<pg$pcn>
THE TRAVELERS VARIABLE
PRODUCTS FUNDS
ANNUAL REPORTS
December 31, 1996
MANAGED ASSETS TRUST
HIGH YIELD BOND TRUST
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
THE TRAVELERS SERIES TRUST:
U.S. Government Securities Portfolio
Social Awareness Stock Portfolio
Utilities Portfolio
[TRAVELERSLIFE LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- ------------------------------------------------------------
- --------------------
ECONOMIC REVIEW AND OUTLOOK
As 1996 began, the federal government found itself paralyzed
by a prolonged
budget dispute. In the financial markets, investors were
focused on signs of a
slowing economy. With two-year Treasury notes priced to
yield less than the
federal funds rate, the bond market clearly expected the
Federal Reserve Board
(the "Fed") to cut interest rates significantly. The Fed
lowered the federal
funds rate by 0.25% in January, but strong employment growth
over the next
several months sent the bond market into a tailspin
reminiscent of 1994.
Interest rates hit their highest levels for the year in the
June to September
period as investors prepared for the Fed to raise interest
rates at their
September meeting.
The policy makers at the Fed decided to hold interest rates
steady at their
September meeting and interest rates declined through the
autumn as economic
growth once again slowed. The financial markets also
responded positively to the
Republicans' success in retaining control of Congress in the
November election.
Going into December, the bond and stock markets reflected a
"best of all worlds"
scenario of moderate economic growth with low inflation, low
unemployment and a
benign to positive political landscape. Interest rates
started to move back up
again in December as some economic indicators strengthened,
but ended the year
well below the levels seen in the second and third quarters.
We expect real economic growth to average around 2% in 1997.
The consumer
sector, which makes up two-thirds of Gross Domestic Product
("GDP"), should show
modest growth. The factors that would otherwise contribute
to strong consumer
spending -- low unemployment, high consumer confidence, and
the wealth effects
from the strong stock market -- should be muted by high
consumer debt levels
(particularly at lower income levels) and lack of pent-up
demand. The export
sector should continue to grow 5% to 10% in 1997, helped by
the United States'
strong competitive position and continued robust growth in
emerging markets.
Growth should improve slightly in Europe and Japan, helped
by the recent
strengthening of the dollar against those currencies. The
stronger dollar is
likely to be a mixed blessing, by making the prices of
foreign imports more
attractive and thereby helping to dampen inflation. The
capital goods sector has
slowed in recent quarters, but is still expected to grow
faster than the overall
U.S. economy. The government sector should continue to be a
drag on GDP growth.
Overall, we believe that the U.S. economy is likely to
remain on a path of
moderate non-inflationary growth in 1997. However, because
of the current low
level of unemployment, we also expect that the Fed will
remain cautious and
biased towards a tighter monetary policy. Whether the Fed
acts may depend in
part on market psychology. Upward shifts in long-term bond
yields have served to
moderate economic growth in recent years and reduced the
need for any major
changes in Fed policy.
FIXED INCOME COMMENTARY
The U.S. bond market had its best quarter of the year in the
fourth quarter. The
Lehman Intermediate Government/Corporate Index returned 2.5%
for the quarter and
4.1% for the full year. For the year, the Lehman Long
Government/Corporate Index
provided a total return of only 0.1%. Treasury bonds with
maturities longer than
10 years had negative total returns.
Within the fixed income market, all private issuer sectors
outperformed Treasury
bonds as quality spreads continued to narrow. While
Treasuries performed almost
as poorly in 1996 as in 1994, the effect on other sectors
was relatively
neutral, unlike 1994 when there were problems with mortgage-
backed derivatives,
Mexico, and Orange County. The yield curve was also
remarkably stable in 1996,
unlike 1994 when short-term interest rates rose
considerably. The
mortgage-backed, high yield, and municipal sectors were the
best performing
areas in 1996 on a duration-adjusted basis. Within the
corporate sector, lower
quality and foreign issues were the best performers based on
both higher coupons
and spread tightening.
We expect interest rates to stay in the trading range
established in 1996 (the
yield of the 30-year Treasury bond ranged between 6.0% and
7.2%). On one hand,
investors are concerned that low unemployment will
eventually give rise to
inflationary wage growth. We believe this sets a floor for
long-term bond yields
at about 6.0%. At the upper end of the range, the 7.2% level
has proved to be
sufficient to generate increased demand for bonds and
depress high risk asset
classes and interest sensitive sectors of the economy. We
feel that central bank
vigilance against inflation, globalization, and productivity
improvements will
keep inflation under control, preventing interest rates from
rising much above
their 1996 high.
1
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- ------------------------------------------------------------
- --------------------
Within the fixed income markets, demand for corporate,
mortgage-backed and
asset-backed issue continues to be high. Yield spreads
(relative to Treasury
issues) for lower and higher quality corporate bonds are
quite narrow. The
mortgage-backed and asset-backed markets are similarly
compressed, with
investors digging for yield. There is nothing in our
economic outlook that is
likely to change the tight spread environment in the near
future. We are being
careful, however, to weed out riskier credits and issues
that do not offer
enough yield premium to offset their potential for negative
surprises. The
foreign area continues to offer opportunities, particularly
foreign corporate
bonds that sometimes have very strong balance sheets but are
capped by the
rating of their home country. Foreign sovereign credits are
also continuing to
improve based on solid global economic growth and increased
acceptance of the
need for sound fiscal and monetary policy.
EQUITY COMMENTARY
During 1996, financial markets were repeatedly jolted by
changes in sentiment
about the strength of the U.S. economy and the direction of
Fed policy. When
investors gained confidence that the economy was continuing
on a track of
moderate, non-inflationary growth, the stock market advanced
strongly and posted
another year of outstanding performance. For the year ended
December 31, 1996,
the Standard & Poor's 500 Stock Index ("S&P 500") (a
capitalization-weighted
index of 500 widely held common stocks) provided a total
return of 22.95%. Over
the same period, the Russell 2000 Stock Index, a measure of
the performance of
the small company segment of the equity market, provided a
total return of
16.5%.
After a weak start in January, the stock market moved
broadly higher through the
first months of spring. Small company shares advanced
strongly in April and May,
led by the technology sector. In late June and July, when
long-term bond yields
moved back over 7%, the stock market traded back down to
where it began the
year. Recent initial public offerings and more speculative
issues were
particularly hard hit during the reversal. Large company
stocks quickly
recovered their losses when the bond market stabilized at
the end of July.
However, small company stocks continued to struggle. During
the autumn, against
the backdrop of lower bond yields, low inflation and
surprisingly resilient
corporate earnings, the stock market made its strongest
advance of the year,
with large company issues leading the way.
As measured by the S&P 500, the U.S. stock market has
provided a cumulative
total return of nearly 70% over the past two years, capping
a six-year bull
market that began in October of 1990. Notwithstanding the
strong overall
environment for equities, 1996 marked the third consecutive
year of
underperformance by small and mid-sized company stocks
relative to "blue chip"
indices. The underperformance of small company stocks can be
explained in part
by the sharper falloff in earnings growth experienced by
smaller companies in
the 1995-96 period. The performance lag also reflected a
backing away by
investors from higher risk growth stocks, in an environment
of rising interest
rates and market volatility.
Given the frequent alarms raised in 1996 about slowing
earnings growth,
investors showed an understandable preference for industry
sectors with visible
earnings momentum. In the energy sector, analysts' earnings
estimates and share
prices moved sharply higher in response to firmer prices for
oil and natural
gas. Stocks in the finance sector also performed
exceptionally well despite
emerging credit quality concerns. In the consumer sector,
specialty and
broad-line retail stocks were up strongly in response to
higher than expected
levels of consumer spending. The technology sector provided
superior returns for
investors last year, led by Intel and Microsoft. Within the
technology sector,
software, semiconductor and computer product stocks had the
strongest relative
performance. Industrial cyclical stocks underperformed, as
soft domestic and
export demand led to declining commodity prices for paper,
copper, aluminum,
steel and fertilizer products. The health care sector was
mixed. Drug stocks
kept pace with the market due to strong earnings gains,
while the HMO group
declined sharply on repeated earnings disappointments.
Utilities were the
weakest overall sector during the year, held back by the
relatively poor
performance of local telephone carriers and electrical
companies.
We are taking a more cautious position toward the U.S. stock
market at this
point. Over the past year, the price-to-earnings ratio of
the S&P 500 on
12-month forward earnings has increased from 15 to 17 times
earnings per share.
This level of valuation is consistent with earlier periods
of moderate growth
and low inflation, but leaves no cushion for earnings or
inflation
disappointments. After a prolonged period of
underperformance, relative
valuations for small company stocks are becoming more
attractive. However, we
believe that caution should still be exercised since the
small capitalization
segment of the equity market has a relatively high exposure
to cyclical
industries and would be vulnerable to any combination of
higher interest rates
and slower profit growth.
2
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- ------------------------------------------------------------
- --------------------
MANAGED ASSETS TRUST
The first nine months of 1996 were almost as bad as 1994 for
bonds in general.
U.S. Treasuries performed poorly but there were much fewer
problems in other
types of bonds. Stocks performed well through May of 1996,
but suffered a slight
correction in June and July. Large capitalization stocks
rebounded smartly from
the summer correction and reached new highs by November.
Small capitalization
stocks, which clearly were doing well in May, recovered much
more slowly and
still had not reached new highs by the end of 1996.
The fourth quarter of 1996 was the best quarter of the year
for both the stock
and bond markets. Bonds rallied as the U.S. economy slowed
down and the
Republicans maintained control of the U.S. Congress. Stocks
benefited from the
decline in interest rates as well as ongoing expectations
for high corporate
earnings growth.
Managed Assets Trust's total return was 13.78% gross for
1996, 0.23% behind the
60% S&P 500 and 40% Lehman Government/Corporate blended
benchmark. However, for
the fourth quarter, Managed Assets Trust outperformed the
blended benchmark by
0.05% (6.29% versus 6.24%). Managed Assets Trust was helped
by its stock portion
outperforming the S&P 500 three out of four quarters and the
biggest drag on its
performance was its underweighting in stocks during the
first half of 1996.
Looking ahead at 1997, we expect interest rates to stay in
the relatively narrow
trading range established in 1996. In our view, low
unemployment is the biggest
risk of higher interest rates but a 7% yield has proven to
be sufficient in
attracting more investors to bonds and has helped to cool
interest-sensitive
sectors of the economy. In our opinion, the biggest risk
ahead for stocks is if
interest rates go above 7%. While stock valuations are high,
corporate earnings
growth is expected to be slightly faster in 1997. In
addition, we also expect
the U.S. dollar to be strong in 1997 and that could pose a
risk to future
earnings growth. We plan on increasing the duration of the
bond portion of
Managed Assets Trust if rates get closer to their 1996 highs
and reduce its
duration if rates go down. Moreover, we continue to hold
convertible bonds to
provide some defensive characteristics and in keeping with
our relatively
neutral stance regarding stocks.
HIGH YIELD BOND TRUST
High Yield Bond Trust closed out the year successfully,
ending with a
particularly strong fourth quarter performance. For the year
ended December 31,
1996, the High Yield Bond Trust generated a total return of
16.05%, exceeding
both the First Boston High-Yield Index and the Bear Stearns
High-Yield Index,
both of which had a total return of approximately 12.40% for
the same period.
Investor interest in high yield bonds remained strong for
the first three
quarters of the year. As mutual fund inflows into high yield
bond funds
continued at a brisk pace, we viewed the fixed-income market
in general as
skittish. Lower interest rate expectations and investor
uncertainty of
lower-quality bonds caused many investors to gravitate
toward the higher-rated
issues. We remained especially cautious toward lower-quality
issues and
telecommunications issues that we believed may have
disappointing earnings
reports. Our cautious stance with respect to these sectors
allowed us to avoid
the heavy losses incurred in the fourth quarter by many high-
profile and
high-yield issues such as Marvel Entertainment, MobileMedia,
and CAI Wireless.
Although we maintained a relatively high cash position of
23%, this position
proved to be prudent during this volatile period.
The Trust's biggest winners of the year include Renaissance
Cosmetics and
Transamerican Refining bonds. Renaissance Cosmetics recently
announced a very
attractive tender offer for bonds that we hold and
Transamerican Refining
appears to be nearing completion of a successful refinancing
effort. Among the
Trust's other significant winners during 1996 were U.S.
Banknote, Fleming, Gulf
States Steel, and Sheffield Steel. In addition, we are
pleased by the
performance of K mart, Great Dane bonds, and the FRD
Acquisition notes, all of
which produced handsome returns by year's end.
