-term profits, securities held by the Portfolios will be sold whenever the
Portfolios' investment adviser or Subadviser believes it is appropriate to do so
in light of the Portfolios' investment objective, without regard to the length
of time a particular security may have been held. The MFS Research portfolio
turnover rate is anticipated to be approximately 85% for 1998. The Strategic
Stock Portfolio's portfolio turnover rate is expected to be 100%.

BOARD OF TRUSTEES

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

INVESTMENT ADVISER

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

INVESTMENT ADVISER: TAMIC

Under its Investment Advisory Agreement with the Trust, TAMIC is paid an amount
equivalent on an annual basis to 0.80% of the average daily net assets of the
MFS Research Portfolio, and for the Strategic Stock Portfolio, 0.60% of the
Portfolio's average daily net assets. The fee is computed daily and paid
monthly.

TST-8
<PAGE> 105

SUBADVISER: MFS RESEARCH PORTFOLIO
PORTFOLIO MANAGER

For its investment subsidiary services, MFS receives a fee from TAMIC equal, on
an annual basis, to 0.375% of the MFS Research Portfolio's average daily net
assets. MFS Research Portfolio is managed by a committee of various equity
research analysts employed by MFS.

STRATEGIC STOCK PORTFOLIO
SUBADVISER: TIMCO

TIMCO, located at One Tower Square, Hartford, CT 06183-2030 serves as the
Portfolio's investment subadviser. The Subadviser, a registered investment
adviser since 1971, has been in the investment counseling business since 1967
and renders investment advice to a number of institutional accounts as well as
various registered investment companies and insurance company separate accounts
that had total assets under management as of December 31, 1997 in excess of $2
billion. Subject to the supervision and direction of the Fund's Board of
Trustees, the Subadviser manages the Portfolio in accordance with the
Portfolio's stated investment objective and policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and employs
professional portfolio managers and securities analysts who provide research
services to the Portfolio.

TAMIC pays TIMCO a subadvisory fee of 0.20% of the Strategic Stock Portfolio's
average daily net assets pursuant to an advisory agreement entered into by the
subadviser and TAMIC.

Sandip Bhagat, president and chief executive officer, of TIMCO is primarily
responsible for the day-to-day operations of the Portfolio, including making all
investment decisions.

FUND ADMINISTRATION

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

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

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

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

The Portfolio may pay higher commissions to broker-dealers which provide
research services. The Investment Adviser may use these services in advising the
Portfolio, as well as in advising their other clients.
TST-9
<PAGE> 106

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

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

Pursuant to a Management Agreement originally executed on May 1, 1993 (and its
subsequent amendments) between the Series Trust and the Company, the Company
agreed to reimburse the Series Trust for the amount by which the Portfolio's
aggregate annual expenses, including investment advisory fees but excluding
brokerage commissions, interest charges and taxes, exceed a percent of the
Portfolio's average net assets for any fiscal year. For MFS Research Portfolio,
the percent is 1.00%; for Strategic Stock Portfolio, the percent is .90%. This
agreement will remain in effect until terminated by either party upon sixty
days' notice.

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.

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

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

ers shall not be subject to any personal liability for the Series Trust's
obligations and provides indemnification from Series Trust assets for any
shareholder held personally liable for the Series Trust's obligations.
Disclaimers of such liability are included in each agreement entered into by the
Series Trust or its Portfolios.

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

The Series Trust or a 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

TST-11
<PAGE> 108

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

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

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

YEAR 2000 COMPLIANCE

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

Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our principal systems will be Year
2000 compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of the Series Trust.