Our biggest disappointments in the past year were Alliance
Entertainment and
Trump Castle. Alliance Entertainment suffered a sharp
decline following a
lower-than-expected earnings report in the third quarter. We
were initially
attracted to the Trump Castle issues because of its proposed
partnership with
Hard Rock Cafe to "re-theme" Trump Castle. With much new
development coming to
the Atlantic City marina area, we were also attracted by
Trump Castle's
underlying asset value. However, after the proposed
partnership with Hard Rock
Cafe fell apart, the bonds experienced a loss. Nevertheless,
despite our
disappointments, we remain confident in the Trump Castle
high-yield bonds and
believe that they will make a strong contribution to the
High Yield Bond Trust
going forward.
3
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- ------------------------------------------------------------
- --------------------
We remain bullish on the prospects for high-yield bonds for
1997. In the year
ahead, we also believe that many investors will probably
avoid the more
speculative issues. Given the lack of progress among
wireless cable companies,
on-going capital expenditure concerns among paging
companies, and the uncertain
prospect of lower-quality cable companies to fulfill their
debt obligations, we
do, however, expect more higher volatility in the
telecommunications sector. In
our view, although many high-yield sectors will continue to
experience
volatility, our investment strategy of careful security
selection should provide
investors with competitive total returns in the year ahead.
CAPITAL APPRECIATION FUND
Stocks moved ahead in the fourth quarter of 1996, ending the
year near record
highs. The S&P 500 gained 8.34% for the fourth quarter. For
the year ended
December 31, 1996, the Capital Appreciation Fund appreciated
28.21% versus a
22.95% gain for the S&P 500 over the same period.
While the Capital Appreciation Fund's fourth quarter
performance was
respectable, we are especially proud of the Janus research
team's performance
this past year. Of course, the powerful performance of the
stock market deserves
some credit, as do nearly ideal economic conditions and
record corporate
profits, all of which have lifted stock valuations. While
moderate economic
growth, mild inflation and low interest rates have made
business conditions
healthy, our research team's solid fundamental research have
contributed to the
Capital Appreciation Fund's stock selection process.
In terms of individual holdings, the Capital Appreciation
Fund has a substantial
weighting in financial services stocks. We believe companies
such as Wells
Fargo, Citicorp and Chase Manhattan should continue to enjoy
excellent lending
margins and should be able to extend their domination in
select markets. Low
interest rates and a mild economic climate tend to boost
profits at dominant
franchise competitors across a broad spectrum of industries.
The Capital Appreciation Fund holds a number of familiar
technology names such
as International Business Machines, Microsoft, Cisco Systems
and Intel to
established drug manufacturers such as Pfizer, Eli Lilly and
Monsanto (an
organization that is transforming itself from an old-line
chemical producer into
a far more dynamic life sciences company). These stocks
performed well during
the fourth quarter. The Capital Appreciation Fund also
benefited from the
excellent returns of UAL (parent company to United
Airlines), which gained
roughly more than 30%. We believe the employee management at
UAL has done a good
job. In our view, UAL (and the airline industry in general)
have attractive
valuations. For example, UAL is currently selling at 6 1/2
times our 1998
earnings estimate. In general, the airlines industry has
undergone huge changes
in the last few years, becoming more rational with fewer
overlapping and
unprofitable competitors. Instead of adding capacity, many
airline managements
have focused on pulling back from unprofitable routes and
increasing loads in
existing routes. In addition, average airline ticket prices
are up as well. In
our view, the only negative for the industry is rising fuel
prices but most, if
not all, of the increase is probably already factored into
their stock prices.
During the fourth quarter, we trimmed Microsoft and long-
time holding Merrill
Lynch when both reached high valuations. Moreover, we sold
sports apparel
manufacturer Fila at a profit due to valuation concerns and
because its products
have begun to lose momentum in the branded sportswear
industry. Lastly, Centocor
and Trans World Airlines were sold at losses. With respect
to Centocor, we had
to revise our earnings and revenues estimates downward due
to a
slower-than-anticipated sales upturn of Reopro, the
company's new drug to fight
cardiovascular disease. As many of you know, Trans World
Airlines was a far more
tragic situation. In addition to the crash of Flight 800
which may affect
bookings for some time to come, management turnover at TWA
has also raised some
concerns. Although we expect greater stock market volatility
in 1997, we
continue to be very excited about the stock market for all
of the reasons
outlined at the beginning of this market commentary. We
stayed the course in
1996 and, unless there is a radical change in the current
economic and business
environment, we intend to do the same in 1997. We believe
the Capital
Appreciation Fund's focus on primarily large, high-quality
growth companies
should continue to serve our shareholders well in the days
ahead.
4
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS
- ------------------------------------------------------------
- --------------------
CASH INCOME TRUST
Cash Income Trust seeks to provide shareholders with high
current income from
short-term money market investments while emphasizing
preservation of capital
and maintaining a high degree of liquidity. Cash Income
Trust pursues this
objective by investing in securities maturing in one year or
less.
For the year ended December 31, 1996, Cash Income Trust
generated an annual
effective yield of 4.20% and as of December 31, 1996 had an
average maturity of
38.8 days. Cash Income Trust continues to invest primarily
in U.S. Treasuries
and government agency securities. This investment strategy
has provided Cash
Income Trust with safety, liquidity, and stability.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
January 15, 1997
5
<pg$pcn>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- MANAGED ASSETS TRUST AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 13.78%
Five Years Ended 12/31/96 8.83%
Ten Years Ended 12/31/96 9.76%
</TABLE>
This chart assumes an initial investment of $10,000 made on
December 31, 1986
assuming reinvestment of dividends through December 31,
1996. The Lehman
Government/Corporate Bond Index is a weighted composite of
the Lehman
Government Bond Index, which is a broad-based index of all
public debt
obligations of the U.S. Government and its agencies and has
an average maturity
of nine years and the Lehman Corporate Bond Index, which is
comprised of all
public fixed-rate non-convertible investment-grade domestic
corporate debt,
excluding collateralized mortgage obligations. The Consumer
Price Index is a
measure of the average change in prices over time in a fixed
market basket of
goods and services. The Standard & Poor's 500 Index is an
unmanaged index
composed of 500 widely held common stocks listed on the New
York Stock
Exchange, American Stock Exchange and over-the-counter
market.
<TABLE>
<CAPTION>
Lehman
Measurement Govern-
Period Managed ment/Corporate Consumer
Standard
(Fiscal Year Assets Bond Price &
Poor's
Covered) Trust Index Index
500 Index
<S> <C> <C> <C> <C>
12/86 10000 10000 10000
10000
12/87 11905 10229 10441
10525
12/88 12134 11004 10903
12269
12/89 13247 12570 11410
16150
12/90 16840 13612 12106
15648
12/91 17256 15807 12476
20406
12/92 21001 17006 12838
21960
12/93 22080 18883 13191
24167
12/94 24140 18218 13544
24485
12/95 23599 21725 13888
29853
12/96 26837 22354 14348
36704
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses associated
with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- HIGH YIELD BOND TRUST AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 16.05%
Five Years Ended 12/31/96 9.90%
Ten Years Ended 12/31/96 7.21%
</TABLE>
This chart assumes an initial investment of $10,000 made on
December 31, 1986 assuming reinvestment of dividends through
December 31, 1996. The Lehman Aggregate Bond Index, an
unmanaged
index, is composed of the Lehman Intermediate
Government/Corporate
Bond Index and the Mortgage Backed Securities Index and
includes
treasury issues, agency issued, corporate bond issues and
mortgage-backed securities. The Consumer Price Index is a
measure
of the average change in prices over time in a fixed market
basket
of goods and services. The First Boston High Yield Index Top
Tier
is a broad-based market measure of high yield bonds,
commonly known
as "junk bonds."
<TABLE>
<CAPTION>
First
Boston
Measurement High Lehman
High
Period Yield Aggre- Consumer
Yield
(Fiscal Year Bond gate Bond Price
Index Top
Covered) Trust Index Index
Tier
<S> <C> <C> <C> <C>
12/86 10000 10000 10000
10000
12/87 10798 10276 10441
11254
12/88 10761 11086 10903
12630
12/89 12329 12698 11410
14296
12/90 12502 13835 12106
14429
12/91 11361 16050 12476
17731
12/92 14328 17236 12838
19279
12/93 16214 18918 13191
22290
12/94 18485 18365 13544
22248
12/95 18252 21758 13888
26403
12/96 21181 22548 14348
29234
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses associated
with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
6
<pg$pcn>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- CAPITAL APPRECIATION FUND AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 28.21%
Five Years Ended 12/31/96 16.18%
Ten Years Ended 12/31/96 11.44%
</TABLE>
This chart assumes an initial investment of $10,000 made on
December 31, 1986 assuming reinvestment of dividends through
December 31, 1996. The Standard & Poor's 500 Index is an
unmanaged
index composed of 500 widely held common stocks listed on
the New
York Stock Exchange, American Stock Exchange and over-the-
counter
market. The Russell 2000 Index is a capitalization weighted
total
return index which is comprised of 2,000 of the smallest
capitaled
U.S. domiciled companies with less than average growth
orientation
whose common stock is traded in the United States of the New
York
Stock Exchange, American Stock Exchange and NASDAQ. The
Consumer
Price Index is a measure of the average change in prices
over time
in a fixed market basket of goods and services.
<TABLE>
<CAPTION>
Measurement
Period Capital Standard Russell
Consumer
(Fiscal Year Apprecia- & Poor's 2000
Price
Covered) tion Fund 500 Index Index
Index
<S> <C> <C> <C> <C>
12/86 10000 10000 10000
10000
12/87 11005 10525 9120
10441
12/88 10111 12269 11402
10903
12/89 11129 16150 13256
11410
12/90 12877 15648 10674
12106
12/91 12073 20406 15589
12476
12/92 16318 21960 18458
12838
12/93 19190 24167 21943
13191
12/94 22086 24485 9105
13544
12/95 21035 29853 11696
13888
12/96 26976 36704 13626
14348
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gains or losses from portfolio
investments assuming
reinvestments of dividends. The returns do not reflect
expenses associated with
the subaccount such as administrative fees, account charges
and surrender
charges which, if reflected, would reduce the performance
shown.
7
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
COMMON STOCKS -- 54.7%
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER CYCLICALS -- 7.6%
15,400 Accustaff
Inc.+.......................................................
......... $ 325,325
10,200 American Stores
Co..........................................................
... 416,925
8,200 Borders Group,
Inc.+.......................................................
.... 294,175
10,400 Clear Channel Communications,
Inc.+............................................
375,700
2,700 Colgate-Palmolive
Co..........................................................
. 249,075
10,000 Corrections Corp. of
America+..................................................
306,250
9,700 Dollar
General.....................................................
............ 310,400
5,200 Duracell
International...............................................
.......... 363,350
6,100 Eastman Kodak
Co..........................................................
..... 489,525
12,100 Federated Department Stores
Inc.+..............................................
412,913
6,500 Gannett
Co..........................................................
........... 486,688
15,500 Gap
Inc.........................................................
............... 466,938
12,700 Gillette
Co..........................................................
.......... 987,425
8,800 HFS
Inc.+.......................................................
............... 525,800
13,800 Hilton Hotels
Corp........................................................
..... 360,525
9,400 Home Depot
Inc.........................................................
........ 471,175
5,174 Kimberly-Clark
Corp........................................................
.... 492,824
11,200 Lowes
Co..........................................................
............. 397,600
11,600 McDonalds
Corp........................................................
......... 524,900
10,100 New York Times Co., Class A
Shares.............................................
383,800
10,700 Nike Inc., Class B
Shares......................................................
639,325
13,000 Procter & Gamble
Co..........................................................
.. 1,397,500
7,000 Sears Roebuck &
Co..........................................................
... 322,875
1,250 TCI Satellite Entertainment
Inc.+..............................................
12,344
12,500 Tele-Communications
Inc.+......................................................
163,281
12,477 The Walt Disney
Co..........................................................
... 868,711
8,700 Tiffany &
Co..........................................................
......... 318,638
10,000 Time Warner
Inc.........................................................
....... 375,000
2,600 Unilever
N.V.........................................................
.......... 455,650
5,700 VF
Corp........................................................
................ 384,750
32,600 Wal-Mart Stores,
Inc.........................................................
.. 745,725
- ------------------------------------------------------------
- ---------------------------------------------
14,325,112
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER STAPLES -- 4.5%
3,100 American Brands
Inc.........................................................
... 153,838
9,200 Anheuser-Busch
Co..........................................................
.... 368,000
1,900 Campbell Soup
Co..........................................................
..... 152,475
44,800 Coca-Cola
Co..........................................................
......... 2,357,600
13,900 Conagra
Inc.........................................................
........... 691,525
6,500 CPC International
Inc.........................................................
. 503,750
11,700 Dean
Foods.......................................................
.............. 377,325
2,900 General Mills
Inc.........................................................
..... 183,788
29,000 PepsiCo
Inc.........................................................
........... 851,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
CONSUMER STAPLES -- 4.5% (CONTINUED)
18,100 Philip Morris Cos.
............................................................
$ 2,038,513
6,800 Pioneer Hi-Bred
International...............................................
... 476,000
9,000 Sara Lee Corp.
............................................................
.... 335,250
- ------------------------------------------------------------
- ---------------------------------------------
8,489,939
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 0.7%
5,700 Chesapeake Energy
Corp.+......................................................
. 317,091
6,800 Halliburton
Co..........................................................
....... 409,700
6,400 Louisiana Land & Exploration
Co................................................
343,200
2,800 Schlumberger Ltd.
............................................................
. 279,650
- ------------------------------------------------------------
- ---------------------------------------------
1,349,641
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 8.2%
8,265 Allstate Corp.
............................................................
.... 478,337
8,200 Ambac
Inc.........................................................
............. 544,275
9,200 American Express Co.
..........................................................
519,800
8,850 American International Group Inc.
............................................. 958,012
7,289 Banc One Corp.
............................................................
.... 313,427
7,300 Bank of Boston
Corp........................................................
.... 469,025
10,400 BankAmerica Corp.
............................................................
. 1,037,400
3,600 Barnett Banks Inc.
............................................................
148,050
12,736 Chase Manhattan Corp.
.........................................................
1,136,688
7,000 Chubb
Corp........................................................
............. 376,250
3,600 Cigna
Corp........................................................
............. 491,850
13,700
Citicorp....................................................
................... 1,411,100
3,500 Federal Home Loan Mortgage
Corp................................................
385,437
20,600 Federal National Mortgage
Association..........................................
767,350
2,600 First Bank System
Inc.........................................................
. 177,450
6,000 First Chicago NBD
Corp........................................................
. 322,500
1,500 General Reinsurance Corp.
.....................................................
236,625
4,700 Golden West Financial
Corp.....................................................
296,687
4,900 Household International
Inc....................................................
452,025
7,200 ITT Hartford Group,
Inc........................................................
486,000
8,300 Mellon Bank
Corp........................................................
....... 589,300
3,100 Merrill Lynch &
Co..........................................................
... 252,650
3,000 Morgan Stanley Group Inc.
.....................................................
171,375
6,000 NationsBank
Corp........................................................
....... 586,500
8,400 Northern Trust Corp.
..........................................................
304,500
16,200 Norwest
Corp........................................................
........... 704,700
3,500 Student Loan Marketing
Association.............................................
325,938
6,900 SunAmerica
Inc.........................................................
........ 306,188
4,100 SunTrust Banks
Inc.........................................................
.... 201,925
5,400 Transatlantic Holdings
Inc.....................................................
434,700
1,800 Wells Fargo &
Co..........................................................
..... 485,550
- ------------------------------------------------------------
- ---------------------------------------------
15,371,614
- ------------------------------------------------------------
- ---------------------------------------------
HEALTHCARE -- 6.0%
9,100 Abbott
Laboratories................................................
............ 461,825
7,000 American Home Products
Corp....................................................
410,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
HEALTHCARE -- 6.0% (CONTINUED)
10,000 Amgen
Inc.+.......................................................
............. $ 543,750
13,100 Bristol-Meyers Squibb
Co.......................................................
1,424,625
12,300 Columbia/HCA Healthcare
Corp...................................................
501,225
6,400 Eli Lilly &
Co..........................................................
....... 467,200
6,800 Guidant
Corp........................................................
........... 387,600
7,900 HBO &
Co..........................................................
............. 469,063
29,600 Johnson &
Johnson.....................................................
......... 1,472,600
12,600 Medpartners,
Inc.+.......................................................
...... 264,600
4,500 Medtronic
Inc.........................................................
......... 306,000
25,900 Merck &
Co..........................................................
........... 2,052,575
11,700 Pfizer Inc.
............................................................
....... 969,637
11,400 Schering-Plough
Corp........................................................
... 738,150
9,600 Vencor Inc.+
............................................................
...... 303,600
5,000 Warner-Lambert
Co..........................................................
.... 375,000
- ------------------------------------------------------------
- ---------------------------------------------
11,147,825
- ------------------------------------------------------------
- ---------------------------------------------
MATERIALS & PROCESSING -- 3.1%
5,000 Aluminum Co. of
America.....................................................
... 318,750
5,000 Armstrong World Industries
Inc.................................................
347,500
13,100 Black & Decker
Corp........................................................
.... 394,638
8,800 Cytec Industries
Inc.+.......................................................
.. 357,500
10,200 E.I. du Pont de Nemours & Co.
.................................................
962,625
13,900 Freeport-McMoRan
Copper......................................................
.. 415,262
4,900 Georgia-Pacific Corp.
.........................................................
352,800
18,100 Homestake Mining
Co..........................................................
.. 257,925
18,000 Monsanto
Co..........................................................
.......... 699,750
9,700 Morton International
Inc.......................................................
395,275
1,600 Nucor
Corp........................................................
............. 81,600
10,400 Union Carbide
Corp........................................................
..... 425,100
5,100 USX-US Steel
Group.......................................................
...... 160,012
3,700 Weyerhauser
Co..........................................................
....... 175,287
5,900 Willamette Industries Inc.
....................................................
414,475
- ------------------------------------------------------------
- ---------------------------------------------
5,758,499
- ------------------------------------------------------------
- ---------------------------------------------
PRODUCER DURABLES -- 5.2%
5,200 Allied Signal
Inc.........................................................
..... 348,400
9,900 Boeing Co.
............................................................
........ 1,053,113
3,700 Caterpillar Inc.
............................................................
.. 278,425
13,950 Crane
Co..........................................................
............. 404,550
11,400 Deere &
Co..........................................................
........... 463,125
4,100 Emerson Electric
Co..........................................................
.. 396,675
6,200 Fluor
Corp........................................................
............. 389,050
31,200 General Electric
Co..........................................................
.. 3,084,900
6,700 Honeywell Inc.
............................................................
.... 440,525
6,400 Illinois Tool
Works.......................................................
..... 511,200
3,680 Lockheed Martin Corp.
.........................................................
336,720
7,800 Minnesota Mining & Manufacturing Co.
.......................................... 646,425
4,700 Raychem
Corp........................................................
........... 376,587
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
PRODUCER DURABLES -- 5.2% (CONTINUED)
10,800 United Technologies
Corp.......................................................
$ 712,800
5,000 W.W. Grainger Inc.
............................................................
401,250
- ------------------------------------------------------------
- ---------------------------------------------
9,843,745
- ------------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY -- 7.2%
6,150 Andrew
Corp.+......................................................
............ 326,334
11,100 Atmel
Corp.+......................................................
............. 367,687
5,700 Automatic Data Processing
Inc..................................................
244,388
18,800 Cisco Systems
Inc.+.......................................................
..... 1,196,150
5,400 Compaq Computer
Corp.+......................................................
... 400,950
11,575 Computer Associates International
Inc.......................................... 575,856
8,200 First Data Corp.
............................................................
.. 299,300
5,600 Gateway 2000
Inc.+.......................................................
...... 299,950
18,600 Hewlett Packard
Co..........................................................
... 934,650
17,400 Intel
Corp........................................................
............. 2,278,312
9,500 International Business Machines
Corp...........................................
1,434,500
11,569 Lucent Technologies
Inc........................................................
534,974
22,200 Microsoft
Corp.+......................................................
......... 1,834,275
10,600 Motorola Inc.
............................................................
..... 650,575
12,000 Oracle
Corp.+......................................................
............ 501,000
19,600 Sun Microsystems
Inc.+.......................................................
.. 503,475
3,200 Texas Instruments
Inc.........................................................
. 204,000
3,200 3Com Corp.+
............................................................
....... 234,800
4,900 U.S. Robotics
Corp.+......................................................
..... 352,800
6,000 Xerox Corp.
............................................................
....... 315,750
- ------------------------------------------------------------
- ---------------------------------------------
13,489,726
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 1.9%
6,300 Burlington Northern Sante
Fe...................................................
544,163
17,600 Chrysler
Corp........................................................
.......... 580,800
1,448 Conrail
Inc.........................................................
........... 144,257
11,200 Continental Airlines, Inc., Class B
Shares+.................................... 316,400
21,100 Ford Motor
Co..........................................................
........ 672,562
12,900 General Motors
Corp........................................................
.... 719,175
7,800 Lear
Corp.+......................................................
.............. 266,175
4,000 Union Pacific Corp.
...........................................................
240,500
- ------------------------------------------------------------
- ---------------------------------------------
3,484,032
- ------------------------------------------------------------
- ---------------------------------------------
OIL -- 4.5%
7,100 Amerada Hess
Corp........................................................
...... 410,913
9,000 Amoco
Corp........................................................
............. 724,500
8,100 Ashland Inc.
............................................................
...... 355,388
2,100 Atlantic Richfield
Co..........................................................
278,250
12,000 Chevron
Corp........................................................
........... 780,000
19,400 Exxon Corp.
............................................................
....... 1,901,200
9,800 Mobil
Corp........................................................
............. 1,198,050
7,900 Royal Dutch Petroleum
Co.......................................................
1,348,925
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
OIL -- 4.5% (CONTINUED)
10,200 Texaco Inc.
............................................................
....... $ 1,000,875
11,100 Unocal
Corp........................................................
............ 450,937
- ------------------------------------------------------------
- ---------------------------------------------
8,449,038
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 5.8%
8,400 AES
Corp.+......................................................
............... 390,600
9,700 Allegheny Power System,
Inc....................................................
294,638
22,000 American Telephone & Telegraph
Corp............................................
957,000
10,500 Ameritech
Corp........................................................
......... 636,562
9,900 Baltimore Gas & Electric
Co....................................................
264,825
8,200 Bell Atlantic
Corp........................................................
..... 530,950
19,000 BellSouth
Corp........................................................
......... 767,125
10,100 CalEnergy
Inc.+.......................................................
......... 337,088
6,500 CMS Energy
Corp........................................................
........ 218,563
5,900 Columbia Gas
System......................................................
...... 375,387
7,300 Consolidated Natural
Gas.......................................................
403,325
3,800 Duke Power
Co..........................................................
........ 175,750
4,700 Enron
Corp........................................................
............. 202,688
3,200 FPL Group
Inc.........................................................
......... 147,200
15,600 GTE Corp.
............................................................
......... 709,800
4,900 Houston Industries
Inc.........................................................
110,862
22,700 MCI Communications Corp.
......................................................
742,006
8,300 Nynex Corp.
............................................................
....... 399,438
4,100 Pacific
Enterprises.................................................
........... 124,537
6,600 Pacific Telesis
Group.......................................................
... 242,550
15,400 SBC Communications
Inc.........................................................
796,950
7,900 Sonat Inc.
............................................................
........ 406,850
20,300 Southern
Co..........................................................
.......... 459,287
6,300 Sprint
Corp........................................................
............ 251,213
11,400 Texas Utilities Co.
...........................................................
464,550
3,400 U.S. West Communications
Group.................................................
109,650
15,100 Worldcom
Inc.+.......................................................
.......... 393,542
- ------------------------------------------------------------
- ---------------------------------------------
10,912,936
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$78,744,955)......................................
102,622,107
- ------------------------------------------------------------
- ---------------------------------------------
PREFERRED STOCKS -- 2.1%
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 0.5%
2,000 FINOVA Group, Convertible
5.500%...............................................
105,000
4 Fuji Finance, Convertible
0.250%...............................................
105,140
8,000 Merry Land & Investment, Inc., Convertible
2.150%.............................. 211,000
4,000 St. Paul Capital, Convertible
6.000%...........................................
221,500
5,000 Tosco Financial Trust, Convertible
5.750%...................................... 258,750
- ------------------------------------------------------------
- ---------------------------------------------
901,390
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
INDUSTRIAL -- 1.6%
4,000 Amcor Ltd., Convertible
7.250%................................................. $
204,000
10,000 Corning Delaware
L.P.........................................................
.. 636,250
12,000 International
Paper.......................................................
..... 552,000
10,990 News Corp Ltd., Convertible
5.000%.............................................
1,050,919
9,000 Occidental Petroleum
Corp......................................................
510,750
- ------------------------------------------------------------
- ---------------------------------------------
2,953,919
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL PREFERRED STOCKS (Cost --
$3,510,971)....................................