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

TST-12
<PAGE> 109

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

INVESTMENT TECHNIQUES AT A GLANCE

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

<TABLE>
<CAPTION>
STRATEGIC
MFS STOCK
INVESTMENT TECHNIQUE RESEARCH PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Money Market Instruments X X
- ---------------------------------------------------------------------------------
Bankers Acceptances X X
- ---------------------------------------------------------------------------------
Certificates of Deposit X X
- ---------------------------------------------------------------------------------
U.S. Government Obligations X X
- ---------------------------------------------------------------------------------
Equity Securities X X
- ---------------------------------------------------------------------------------
Debt Securities X X
- ---------------------------------------------------------------------------------
Floating & Variable Rate Instruments X X
- ---------------------------------------------------------------------------------
Variable Amount Master Demand Notes X X
- ---------------------------------------------------------------------------------
Repurchase Agreements X X
- ---------------------------------------------------------------------------------
Reverse Repurchase Agreements X X
- ---------------------------------------------------------------------------------
When-Issued Securities X
- ---------------------------------------------------------------------------------
Futures Contracts X X
- ---------------------------------------------------------------------------------
Commercial Paper X X
- ---------------------------------------------------------------------------------
Writing Covered Call Options
- ---------------------------------------------------------------------------------
Buying Put and Call Options
- ---------------------------------------------------------------------------------
Options on Stock Indices X
- ---------------------------------------------------------------------------------
Index Futures Contracts X X
- ---------------------------------------------------------------------------------
Options on Index Futures Contracts X
- ---------------------------------------------------------------------------------
Forward Contracts on Foreign Currency
- ---------------------------------------------------------------------------------
Options on Foreign Currencies
- ---------------------------------------------------------------------------------
Foreign Securities X
- ---------------------------------------------------------------------------------
American Depository Receipts X
- ---------------------------------------------------------------------------------
Emerging Market Securities X
- ---------------------------------------------------------------------------------
Lending Portfolio Securities X X
- ---------------------------------------------------------------------------------
Temporary Bank Borrowing X X
- ---------------------------------------------------------------------------------
Letters of Credit X X
- ---------------------------------------------------------------------------------
Investment in Unseasoned Companies X
- ---------------------------------------------------------------------------------
Real Estate-Related Instruments X X
- ---------------------------------------------------------------------------------
Corporate Asset-Backed Securities X
- ---------------------------------------------------------------------------------
Asset-Backed Mortgage Securities
- ---------------------------------------------------------------------------------
Loan Participations
- ---------------------------------------------------------------------------------
Other Direct Indebtedness
- ---------------------------------------------------------------------------------
Investment Company Securities X X
- ---------------------------------------------------------------------------------
Affiliated Bank Transactions
- ---------------------------------------------------------------------------------
Indexed Securities
- ---------------------------------------------------------------------------------
Short Sales "Against the Box"
- ---------------------------------------------------------------------------------
Swap Agreements
- ---------------------------------------------------------------------------------
Convertible Securities X
- ---------------------------------------------------------------------------------
Restricted or Illiquid Securities X
- ---------------------------------------------------------------------------------
</TABLE>

TST-13
<PAGE> 110

DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND

INVESTMENT TECHNIQUES AVAILABLE TO THE PORTFOLIOS

The following types of investments and investment techniques are available to
the Portfolios as set forth herein or in the prospectus. Please refer to the
investment objective and policies of each Portfolio for a list of available
investments.

CASH INSTRUMENTS

The Portfolios may invest temporarily in cash and cash items during times of
unusual market conditions for defensive purposes and to maintain liquidity. Cash
items may include, but are not limited to, obligations such as: commercial paper
(generally lower-rated); short-term notes; obligations issued or guaranteed as
to principal and interest by the U.S. government or any of its agencies or
instrumentalities (see "U.S. Government Obligations" below).

SHORT-TERM MONEY MARKET INSTRUMENTS

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

CERTIFICATES OF DEPOSIT

BANKERS' ACCEPTANCES

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

U.S. GOVERNMENT OBLIGATIONS

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

TST-14
<PAGE> 111

Certain Portfolios may also invest in U.S. Government obligations which may not
always receive financial support from the U.S. government including obligations
of the: Federal Land Banks; Central Bank for Cooperatives; Federal Intermediate
Credit Banks; Federal Home Loan Banks; Farmers Home Administration; and Federal
National Mortgage Association.

EQUITY SECURITIES

By definition, equity securities include common stocks, convertible securities,
and warrants. Common stocks, the most familiar type, represent an equity
(ownership) interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes in a
company's financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.

Certain Portfolios may invest in debt obligations which involve equity features
such as conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on revenues, sales
or profits, or the purchase of common stock in a unit transaction (where
corporate debt securities and common stock are offered as a unit).

DEBT SECURITIES

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

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

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

FLOATING AND VARIABLE RATE INSTRUMENTS

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

TST-15
<PAGE> 112

book entry form at a bank other than the Portfolio's custodian, subject to a
subcustodian agreement approved by the Portfolio between that bank and the
Portfolio's custodian.

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

VARIABLE AMOUNT MASTER DEMAND NOTES

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

REPURCHASE AGREEMENTS

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

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

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

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

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

REVERSE REPURCHASE AGREEMENTS

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

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

When effecting reverse repurchase agreements, liquid assets of the Portfolio, in
a dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled. During the period any
reverse repurchase agreements are outstanding, but only to the extent necessary
to assure completion of the reverse repurchase agreements, the Portfolio may
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.

WHEN-ISSUED SECURITIES

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

The prices of such securities will be fixed at the time the commitment to
purchase is made, and may be expressed in either dollar price or yield
maintenance terms. Such commitment to purchase may be viewed as a senior
security, and generally will be marked to market and reflected in the
Portfolio's Accumulation Unit Value daily from the commitment date. Delivery and
payment may be at a future date beyond customary settlement time.

While it is the intention of each Portfolio to take physical delivery of these
securities, offsetting transactions may be made prior to settlement, if it is
advantageous to do so. For example, a 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.

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appreciation (or depreciation) in value from the commitment date. Further, such
failure to complete a transaction may cause the affected Portfolio to miss other
opportunities.