3,855,309
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
CORPORATE BONDS -- 22.9%
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 4.5%
$ 2,500,000 American Express Co., zero coupon due
12/12/00............................. 1,971,875
500,000 Great Western Financial Corp., Notes, 6.375%
due 7/1/00.................... 497,500
5,000,000 New Plan Reality, 5.950% due
11/2/26.......................................
4,993,750
1,000,000 Signet Credit Card, Master Trust 1993-4B,
5.800% due 3/15/98............... 991,620
- ------------------------------------------------------------
- ---------------------------------------------
8,454,745
- ------------------------------------------------------------
- ---------------------------------------------
GOVERNMENT, NATIONAL -- 2.1%
2,000,000 Canada - Global Bond, 6.750% due
8/28/06................................... 2,010,000
2,000,000 Poland, 6.438% due
10/27/24................................................
1,945,000
- ------------------------------------------------------------
- ---------------------------------------------
3,955,000
- ------------------------------------------------------------
- ---------------------------------------------
INDUSTRIAL -- 3.4%
2,000,000 Becton Dickinson & Co., 8.800% due
3/1/01.................................. 2,160,000
2,000,000 Cox Communications Inc., 6.875% due
6/15/05................................ 1,982,500
2,020,000 Tele-Communications Inc. 9.650% due
10/1/03................................ 2,191,700
- ------------------------------------------------------------
- ---------------------------------------------
6,334,200
- ------------------------------------------------------------
- ---------------------------------------------
MATERIALS & PROCESSING -- 5.7%
9,000,000 Weyerhauser Mortgage Co., 8.500% due
1/15/25............................... 10,794,330
- ------------------------------------------------------------
- ---------------------------------------------
OIL -- 1.9%
500,000 Apache Corp., 6.000% due
1/15/02...........................................
640,000
3,000,000 Texaco Capital Inc., 7.750% due
2/15/33.................................... 3,052,500
- ------------------------------------------------------------
- ---------------------------------------------
3,692,500
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 0.5%
929,255 Delta Airlines, Inc., 9.250% due
1/2/07.................................... 960,376
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
UTILITY - ELECTRIC -- 0.6%
$ 1,100,000 Niagara Mohawk Power Corp., 8.000% due
6/1/04.............................. $ 1,050,500
- ------------------------------------------------------------
- ---------------------------------------------
UTILITY - TELEPHONE -- 4.2%
5,000,000 BellSouth Cap Funding, 6.040% due
11/15/26................................. 4,956,250
3,000,000 BellSouth Telecommunications, 7.000% due
12/1/2095......................... 2,887,500
- ------------------------------------------------------------
- ---------------------------------------------
7,843,750
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CORPORATE BONDS (Cost --
$41,691,641)................................ 43,085,401
- ------------------------------------------------------------
- ---------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 5.1%
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER CYCLICALS -- 0.6%
580,000 Hilton Hotels Corp., 5.000% due
5/15/06.................................... 608,275
500,000 Home Depot Inc., 3.250% due
10/1/01........................................
492,500
- ------------------------------------------------------------
- ---------------------------------------------
1,100,775
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 0.7%
500,000 Equitable Cos., 6.125% due
12/15/24........................................
580,625
500,000 Sappi BVI Finance Ltd., 7.500% due
8/1/02.................................. 460,000
500,000 USF&G Corp., zero coupon due
3/3/09........................................
316,250
- ------------------------------------------------------------
- ---------------------------------------------
1,356,875
- ------------------------------------------------------------
- ---------------------------------------------
GOVERNMENT - NATIONAL -- 0.3%
500,000 Republic of Italy, 5.000% due
6/28/01...................................... 492,500
- ------------------------------------------------------------
- ---------------------------------------------
INDUSTRIAL -- 3.2%
1,400,000 Alza Corp., zero coupon due
7/14/14........................................
588,000
300,000 Berkshire Hathaway Inc., 1.000% due
12/3/01................................ 280,125
1,000,000 Comcast Corp., 1.125% due
4/15/07..........................................
512,500
877,000 Cooper Industries Inc., 7.050% due
1/1/15.................................. 940,582
300,000 Inco Ltd., 7.750% due
3/15/16..............................................
317,250
1,000,000 Marriott International Inc., zero coupon due
3/25/11....................... 561,250
500,000 McKesson Corp., 4.500% due
3/1/04..........................................
443,125
100,000 Omnicom Group, Inc., zero coupon due
1/3/07................................ 100,000
500,000 Pennzoil Co., 4.750% due
10/1/03...........................................
571,250
400,000 Rouse Co., 5.750% due
7/23/02..............................................
438,000
300,000 RPM Inc., zero coupon due
9/30/12..........................................
134,625
200,000 Scholastic Corp., 5.000% due
8/15/05.......................................
208,750
200,000 Tenet Healthcare Corp., 6.000% due
12/1/05................................. 212,250
200,000 The Sports Authority Inc., 5.250% due
9/15/01.............................. 187,750
500,000 Trinova Corp., 6.000% due
10/15/02.........................................
496,875
- ------------------------------------------------------------
- ---------------------------------------------
5,992,332
- ------------------------------------------------------------
- ---------------------------------------------
UTILITY - ELECTRIC -- 0.3%
600,000 Potomac Electric Power Co., 5.000% due
9/1/02.............................. 558,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS (Cost --
$9,194,761)..................... 9,500,482
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
MANAGED ASSETS TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
U.S. GOVERNMENT SECTOR -- 7.9%
- ------------------------------------------------------------
- ---------------------------------------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 7.9%
$ 75,000 U.S. Treasury Notes, 6.900% due
8/21/97*................................... $ 72,519
3,000,000 U.S. Treasury Strip, zero coupon due
5/15/07............................... 1,530,000
11,000,000 U.S. Treasury Strip, zero coupon due
5/15/09............................... 4,868,160
493,534 FHLMC, 8.500% due
9/1/02...................................................
508,958
2,000,000 FNMA Principal Strips, 7.890% due
3/9/97................................... 1,976,420
184,841 FNMA, 8.500% due
3/1/05....................................................
192,408
3,333,217 FNMA, 7.500% due
10/1/25...................................................
3,333,217
318,618 GNMA, 7.500% due
3/15/07...................................................
318,914
60,555 GNMA, 7.500% due
6/15/07...................................................
60,612
209,632 GNMA, 9.000% due
12/15/16..................................................
220,900
255,165 GNMA, 9.000% due
11/15/19..................................................
268,881
379,737 GNMA, 9.500% due
1/15/20...................................................
410,473
209,395 GNMA, 9.500% due
3/15/20...................................................
226,342
194,535 GNMA, 7.500% due
5/15/23...................................................
194,717
745,284 GNMA, 7.500% due
12/15/25..................................................
745,976
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost --
$15,170,051)......................... 14,928,497
- ------------------------------------------------------------
- ---------------------------------------------
COMMERCIAL PAPER -- 1.6%
3,000,000 GE Capital Corp, 5.532% due 2/20/97 (Cost --
$2,977,583)................... 2,975,160
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 5.7%
10,715,000 Citibank, 6.900% due 1/2/97; Proceeds at
maturity -- $10,719,107;
(Fully collateralized by U.S. Treasury Notes,
5.750% due 12/31/98;
Market value -- $10,936,313) (Cost --
$10,715,000)......................... 10,715,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$162,004,962**)......................... $187,681,956
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
+ Non-income producing security.
* Segregated security for futures contracts commitments.
** Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS
SECURITY VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C>
CORPORATE BONDS AND NOTES -- 77.0%
- ------------------------------------------------------------
- ----------------------------------------------
AMUSEMENTS -- 5.9%
$500,000 NR Live Entertainment Inc., Sr. Sub.
Notes, 12.000% due 3/23/99........... $ 485,000
500,000 B- Plitt Theaters Inc., Sr. Sub. Notes,
10.875% due 6/15/04............... 510,000
- ------------------------------------------------------------
- ----------------------------------------------
995,000
- ------------------------------------------------------------
- ----------------------------------------------
CHEMICALS, PHARMACEUTICALS AND ALLIED PRODUCTS -- 3.5%
500,000 NR Renaissance Cosmetics Inc., Sr. Notes,
Series B, 13.750% due 8/15/01... 585,000
- ------------------------------------------------------------
- ----------------------------------------------
COMMUNICATIONS -- 10.2%
500,000 B3* Commodore Media Inc., Sr. Sub. Notes,
7.500% due 5/1/03................ 526,250
400,000 B- Paxson Communications Corp., Sr. Sub.
Notes, 11.625% due 10/1/02+...... 417,000
400,000 B- Pegasus Media Communications Inc.,
Notes 12.500% due 7/1/05+........... 433,000
500,000 BB Telewest Communications PLC, Sr.
Discount Debentures,
step bond to yield 10.751% due
10/1/07................................. 348,750
- ------------------------------------------------------------
- ----------------------------------------------
1,725,000
- ------------------------------------------------------------
- ----------------------------------------------
CONSTRUCTION -- 3.7%
250,000 B Greystone Homes Inc., Sr. Notes,
10.750% due 3/1/04.................... 250,313
400,000 B Johnston America Industries, Inc., Sr.
Sub. Notes, 11.750% due 383,000
8/15/05.....................................................
...........
- ------------------------------------------------------------
- ----------------------------------------------
633,313
- ------------------------------------------------------------
- ----------------------------------------------
ELECTRICAL -- 3.0%
500,000 NR Emcor Group Inc., Notes, 11.000% due
12/15/01.......................... 504,375
- ------------------------------------------------------------
- ----------------------------------------------
FINANCE -- 5.4%
400,000 B- B.F. Saul Real Estate Investment
Trust, Sr. Secured Notes, 11.625% due 431,000
4/1/02+.....................................................
...........
36,896 B3* FRD Acquisition Co., Sr. Notes, Series
B, 12.500% due 7/15/04.......... 37,634
500,000 Caa* Trump Castle Funding, 1st Mortgage,
11.750% due 11/15/03............... 442,500
- ------------------------------------------------------------
- ----------------------------------------------
911,134
- ------------------------------------------------------------
- ----------------------------------------------
INSURANCE -- 2.9%
500,000 NR I.C.H. Corp., Sr. Sub. Notes, 11.250%
due 12/1/03++.................... 490,000
- ------------------------------------------------------------
- ----------------------------------------------
MANUFACTURING -- 2.9%
500,000 NR Great Dane Holdings, Inc., Sr. Sub.
Notes, 12.750% due 8/1/01.......... 503,750
- ------------------------------------------------------------
- ----------------------------------------------
METAL PRODUCTS/MINING -- 8.7%
500,000 B Gulf States Steel Alabama Inc., 1st
Mortgage,
13.500% due
4/15/03++..................................................
473,750
500,000 NR Parker Drilling Co., Guaranteed Notes,
9.750% due 11/15/06+............ 527,500
500,000 B- Sheffield Steel Corp., 1st Mortgage
Notes, 12.000% due 11/1/01......... 475,000
- ------------------------------------------------------------
- ----------------------------------------------
1,476,250
- ------------------------------------------------------------
- ----------------------------------------------
PAPER AND ALLIED PRODUCTS -- 2.4%
400,000 B Mail-Well Corp., Sr. Sub. Notes,
10.500% due 2/15/04+.................. 398,500
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS
SECURITY VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C>
PETROLEUM REFINING AND RELATED INDUSTRIES -- 3.0%
$500,000 CCC+ Transamerican Refining Corp.,
Guaranteed 1st Mortgage Notes,
16.500% due
2/15/02...................................................
$ 505,000
- ------------------------------------------------------------
- ----------------------------------------------
PRINTING, PUBLISHING AND ALLIED INDUSTRIES -- 5.8%
500,000 Caa* Sullivan Graphics Inc., Sr. Sub.
Notes, 12.750% due 8/1/05+........... 490,000
500,000 B- U.S. Banknote Corp., Sr. Notes,
11.625% due 8/1/02+................... 482,500
- ------------------------------------------------------------
- ----------------------------------------------
972,500
- ------------------------------------------------------------
- ----------------------------------------------
RETAIL -- 4.2%
250,000 B Flagstar Corp., Sr. Notes, 10.750% due
9/15/01........................ 230,000
500,000 B+ K mart Corp., Notes, 7.900% due
12/14/00.............................. 481,250
- ------------------------------------------------------------
- ----------------------------------------------
711,250
- ------------------------------------------------------------
- ----------------------------------------------
SERVICES -- 8.5%
500,000 B+ Americold Corp., 1st Mortgage Series
B, 11.500% due 3/1/05............ 524,375
500,000 B- Florists Transworld Delivery Inc., Sr.
Sub. Notes,
Series B, 14.000% due
12/15/01........................................
506,250
400,000 B- Regency Health Services Inc., Sr. Sub.
Notes, 9.875% due 10/15/02..... 406,000
- ------------------------------------------------------------
- ----------------------------------------------
1,436,625
- ------------------------------------------------------------
- ----------------------------------------------
TEXTILE MILL PRODUCTS -- 2.8%
500,000 B CMI Industries Inc., Sr. Sub. Notes,
9.500% due 10/1/03............... 466,250
- ------------------------------------------------------------
- ----------------------------------------------
TRANSPORTATION -- 2.6%
400,000 B- Terex Corp., Sr. Secured Notes,
13.250% due 5/15/02+++................ 432,000
- ------------------------------------------------------------
- ----------------------------------------------
WHOLESALE TRADE -- 1.5%
250,000 B+ Fleming Co. Inc., Sr. Notes, 10.625%
due 12/15/01..................... 254,375
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost --
$12,350,130)................................................
. 13,000,322
- ------------------------------------------------------------
- ----------------------------------------------
SHARES
SECURITY VALUE
- ------------------------------------------------------------
- ----------------------------------------------
COMMON STOCKS -- 0.0%
- ------------------------------------------------------------
- ----------------------------------------------
UTILITIES -- 0.0%
264 Great Bay Power Co.+ (Cost --
$0)..................................... 2,210
- ------------------------------------------------------------
- ----------------------------------------------
WARRANTS -- 0.0%
- ------------------------------------------------------------
- ----------------------------------------------
METAL PRODUCTS/MINING -- 0.0%
500 Gulf State Steel Alabama Inc., Expire
4/15/03+........................ 2,500
- ------------------------------------------------------------
- ----------------------------------------------
TRANSPORTATION -- 0.0%
1,600 Terex Corp., Expire
5/15/02++.........................................
3,200
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL WARRANTS
(Cost --
$0).........................................................
. 5,700
- ------------------------------------------------------------
- ----------------------------------------------
SUB-TOTAL INVESTMENTS
(Cost --
$12,350,130)................................................
. 13,008,232
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
HIGH YIELD BOND TRUST
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
SHORT-TERM INVESTMENTS -- 23.0%
- ------------------------------------------------------------
- ---------------------------------------------
COMMERCIAL PAPER -- 3.5%
$ 600,000 Bankers Trust N.Y. Corp., 5.400% due
2/19/97............................ $ 595,590
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 19.5%
3,298,000 Chase Manhattan Bank, 6.550% due 1/2/97;
Proceeds at
maturity -- $3,299,200; (Fully
collateralized by U.S. Treasury Bill due
10/31/98; Market value --
$3,363,993)................................... 3,298,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost --
$3,893,590).................................................
... 3,893,590
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost --
$16,243,720**)..............................................
... $16,901,822
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
+ Security is exempt from registration under Rule 144A of
the Securities Act of
1933. This security may be resold in transactions exempt
that are from
registration, normally to qualified institutional buyers.
++ Non-income producing security.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See page 19 for definition of bond ratings.
SUMMARY OF BONDS BY COMBINED RATINGS
<TABLE>
<CAPTION>
% OF TOTAL CORPORATE
STANDARD & POOR'S BONDS & NOTES
- ------------------------------------------
<S> <C>
BB 2.7%
B 58.8
CCC 7.8
NR 30.7
- ------------------------------------------
100.0%
- ------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<pg$pcn>
- ------------------------------------------------------------
- --------------------
BOND RATINGS
All ratings are by Standard & Poor's Ratings Service
("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by
Moody's Investors
Service, Inc. ("Moodys"). The definitions of the applicable
rating symbols are
set forth below:
Standard & Poor's -- Rating from "AA" to "C" may be modified
by the addition of
a plus (+) or a minus (-) sign to show relative standings
within the major
rating categories.
<TABLE>
<S> <C> <C>
AAA -- Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to
pay interest and repay principal is
extremely strong.
AA -- Debt rated "AA" has a very strong
capacity to pay interest and repay principal and
differs from the highest rated issue
only in a small degree.
A -- Debt rated "A" has a strong capacity to
pay interest and repay principal although
it is somewhat more susceptible to the
adverse effects of changes in circumstances
and economic conditions than debt in
higher rated categories.
BBB -- Debt rated "BBB" are regarded as having
an adequate capacity to pay interest and
repay principal. Whereas they normally
exhibit adequate protection parameters,
adverse economic conditions or changing
circumstances are more likely to lead to a
weakened capacity to pay interest and
repay principal for bonds in this category
than for bonds in higher rated
categories.
BB, B and CCC -- Debt rated "BB" and "B" are regarded,
on balance, as predominantly speculative with
respect to capacity to pay interest and
repay principal in accordance with the
terms of the obligation. "BB"
represents a lower degree of speculation than "B",
and "CCC" the highest degree of
speculation. While such bonds will likely have some
quality and protective characteristics,
these are outweighed by large uncertainties
or major risk exposures to adverse
conditions.
C -- The rating "C" is reserved for income
bonds on which no interest is being paid.
D -- Debt rated "D" are in default, and
payment of interest and/or repayment of
principal is in arrears.
</TABLE>
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to
each generic rating
from "Aa" to "C", where 1 is the highest and 3 the lowest
rating within its
generic category.
<TABLE>
<S> <C> <C>
Aaa -- Bonds that are rated "Aaa" are judged
to be of the best quality. They carry the
smallest degree of investment fisk and
are generally referred to as "gilt edge."
Interest payments are protected by a
large or by an exceptionally stable margin and
principal is secure. While the various
protective elements are likely to change,
such changes as can be visualized are
most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to
be of high quality by all standards.
Together with the "Aaa" group they
comprise what are generally known as high grade
bonds. They are rated lower than the
best bonds because margins of protection may
not be as large as in "Aaa" securities
or fluctuation of protective elements may be
of greater amplitude or there may be
other elements present which make the
long-term risks appear somewhat larger
than in "Aaa" securities.
A -- Bonds that are rated "A" possess many
favorable investment attributes and are to be
considered as upper medium grade
obligations. Factors giving security to principal
and interest are considered adequate
but elements may be present which suggest a
susceptibility to impairment some time
in the future.
Baa -- Bonds that are rated "Baa" are
considered to be medium grade obligations; that is,
they are neither highly protected nor
poorly secured. Interest payment and
principal security appear adequate for
the present but certain protective elements
may be lacking or may be
characteristically unreliable over any great length of
time. These bonds lack outstanding
investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds that are rated "Ba" are judged to
have speculative elements; their future
cannot be considered as well assured.
Often the protection of interest and
principal payments may be very moderate
and thereby not well safeguarded during
both good and bad times over the
future. Uncertainty of position characterizes
bonds in this class.
B -- Bonds that are rated "B" generally lack
characteristics of desirable investments.
Assurance of interest and principal
payments or of maintenance of other terms of
the contract over any long period of
time may be small.
Caa -- Bonds that are rated "Caa" are of poor
standing. These issues may be in default, or
present elements of danger may exist
with respect to principal or interest.
Ca -- Bonds that are rated "Ca" represent
obligations which are speculative in a high
degree. Such issues are often in
default or have other marked shortcomings.
C -- Bonds that are rated "C" are the lowest
rated class of bonds, and issues so rated
can be regarded as having extremely
poor prospects of ever attaining any real
investment standing.
NR -- Indicates that the bond is not rated by
Standard & Poor's or Moody's.
</TABLE>
19
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C>
COMMON STOCKS -- 89.5%
- ------------------------------------------------------------
- ----------------------------------------------
AIRCRAFT & AEROSPACE -- 4.8%
68,375 Boeing
Co..........................................................
...... $ 7,273,391
13,875 Gulfstream Aerospace
Corp.+..............................................
336,469
33,025 Textron
Inc.........................................................
..... 3,112,606
- ------------------------------------------------------------
- ----------------------------------------------
10,722,466
- ------------------------------------------------------------
- ----------------------------------------------
AIRLINES -- 3.9%
138,650 UAL
Corp.+......................................................
......... 8,665,625
- ------------------------------------------------------------
- ----------------------------------------------
AUTO RELATED -- 0.1%
7,925 Cross-Continent Auto
Retailers+..........................................
165,434
- ------------------------------------------------------------
- ----------------------------------------------
BANKING -- 11.7%
10,000 Catskill Financial
Corp.+................................................
140,000
90,475 Chase Manhattan Corp.
...................................................
8,074,894
63,190
Citicorp....................................................
............. 6,508,570
10,000 Community Federal
Bancorp................................................
170,000
10,000 First Bergen
Bancorp.....................................................
115,000
10,000 GA Financial
Inc.........................................................
151,250
28,550 Mercantile Bancorp
Inc...................................................
1,466,756
10,000 PFF Bancorp
Inc.+.......................................................
. 148,750
47,000 R & G Financial
Corp.....................................................
1,116,250
30,666 Wells Fargo &
Co.........................................................
8,272,154
- ------------------------------------------------------------
- ----------------------------------------------
26,163,624
- ------------------------------------------------------------
- ----------------------------------------------
BEVERAGES -- 5.9%
93,250 Coca-Cola
Co..........................................................
... 4,907,281
15,650 Coca-Cola
Enterprises.................................................
... 759,025
257,750 PepsiCo, Inc.
...........................................................
7,571,406
- ------------------------------------------------------------
- ----------------------------------------------
13,237,712
- ------------------------------------------------------------
- ----------------------------------------------
BUSINESS SERVICES -- 4.5%
7,800 Alco Standard
Corp.......................................................
402,675
75,675 Danka Business Systems PLC
ADR...........................................
2,677,003
20,725 Diebold
Inc.........................................................
..... 1,303,084
117,100 First Data Corp.
........................................................
4,274,150
40,850 First USA Paymentech
Inc.+...............................................
1,383,794
- ------------------------------------------------------------
- ----------------------------------------------
10,040,706
- ------------------------------------------------------------
- ----------------------------------------------
CAPITAL GOODS -- 0.1%
3,175 Raychem
Corp........................................................
..... 254,397
- ------------------------------------------------------------
- ----------------------------------------------
CHEMICAL -- 6.3%
175,575 Cytec Industries
Inc.+...................................................
7,132,734
177,775 Monsanto
Co..........................................................
.... 6,911,003
- ------------------------------------------------------------
- ----------------------------------------------
14,043,737
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C>
COMMUNICATIONS -- 0.8%
29,200 Ascend Communications,
Inc.+............................................. $
1,814,050
- ------------------------------------------------------------
- ----------------------------------------------
COMPUTERS -- 10.9%
92,875 Clarify
Inc.+.......................................................
..... 4,458,000
67,375 Dell Computer
Corp.+.....................................................
3,579,297
40,625 Electronics For
Imaging+.................................................
3,341,406
15,200 HBO &
Co..........................................................
....... 902,500
13,850 Intel
Corp........................................................
....... 1,813,484
60,325 International Business Machines
Corp..................................... 9,109,075
21,525 Oracle Systems
Corp.+....................................................
898,669
5,750 Parametric
Technology+.................................................
.. 295,406
3,075 Transaction Systems Architects -- Class A
Shares+........................ 102,244
- ------------------------------------------------------------
- ----------------------------------------------
24,500,081
- ------------------------------------------------------------
- ----------------------------------------------
DIVERSIFIED OPERATIONS -- 1.8%
41,750 General Electric
Co......................................................
4,128,031
- ------------------------------------------------------------
- ----------------------------------------------
DRUGS AND HEALTHCARE -- 8.6%
15,000 American Home Products Corp.
............................................ 879,375
1,650 Bristol-Myers Squibb Co.
................................................
179,438
78,825 Eli Lilly &
Co..........................................................
. 5,754,225
39,550 Merck & Co., Inc.
.......................................................
3,134,338
63,475 Pfizer,
Inc.........................................................
..... 5,260,491
52,225 Warner-Lambert
Co........................................................
3,916,875
- ------------------------------------------------------------
- ----------------------------------------------
19,124,742
- ------------------------------------------------------------
- ----------------------------------------------
ENERGY -- 0.4%
36,100 Peco Energy
Co..........................................................
. 911,525
- ------------------------------------------------------------
- ----------------------------------------------
ENTERTAINMENT AND LEISURE TIME -- 4.1%
98,100 G-TECH Holdings
Corp.+...................................................
3,139,200
113,075 Hilton Hotels
Corp.......................................................
2,954,084
146,250 Mirage Resorts
Inc.+.....................................................
3,162,656
- ------------------------------------------------------------
- ----------------------------------------------
9,255,940
- ------------------------------------------------------------
- ----------------------------------------------
FINANCIAL SERVICES -- 5.0%
8,825 Chester Bancorp Inc.