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

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

FUTURES CONTRACTS

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

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

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

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

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

SPECIAL RISKS RELATING TO FUTURES CONTRACTS

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

BUYING PUT AND CALL OPTIONS

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

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

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

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

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fluctuations will be offset only to the extent of the premium received by the
Portfolio for the writing of the option, less related transaction costs. In
addition if the value of an underlying index moves adversely to the Portfolios'
option position, the option may be exercised, and the Portfolios will experience
a loss which may only be partially offset by the amount of the premium received.

INDEX FUTURES CONTRACTS

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

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

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

Forward Contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments,

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and their use involves certain risks beyond those associated with transactions
in the Futures and Options contracts described above.

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

WRITING COVERED CALL OPTIONS

By writing (i.e., selling) a call option, a Portfolio becomes obligated during
the term of the option to deliver the securities underlying the option upon
payment of the exercise price.

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

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

The Portfolios may only write "covered" call 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.

RESTRICTED AND ILLIQUID SECURITIES

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

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Accordingly such sales may be made at less than fair market value or may not be
able to sell them when the investment adviser believes it is desirable to do so.

The Portfolios currently limit the amount of net assets that may be invested in
illiquid securities to 15% of their respective Portfolio's net assets.

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

Subject to the limitation on investments in illiquid investments, the Portfolios
may also invest in restricted securities that may not be sold under Rule 144A,
which presents certain risks. As a result, a Portfolio might not be able to sell
these securities when the Subadviser wishes to do so, or might have to sell them
at less than fair value. In addition, market quotations are less readily
available. Therefore, the judgment of the Subadviser may at times play a greater
role in valuing these securities than in the case of unrestricted securities.

COMMERCIAL PAPER

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

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

FOREIGN SECURITIES AND AMERICAN DEPOSITORY RECEIPTS

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.

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

Certain restrictions may apply concerning the amount of a Portfolio's net assets
which may be invested in foreign securities.

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

AMERICAN DEPOSITORY RECEIPTS

EMERGING MARKET SECURITIES

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

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problems could cause the Portfolio to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result in losses to a Portfolio. Emerging nations may suffer from extreme and
volatile debt burdens or inflation rates. Securities of issuers located in
countries with emerging markets may have limited marketability and may be
subject to more abrupt or erratic price movements.

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

LENDING PORTFOLIO SECURITIES

The Portfolios are each authorized to lend their portfolio securities to
brokers, dealers and other financial organizations. The purpose of this lending
activity is to generate additional income. The primary risk associated with
lending portfolio securities, as with other extensions of credit, consists of
possible loss of rights in the collateral should the borrower fail financially.

Each of the Portfolios engaging in securities lending will follow certain
guidelines in determining whether a particular potential securities borrower is
appropriate.

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

TEMPORARY BANK BORROWING

All of the Portfolios may borrow from banks for temporary purposes, including
the meeting of redemption requests which might require the untimely disposition
of securities.

LETTERS OF CREDIT

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of default by an issuer. Only banks the securities of which, in the opinion of
the Investment Subadviser, are of investment quality comparable to other
permitted investments of the Portfolio may be used for letter of credit-backed
investment.

INVESTMENT IN UNSEASONED COMPANIES

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

REAL ESTATE-RELATED INSTRUMENTS

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

CORPORATE ASSET-BACKED SECURITIES

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

ASSET-BACKED MORTGAGE SECURITIES

LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS

By purchasing a loan participation, a Portfolio acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many such loans are secured, and most impose restrictive covenants
which must be met by the borrower. These loans are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs
and other corporate activities. Such loans may be in default at the time of
purchase.

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

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transfer, and only limited opportunities may exist to resell such instruments.
As a result, the Portfolios may be unable to sell such investments at an
opportune time or may have to resell them at less than fair market value.

INVESTMENT COMPANY SECURITIES

Generally, the Portfolios may purchase and sell securities of open and
closed-end investment companies.

AFFILIATED BANK TRANSACTIONS

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

INDEXED SECURITIES

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

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

SHORT SALES "AGAINST THE BOX"

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

SWAP AGREEMENTS

Swap agreements can be individually negotiated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may

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increase or decrease a fund's exposure to long- or short-term interest rates (in
the United States or abroad), foreign currency values, mortgage securities,
corporate borrowing rates, or other factors such as security prices or inflation
rates. Swap agreements can take many different forms and are known by a variety
of names. A Portfolio is not limited to any particular form of swap agreement if
the Subadviser determines it is consistent with the fund's investment objective
and policies.

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

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

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

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

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures, convertible preferred stock,
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security hold, such as DECS-(Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when issued as
a debt security), LYONS-(Liquid Yield Option Notes, which are corporate bonds
that are purchased at prices below par with no coupons and are convertible into
stock), PERCS-(Preferred Equity Redeemable Stock (an equity issue that pays a
high cash dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES-(Preferred Redeemable Increased Dividend Securities (which
are essentially the same as DECS; the difference is little more than who
initially underwrites the issue).

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could result in a Portfolio purchasing and holding, without limit, convertible
securities rated below investment grade by as NRSRO or in a Portfolio holding
such securities where they have a acquired below-investment-grade rating after a
Portfolio has purchased it.

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