....................................................
115,828
4,375 Federal Home Loan Mortgage Corp.
........................................ 481,797
101,630 Federal National Mortgage
Association....................................
3,823,829
10,000 First Defiance Financial
Corp............................................
123,750
80,465 Merrill Lynch & Co., Inc.
...............................................
6,557,898
10,000 South Street Financial
Co.+..............................................
140,000
- ------------------------------------------------------------
- ----------------------------------------------
11,243,102
- ------------------------------------------------------------
- ----------------------------------------------
HOSPITAL RELATED -- 0.5%
43,275 Fresenius Medical Care
ADR+..............................................
1,217,109
- ------------------------------------------------------------
- ----------------------------------------------
INSURANCE -- 0.4%
26,600 CMAC Investment Corp.
...................................................
977,550
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C>
NATURAL GAS -- 1.6%
75,500 Praxair
Inc.........................................................
..... $ 3,482,438
- ------------------------------------------------------------
- ----------------------------------------------
NETWORKING -- 3.4%
119,375 Cisco Systems
Inc.+......................................................
7,595,234
- ------------------------------------------------------------
- ----------------------------------------------
PRINTING & PUBLISHING -- 2.3%
133,350 Gartner
Group+......................................................
..... 5,192,316
- ------------------------------------------------------------
- ----------------------------------------------
RETAIL -- 5.2%
50,400 Gucci Group
N.V.........................................................
. 3,219,300
115,975 Nike Inc., Class B
Shares................................................
6,929,506
18,600 The Finish Line, Class A
Shares+.........................................
392,925
17,800 Vons Companies
Inc.+.....................................................
1,065,775
- ------------------------------------------------------------
- ----------------------------------------------
11,607,506
- ------------------------------------------------------------
- ----------------------------------------------
SOFTWARE -- 2.9%
77,975 Microsoft
Corp.+......................................................
... 6,442,684
- ------------------------------------------------------------
- ----------------------------------------------
TELECOMMUNICATIONS -- 4.3%
14,225 Cincinnati Bell,
Inc.....................................................
876,616
186,900 Lucent Technologies
Inc..................................................
8,644,125
- ------------------------------------------------------------
- ----------------------------------------------
9,520,741
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL COMMON STOCKS (Cost --
$154,608,059)............................... 200,306,750
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<C> <S>
<C>
REPURCHASE AGREEMENT -- 10.5%
$23,489,000 Citibank, 6.898% due 1/2/97; Proceeds at
maturity -- $23,579,002; (Fully
collateralized by U.S. Treasury Notes,
5.750% due 12/13/98; Market
value -- $23,970,000) (Cost --
$23,489,000).............................. 23,489,000
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$178,097,059*)........................ $223,795,750
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
CASH INCOME TRUST
<TABLE>
<CAPTION>
FACE
ANNUALIZED
AMOUNT SECURITY
YIELD VALUE
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C>
U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 19.6%
$ 275,000 Federal Home Loan Mortgage Corp. matures
2/18/97............... 5.28% to 5.41% $ 273,068
425,000 Federal National Mortgage Association mature
1/3/97 to 5.28 to 5.31
3/3/97......................................................
. 422,648
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES AND OBLIGATIONS
(Cost --
$695,716).............................................
695,716
- ------------------------------------------------------------
- ------------------------------------------------
U.S. TREASURY BILLS -- 38.7%
1,385,000 U.S. Treasury Bills mature 1/9/97 to 4/17/97
5.07 to 5.11
(Cost --
$1,374,750).........................................
1,374,750
- ------------------------------------------------------------
- ------------------------------------------------
COMMERCIAL PAPER -- 41.7%
150,000 Associates Corp. of North America matures
2/4/97............... 5.36 149,251
150,000 Chevron Oil Finance matures
2/4/97............................. 5.34
149,253
150,000 CIT Group Holdings, Inc. matures
1/16/97....................... 5.37
149,668
150,000 Ford Motor Credit Corp. matures
1/16/97........................ 5.36
149,669
150,000 General Electric Capital Corp. matures
1/9/97.................. 5.48 149,820
150,000 H.J. Heinz Co. matures
1/23/97................................. 5.45
149,507
150,000 Household Finance Corp. matures
2/13/97........................ 5.48
149,032
135,000 Potomac Electric Power Co. matures
1/15/97..................... 5.83 134,698
150,000 Prudential Funding Co. matures
1/16/97......................... 5.34
149,671
150,000 Xerox Corp. matures
1/16/97.................................... 5.45
149,664
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost --
$1,480,233)....................
1,480,233
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$3,550,699*)................ $3,550,699
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C> <C> <C>
ASSETS:
Investments -- Cost...............................
$162,004,962 $12,350,130 $154,608,059 $3,550,699
Short-term investments -- Cost....................
- -- 3,893,590 23,489,000 --
- ------------------------------------------------------------
- ------------------------------------------------
Investments, at value.............................
$187,681,956 $13,008,232 $200,306,750 $3,550,699
Short-term investments, at value..................
- -- 3,893,590 23,489,000 --
Cash..............................................
518 -- 855 4,509
Receivable for securities sold....................
409,824 -- -- --
Dividends and interest receivable.................
1,128,214 360,137 147,193 --
Receivable for Fund shares sold...................
- -- 52,645 454,681 --
Receivable from affiliate.........................
- -- -- -- 15,843
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL ASSETS......................................
189,220,512 17,314,604 224,398,479 3,571,051
- ------------------------------------------------------------
- ------------------------------------------------
LIABILITIES:
Payable for securities purchased..................
519,223 -- 109,975 --
Investment advisory fees payable..................
77,599 7,420 141,259 1,147
Payable for Fund shares purchased.................
3,504 -- -- --
Dividends payable.................................
- -- -- -- 5,696
Accrued expenses..................................
9,705 16,141 15,494 21,553
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL LIABILITIES.................................
610,031 23,561 266,728 28,396
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET ASSETS....................................
$188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS:
Paid-in capital...................................
$158,673,246 $21,746,024 $179,434,374 $3,542,655
Undistributed (overdistributed) net investment
income.........................................
689,249 (172,955) 219,605 --
Accumulated net realized gain (loss) from security
transactions and futures contracts.............
3,570,992 (4,940,128) (1,220,919) --
Net unrealized appreciation of investments........
25,676,994 658,102 45,698,691 --
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET ASSETS....................................
$188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------
- ------------------------------------------------
SHARES OUTSTANDING..................................
12,594,215 2,036,482 6,103,983 3,542,673
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, PER SHARE..........................
$14.98 $8.49 $36.72 $1.00
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------
- -------------------------------------------------
<S>
<C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................... $
5,087,435 $1,774,958 $ 853,439 $114,317
Dividends..............................................
2,160,122 -- 1,687,610 --
- ------------------------------------------------------------
- -------------------------------------------------
TOTAL INVESTMENT INCOME................................
7,247,557 1,774,958 2,541,049 114,317
- ------------------------------------------------------------
- -------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)......................
891,042 72,800 1,261,284 19,000
Custody................................................
49,323 12,866 65,089 --
Administration fees (Note 3)...........................
48,885 24,332 25,243 6,622
Shareholder communications.............................
22,028 16,446 17,563 16,446
Trustees' fees.........................................
6,544 6,544 6,544 6,544
Audit and legal........................................
5,918 6,440 9,521 13,330
Registration fees......................................
1,267 1,267 1,267 1,267
Shareholder and system servicing fees..................
1,000 1,000 2,000 --
Other..................................................
104 1,569 3,083 --
- ------------------------------------------------------------
- -------------------------------------------------
TOTAL EXPENSES.........................................
1,026,111 143,264 1,391,594 63,209
Less: Expense reimbursement (Note 3)...................
- -- -- -- (43,376)
- ------------------------------------------------------------
- -------------------------------------------------
NET EXPENSES...........................................
1,026,111 143,264 1,391,594 19,833
- ------------------------------------------------------------
- -------------------------------------------------
NET INVESTMENT INCOME....................................
6,221,446 1,631,694 1,149,455 94,484
- ------------------------------------------------------------
- -------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS (NOTES 4 & 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities).......................................
14,175,095 (304,388) 13,938,060 --
Futures contracts...................................
(744,302) -- -- --
- ------------------------------------------------------------
- -------------------------------------------------
NET REALIZED GAIN (LOSS)...............................
13,430,793 (304,388) 13,938,060 --
- ------------------------------------------------------------
- -------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year...................................
22,303,922 (199,726) 21,220,176 --
End of year.........................................
25,676,994 658,102 45,698,691 --
- ------------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION................
3,373,072 857,828 24,478,515 --
- ------------------------------------------------------------
- -------------------------------------------------
NET GAIN ON INVESTMENTS AND FUTURES CONTRACTS............
16,803,865 553,440 38,416,575 --
- ------------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................
$23,025,311 $2,185,134 $ 39,566,030 $ 94,484
- ------------------------------------------------------------
- -------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C> <C> <C>
OPERATIONS:
Net investment income............................. $
6,221,446 $ 1,631,694 $ 1,149,455 $ 94,484
Net realized gain (loss)..........................
13,430,793 (304,388) 13,938,060 --
Increase in net unrealized appreciation...........
3,373,072 857,828 24,478,515 --
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS............
23,025,311 2,185,134 39,566,030 94,484
- ------------------------------------------------------------
- ------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income.............................
(10,914,123) (2,978,125) (1,741,271) (94,502)
Net realized gains................................
(17,258,729) -- (23,015,510) --
- ------------------------------------------------------------
- ------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS..................
(28,172,852) (2,978,125) (24,756,781) (94,502)
- ------------------------------------------------------------
- ------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares..................
7,067,309 5,233,862 72,301,317 9,941,686
Net asset value of shares issued for
reinvestment of dividends......................
28,172,852 2,978,125 24,756,781 94,502
Cost of shares reacquired.........................
(12,757,653) (3,030,251) (9,891,028) (7,910,199)
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS...................................
22,482,508 5,181,736 87,167,070 2,125,989
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS..............................
17,334,967 4,388,745 101,976,319 2,125,971
NET ASSETS:
Beginning of year.................................
171,275,514 12,902,298 122,155,432 1,416,684
- ------------------------------------------------------------
- ------------------------------------------------
END OF YEAR*......................................
$188,610,481 $17,291,043 $224,131,751 $3,542,655
- ------------------------------------------------------------
- ------------------------------------------------
* Includes undistributed (overdistributed) net
investment income of: ............................
$689,249 $(172,955) $219,605 --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MANAGED HIGH YIELD CAPITAL CASH
ASSETS BOND APPRECIATION INCOME
TRUST TRUST FUND TRUST
- ------------------------------------------------------------
- -------------------------------------------------
<S> <C>
<C> <C> <C>
OPERATIONS:
Net investment income............................. $
5,381,926 $ 1,173,476 $ 811,421 $ 51,414
Net realized gain.................................
7,915,343 395,891 12,852,764 --
Increase in net unrealized appreciation...........
23,599,777 221,759 16,423,842 --
- ------------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS............
36,897,046 1,791,126 30,088,027 51,414
- ------------------------------------------------------------
- -------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income.............................
(5,441,569) (960,192) (540,784) (51,414)
Net realized gains................................
(1,783,880) -- -- --
- ------------------------------------------------------------
- -------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS..................
(7,225,449) (960,192) (540,784) (51,414)
- ------------------------------------------------------------
- -------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares..................
5,376,731 1,749,523 26,600,150 3,284,741
Net asset value of shares issued for
reinvestment of dividends......................
7,225,449 960,192 540,784 52,033
Cost of shares reacquired.........................
(11,885,171) (2,354,757) (13,026,347) (3,122,783)
- ------------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS...................................
717,009 354,958 14,114,587 213,991
- ------------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET ASSETS..............................
30,388,606 1,185,892 43,661,830 213,991
NET ASSETS:
Beginning of year.................................
140,886,908 11,716,406 78,493,602 1,202,693
- ------------------------------------------------------------
- -------------------------------------------------
END OF YEAR*......................................
$171,275,514 $12,902,298 $122,155,432 $ 1,416,684
- ------------------------------------------------------------
- -------------------------------------------------
* Includes undistributed net investment income
of:...............................................
$5,381,926 $1,173,476 $811,421 --
- ------------------------------------------------------------
- -------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Managed Assets Trust, High Yield Bond Trust,
Capital Appreciation Fund
and Cash Income Trust (collectively, "Fund(s)") are each a
Massachusetts
business trust registered under the Investment Company Act
of 1940, as amended,
as diversified, open-end management investment companies.
Shares of the Funds
are offered only to insurance company separate accounts that
fund certain
variable annuity and variable life insurance contracts.
The significant accounting policies consistently
followed by the Funds are:
(a) security transactions are accounted for on trade date;
(b) securities traded
on national securities markets are valued at the closing
prices on such markets;
securities for which no sales price were reported and U.S.
Government and Agency
obligations are valued at the mean between the last reported
bid and ask prices
or on the basis of quotations received from reputable
brokers or other
recognized sources; (c) securities maturing within 60 days
are valued at cost
plus accreted discount and, or minus amortized premium,
which approximates
market value; (d) securities that have a maturity of 60 days
or more are valued
at prices based on market quotations for securities of
similar type, yield and
maturity; (e) interest income, adjusted for amortization of
premium and
accretion of discount, is recorded on the accrual basis and
dividend income is
recorded on the ex-dividend date; (f) gains or losses on the
sale of securities
are calculated by using the specific identification method;
(g) dividends and
distributions to shareholders are recorded on the ex-
dividend date; (h) the
character of income and gains to be distributed are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles. At December 31, 1996, reclassifications were
made to the capital
accounts of the High Yield Bond Trust, Capital Appreciation
Fund and Cash Income
Trust to reflect permanent book/tax differences and income
and gains available
for distributions under income tax regulations. Accordingly,
for the High Yield
Bond Trust a portion of accumulated net realized loss
amounting to $1,893,310
was reclassified to paid-in capital. Net investment income,
net realized gains
and net assets were not affected by this change; (i) the
Funds intend to comply
with the requirements of the Internal Revenue Code of 1986,
as amended,
pertaining to regulated investment companies and to make
distributions of
taxable income sufficient to relieve it from substantially
all Federal income
and excise taxes; and (j) estimates and assumptions are
required to be made
regarding assets, liabilities and changes in net assets
resulting from
operations when financial statements are prepared. Changes
in the economic
environment, financial markets and any other parameters used
in determining
these estimates could cause actual results to differ.
In addition, for the year ended December 31, 1996,
distributions from
realized gains include both net realized short-term and long-
term capital gains.
Previous to 1996 net realized short-term capital gains were
included in
distributions from net investment income.
2. DIVIDENDS
Cash Income Trust declares and records a dividend of
substantially all of
its net investment income on each business day. Such
dividends are paid or
reinvested on the payable date.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER
TRANSACTIONS
Travelers Asset Management International Corporation
("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as
investment manager and
advisor to the Managed Assets Trust ("MAT"), High Yield Bond
Trust ("HYBT") and
Cash Income Trust ("CIT"). MAT and CIT pay TAMIC an
investment management and
advisory fee calculated at the annual rate of 0.50% and
0.3233%, respectively of
its average daily net assets. HYBT pays TAMIC an investment
management and
advisory fee calculated at an annual rate of: 0.50% on the
first $50,000,000,
0.40% on the next $100,000,000, 0.30% on the next
$100,000,000 and 0.25% on the
amount over $250,000,000 of its average daily net assets.
This fee is calculated
daily and paid monthly.
TAMIC has a sub-advisory agreement with The Travelers
Investment Management
Company, Inc. ("TIMCO"), an indirect wholly owned subsidiary
of Travelers Group
Inc. Pursuant to the sub-advisory agreement, TIMCO is
responsible for the
day-to-day portfolio operations and investment decisions for
MAT. As a result,
TAMIC pays TIMCO, as sub-advisor, 0.25% of the average daily
net assets of MAT.
In addition, TIMCO acts as investment manager and
advisor to the Capital
Appreciation Fund ("CAF"). CAF pays TIMCO an investment
management and advisory
fee calculated at an annual rate of 0.75% of the average
daily net assets. This
fee is calculated daily and paid monthly.
28
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TIMCO also has a sub-advisory agreement with Janus
Capital Corporation
("Janus"). Pursuant to the sub-advisory agreement, Janus is
responsible for the
day-to-day portfolio operations and investment decisions for
CAF. As a result,
TIMCO pays Janus, as sub-advisor, 0.55% of the average daily
net assets of CAF.
Travelers Insurance Company ("Travelers Insurance")
acts as administrator
to the Funds. The Funds pay Travelers Insurance an
administration fee calculated
at an annual rate of 0.06% of its average daily net assets.
Travelers Insurance
has entered into a sub-administrative services agreement
with Smith Barney
Mutual Funds Management Inc. ("SBMFM"), a subsidiary of
Smith Barney Holdings
Inc. ("SBH"). Travelers Insurance pays SBMFM, as sub-
administrator, a fee
calculated at an annual rate of 0.06% for the average daily
net assets of each
Fund. This fee is calculated daily and paid monthly.
MAT received brokerage commissions of $1,380 from
affiliated brokers.
One Trustee and all officers of the Funds are employees
of Travelers Group
Inc., or its subsidiaries.
4. INVESTMENTS
During the year ended December 31, 1996, the aggregate
cost of purchases
and proceeds from sales of investments (including
maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
Purchases...................................................
. $177,030,601 $10,021,937 $180,570,344
- ------------------------------------------------------------
- -----------------------------------------------
Sales.......................................................
. 189,051,386 9,367,054 126,712,795
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
At December 31, 1996, the aggregate gross unrealized
appreciation and
depreciation of investments were as follows:
<TABLE>
<CAPTION>
MANAGED HIGH CAPITAL
ASSETS YIELD BOND APPRECIATION
TRUST TRUST FUND
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
Gross unrealized
appreciation*............................... $26,911,202
$779,745 $47,569,236
Gross unrealized
depreciation*............................... (1,234,208)
(121,643) (1,870,545)
- ------------------------------------------------------------
- -----------------------------------------------
Net unrealized
appreciation*................................. $25,676,994
$658,102 $45,698,691
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
* Substantially the same for Federal income tax purposes.
5. REPURCHASE AGREEMENTS
The Funds purchase (and its custodian takes possession
of) U.S. Government
securities from banks and securities dealers subject to
agreements to resell the
securities to the sellers at a future date (generally, the
next business day) at
an agreed-upon higher repurchase price. The Funds require
continual maintenance
of the market value of the collateral in amounts at least
equal to 102% of the
repurchase price.
6. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures
contracts are
recognized as assets. The initial margin is segregated by
the custodian and is
noted in the schedule of investments. During the period the
futures contract is
open, changes in the value of the contract are recognized as
unrealized gains or
losses by "marking-to-market" on a daily basis to reflect
the market value of
the contract at the end of each day's trading. Variation
margin payments are
made or received and recognized as assets due from or
liabilities due to broker,
depending upon whether unrealized gains or losses are
incurred. When the
contract is closed, the Funds record a realized gain or loss
equal to the
difference between the proceeds from (or cost of) the
closing transactions and
the Funds' basis in the contract. The Funds bear the market
risk that arises
from changes in the value of the financial instruments and
securities indices
(futures contracts) and the credit risk should a
counterparty fail to perform
under such contracts.
At December 31, 1996, the Funds had no open futures
contracts.
29
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. OPTIONS CONTRACTS
Premiums paid when put or call options are purchased by
the Funds,
represent investments, which are "marked-to-market" daily.
When a purchased
option expires, the Funds realize a loss in the amount of
the premium paid. When
the Funds enter into closing sales transactions, the Funds
realize a gain or
loss depending on whether the proceeds from the closing
sales transaction are
greater or less than the premium paid for the option. When
the Funds exercise a
put option, it will realize a gain or loss from the sale of
the underlying
security and the proceeds from such sale will be decreased
by the premium
originally paid. When the Funds exercise a call option, the
cost of the security
which the Funds purchase upon exercise will be increased by
the premium
originally paid.
As of December 31, 1996, the Funds had no open
purchased call or put
options contracts.
8. CAPITAL LOSS CARRYFORWARD
At December 31, 1996, HYBT had, for Federal income tax
purposes,
approximately $4,751,000 of capital loss carryforwards
available to offset
future capital gains. To the extent that these carryforward
losses can be used
to offset realized capital gains, it is probable that such
gains will not be
distributed. The amount and expiration of the carryforwards
are indicated below.
Expiration occurs on December 31 of the year indicated:
<TABLE>
<CAPTION>
1996 1997 1998
1999 2000 2001 2002 2004
- ------------------------------------------------------------
- ----------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Carryforward
Amounts............ $530,000 $1,094,000 $1,970,000
$748,000 $48,000 $135,000 $38,000 $188,000
- ------------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
9. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an
unlimited number of
shares of beneficial interest without par value.
Transactions in shares of each
Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C>
MANAGED ASSETS TRUST
Shares
sold....................................................
469,580 375,304
Shares issued on
reinvestment..................................
1,926,518 581,291
Shares
redeemed................................................
(847,611) (871,567)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
1,548,487 85,028
- ------------------------------------------------------------
- --------------------------------------------
HIGH YIELD BOND TRUST
Shares
sold....................................................
591,013 206,291
Shares issued on
reinvestment..................................
356,007 122,473
Shares
redeemed................................................
(343,196) (276,334)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
603,824 52,430
- ------------------------------------------------------------
- --------------------------------------------
CAPITAL APPRECIATION FUND
Shares
sold....................................................
1,994,300 900,317
Shares issued on
reinvestment..................................
716,103 22,109
Shares
redeemed................................................
(287,644) (445,510)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
2,422,759 476,916
- ------------------------------------------------------------
- --------------------------------------------
CASH INCOME TRUST
Shares
sold....................................................
9,941,686 3,284,741
Shares issued on
reinvestment..................................
94,502 52,033
Shares
redeemed................................................
(7,910,199) (3,122,783)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
2,125,989 213,991
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
30
<pg$pcn>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST 1996
1995 1994 1993 1992
- ------------------------------------------------------------
- --------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.................
$15.50 $12.85 $14.21 $14.02 $14.78
- ------------------------------------------------------------
- --------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income............................
0.46 0.49 0.46 0.51 0.64
Net realized and unrealized gain (loss)..........
1.50 2.83 (0.73) 0.72 0.01
- ------------------------------------------------------------
- --------------------------------------------------
Total Income (Loss) From Operations................
1.96 3.32 (0.27) 1.23 0.65
- ------------------------------------------------------------
- --------------------------------------------------
LESS DISTRIBUTIONS FROM (1):
Net investment income............................
(0.89) (0.50) (0.67) (0.85) (1.04)
Net realized gains...............................
(1.59) (0.17) (0.42) (0.19) (0.37)
- ------------------------------------------------------------
- --------------------------------------------------
Total Distributions................................
(2.48) (0.67) (1.09) (1.04) (1.41)
- ------------------------------------------------------------
- --------------------------------------------------
NET ASSET VALUE, END OF YEAR.......................
$14.98 $15.50 $12.85 $14.21 $14.02
- ------------------------------------------------------------
- --------------------------------------------------
TOTAL RETURN.......................................
13.78% 27.12% (2.24)% 9.33% 5.14%
- ------------------------------------------------------------
- --------------------------------------------------
NET ASSETS, END OF YEAR (000'S)....................
$188,610 $171,276 $140,887 $156,767 $148,971
- ------------------------------------------------------------
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).....................................
0.58% 0.58% 0.61% 0.56% 0.56%
Net investment income............................
3.51 3.49 3.59 3.65 4.97
- ------------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE............................
108% 110% 97% 86% 112%
- ------------------------------------------------------------
- --------------------------------------------------
AVERAGE COMMISSIONS PER SHARES PAID ON EQUITY
TRANSACTIONS (3).................................
$0.06 -- -- -- --
- ------------------------------------------------------------
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND TRUST 1996
1995 1994 1993 1992
- ------------------------------------------------------------
- --------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.................
$9.00 $8.49 $9.25 $8.91 $8.75
- ------------------------------------------------------------
- --------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income............................
0.91 0.80 0.66 0.68 0.88
Net realized and unrealized gain (loss)..........
0.41 0.41 (0.76) 0.47 0.18
- ------------------------------------------------------------
- --------------------------------------------------
Total Income (Loss) From Operations................
1.32 1.21 (0.10) 1.15 1.06
- ------------------------------------------------------------
- --------------------------------------------------
LESS DISTRIBUTION FROM (1):
Net investment income............................
(1.83) (0.70) (0.66) (0.81) (0.90)
- ------------------------------------------------------------
- --------------------------------------------------
NET ASSET VALUE, END OF YEAR.......................
$8.49 $9.00 $8.49 $9.25 $8.91
- ------------------------------------------------------------
- --------------------------------------------------
TOTAL RETURN.......................................
16.05% 15.47% (1.26)% 14.01% 13.16%
- ------------------------------------------------------------
- --------------------------------------------------
NET ASSETS, END OF YEAR (000'S)....................
$17,291 $12,902 $11,716 $12,765 $10,289
- ------------------------------------------------------------
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (4).....................................
0.97% 1.25% 1.25% 0.99% 0.56%
Net investment income............................
11.01 9.37 7.71 7.69 10.24
- ------------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE............................
84% 222% 146.% 19% 52%
- ------------------------------------------------------------
- --------------------------------------------------
</TABLE>
(1) For the year ended December 31, 1996, distributions from
realized gains
include both net realized short-term and long-term
capital gains. Previous
to 1996 net realized short-term capital gains were
included in distributions
from net investment income.
(2) The ratios of expenses to average net assets for the
years 1993 and 1992
reflects an expense reimbursement by The Travelers in
connection with
voluntary expense limitations. Without the expense
reimbursement, the ratios
of expenses to average net assets would have been 0.60%
and 0.63%, for the
years ended December 31, 1993 and 1992, respectively.
(3) For the fiscal years beginning after 1995, the SEC
instituted new guidelines
requiring the disclosure of average commissions per
share on Funds which
held more than 10% of their assets in commissionable
equity securities.
(4) The ratio of expenses to average net assets reflects an
expense
reimbursement by The Travelers in connection with
voluntary expense
limitations. Without the expense reimbursement, the
ratios of expenses to
average net assets would have been 1.28%, 1.33%, 1.31%
and 1.28%, for the
years ended December 31, 1995, 1994, 1993 and 1992,
respectively.
31
<pg$pcn>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND 1996
1995 1994 1993(1) 1992
- ------------------------------------------------------------
- -------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............ $33.18
$24.50 $25.87 $22.72 $19.63
- ------------------------------------------------------------
- -------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income....................... 0.23
0.24 0.19 0.19 0.28
Net realized and unrealized gain (loss)..... 8.49
8.61 (1.41) 3.21 3.13
- ------------------------------------------------------------
- -------------------------------------------------
Total Income (Loss) From Operations........... 8.72
8.85 (1.22) 3.40 3.41
- ------------------------------------------------------------
- -------------------------------------------------
LESS DISTRIBUTION FROM (2):
Net investment income....................... (0.41)
(0.17) (0.15) (0.25) (0.32)
Net realized gains.......................... (4.77)
- -- -- -- --
- ------------------------------------------------------------
- -------------------------------------------------
Total Distributions........................... (5.18)
(0.17) (0.15) (0.25) (0.32)
- ------------------------------------------------------------
- -------------------------------------------------
NET ASSET VALUE, END OF YEAR.................. $36.72
$33.18 $24.50 $25.87 $22.72
- ------------------------------------------------------------
- -------------------------------------------------
TOTAL RETURN.................................. 28.21%
36.37% (4.76)% 15.09% 17.60%
- ------------------------------------------------------------
- -------------------------------------------------
NET ASSETS, END OF YEAR (000'S)............... $224,132
$122,155 $78,494 $62,414 $29,506
- ------------------------------------------------------------
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)................................ 0.83%
0.85% 0.89% 0.87% 0.56%
Net investment income....................... 0.69
0.84 0.79 0.81 1.39
- ------------------------------------------------------------
- -------------------------------------------------
PORTFOLIO TURNOVER RATE....................... 84%
124% 106% 155% 126%
- ------------------------------------------------------------
- -------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (4).................. $0.06
- -- -- -- --
- ------------------------------------------------------------
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CASH INCOME TRUST 1996
1995 1994 1993 1992
- ------------------------------------------------------------
- -------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............ $1.00
$1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------------
Net investment income (5)................... 0.0412
0.0417 0.0278 0.0214 0.0322
Distributions from net investment income.... (0.0412)
(0.0417) (0.0278) (0.0214) (0.0322)
- ------------------------------------------------------------
- -------------------------------------------------
NET ASSET VALUE, END OF YEAR.................. $1.00
$1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------------
TOTAL RETURN.................................. 4.20%
4.17% 2.78% 2.14% 3.22%
- ------------------------------------------------------------
- -------------------------------------------------
NET ASSETS, END OF YEAR (000'S)............... $3,543
$1,417 $1,203 $647 $697
- ------------------------------------------------------------
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (5)(6)............................. 0.78%
1.25% 1.25% 0.94% 0.38%
Net investment income....................... 3.72
- -- -- -- --
- ------------------------------------------------------------
- -------------------------------------------------
</TABLE>
(1) Effective May 1, 1993, Janus Capital Corporation became
sub-adviser for
Capital Appreciation Fund.
(2) For the year ended December 31, 1996, distributions from
realized gains
include both net realized short-term and long-term
capital gains. Previous
to 1996 net realized short-term capital gains were
included in distributions
from net investment income.
(3) The ratio of expenses to average net assets for 1993 and
1992 reflects an
expense reimbursement by The Travelers in connection
with voluntary expense
limitations. Without the expense reimbursement, the
ratios of expenses to
average net assets would have been 0.96% and 0.91%, for
the years ended
December 31, 1993 and 1992, respectively.
(4) For the fiscal years beginning after 1995, the SEC
instituted new guidelines
requiring the disclosure of average commissions per
share on Funds which
held more than 10% of their assets in commissionable
equity securities.
(5) For the year ended December 31, 1996, The Travelers
reimbursed CIT for
$43,376 in expenses. If such fees were not waived and
expenses not
reimbursed, the per share decrease of net investment
income would have been
$0.002 and the expense ratio would have been 1.71%.
(6) The ratio of expenses to average net assets for 1995-
1992 reflects an
expense reimbursement by The Travelers in connection
with voluntary expense
limitations. Without the expense reimbursement, the
ratios of expenses to
average net assets would have been 7.37%, 6.40%, 8.47%
and 7.70% for the
years ended December 31, 1995, 1994, 1993 and 1992,
respectively.
- ------------------------------------------------------------
- --------------------
TAX INFORMATION (UNAUDITED)
The amount of long-term capital gains paid for the
fiscal year ended
December 31, 1996, are $13,912,800 for the Managed Assets
Trust and $19,412,512
for the Capital Appreciation Portfolio.
32
<pg$pcn>
- ------------------------------------------------------------
- --------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Managed Assets Trust:
We have audited the accompanying statement of assets and
liabilities of Managed
Assets Trust including the schedule of investments as of
December 31, 1996, and
the related statement of operations for the year then ended,
the statement of
changes in net assets for each of the two years in the
period then ended, and
the financial highlights for each of the five years in the
period then ended.
These financial statements and financial highlights are the
responsibility of
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian and
brokers. An audit
also includes assessing the accounting principles used and
significant estimates
made by management, as well as evaluating the overall
financial statement
presentation. We believe that our audits provide a
reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of
Managed Assets Trust as of December 31, 1996, the results of
its operations for
the year then ended, the changes in its net assets for each
of the two years in
the period then ended, and the financial highlights for each
of the five years
in the period then ended, in conformity with generally
accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 24, 1997
33
<pg$pcn>
- ------------------------------------------------------------
- --------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
High Yield Bond Trust:
We have audited the accompanying statement of assets and
liabilities of High
Yield Bond Trust including the schedule of investments as of
December 31, 1996,
and the related statement of operations for the year then
ended, the statement
of changes in net assets for each of the two years in the
period then ended, and
the financial highlights for each of the five years in the
period then ended.
These financial statements and financial highlights are the
responsibility of
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of High
Yield Bond Trust as of December 31, 1996, the results of its
operations for the
year then ended, the changes in its net assets for each of
the two years in the
period then ended, and the financial highlights for each of
the five years in
the period then ended, in conformity with generally accepted
accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 24, 1997
34
<pg$pcn>
- ------------------------------------------------------------
- --------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Capital Appreciation Fund:
We have audited the accompanying statement of assets and
liabilities of Capital
Appreciation Fund including the schedule of investments as
of December 31, 1996,
and the related statement of operations for the year then
ended, the statement
of changes in net assets for each of the two years in the
period then ended, and
the financial highlights for each of the five years in the
period then ended.
These financial statements and financial highlights are the
responsibility of
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian and
brokers. An audit
also includes assessing the accounting principles used and
significant estimates
made by management, as well as evaluating the overall
financial statement
presentation. We believe that our audits provide a
reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of
Capital Appreciation Fund as of December 31, 1996, the
results of its operations
for the year then ended, the changes in its net assets for
each of the two years
in the period then ended, and the financial highlights for
each of the five
years in the period then ended, in conformity with generally
accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 24, 1997
35
<pg$pcn>
- ------------------------------------------------------------
- --------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Cash Income Trust:
We have audited the accompanying statement of assets and
liabilities of Cash
Income Trust including the schedule of investments as of
December 31, 1996, and
the related statement of operations for the year then ended,
the statement of
changes in net assets for each of the two years in the
period then ended, and
the financial highlights for each of the five years in the
period then ended.
These financial statements and financial highlights are the
responsibility of
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of Cash
Income Trust as of December 31, 1996, the results of its
operations for the year
then ended, the changes in its net assets for each of the
two years in the
period then ended, and the financial highlights for each of
the five years in
the period then ended, in conformity with generally accepted
accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 24, 1997
36
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
- ------------------------------------------------------------
- --------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
For the year ended December 31, 1996, the U.S. Government
Securities Portfolio
generated a total return of 1.46%. As of December 31, 1996
the composition of
assets contained in the Portfolio was 47% in mortgage-backed
securities, 31% in
U.S. Treasuries, 12% in U.S. agency securities and 10% in
cash.
Prospects for bond investors appeared promising as the year
began. In
Washington, D.C., there were talks of federal deficit
reduction through a
balanced budget amendment while the outlook for inflation
was tame. Long-term
U.S. Treasuries were yielding less than 6% and the
expectation of a Federal
Reserve easing of monetary policy drove down yields on 2
year U.S. Treasuries to
under 5%. However, as the year progressed, bullish
sentiments were shattered as
balanced budget talks stalled, energy prices began to rise
and U.S. economic
growth resumed. Heightened investor concerns over rising
inflation drove up the
yield on long-term U.S. Treasuries to over 7%. Toward the
end of the year, these
inflation fears proved to be unfounded and the long-term
U.S. Treasury dropped
to a range of around 6.6%.
Against this backdrop of volatile interest rates, the
Portfolio lagged behind
the Lehman Government Bond Index for the first three
quarters of the year. By
shortening the maturity and through careful selection of
securities, we were
able to recoup lost ground to finish the year in line with
the Portfolio's
benchmark. Specifically, we added securities from Financing
Corporation ("FICO")
and Tennessee Valley Authority ("TVA"). In our view, FICO
securities were very
attractively priced due to concerns about the solvency of
the Savings
Association Insurance Fund, the agency responsible for
making interest payments
on the FICO securities. The U.S. Congress subsequently
passed a bill that would
shore up funds required to ensure payment of interest which
resulted in the FICO
bond's rise in price. In the case of TVA bonds, we utilized
a hedging strategy
to boost the yield as well as to provide investors with an
additional cushion
against interest rate volatility.
Looking ahead to 1997, we expect a continuation of higher
interest rate
volatility. Therefore, we have reduced the Portfolio's
weighting in
mortgage-backed securities while increasing the exposure to
other U.S. agency
bonds. In addition, we believe the recently introduced
inflation-indexed
securities by the U.S. Treasury may represent a good
investment opportunity for
the Portfolio.
SOCIAL AWARENESS STOCK PORTFOLIO
Social Awareness Stock Portfolio finished 1996 with a
competitive total return
of 19.98%. Our exposure to the financial and technology
sectors were major
contributors to the Portfolio's positive results. As of
December 31, 1996, the
Portfolio consisted of about 15% cash reserves and 71 stock
holdings, with some
75% of those considered to be "core" investments. The
weighted market
capitalization of the stocks owned by the Portfolio averages
about $24.5
billion, approximating a 50/50 mix of large and mid-
capitalization companies. As
the year ended, the Portfolio was overweighted in the
consumer cyclical,
financial, and technology industries while underweighted in
capital goods,
communications services, energy, and utilities industries.
This composition
proved to be an advantage for the Portfolio during the
period. While the
Portfolio's beta ( the comparative movement of a security's
price relative to
the overall market) was approximately 10% more than the rest
of the stock
market, the slightly increased risk taken was generally well
rewarded. The
stocks in the Portfolio generated more earnings and more
growth potential
compared to their cost than that offered by the overall
market.
Our investment strategy for 1997 continues to focus on
owning quality companies.
The overall Portfolio's quality remains strong with a
Standard & Poor's average
rating of A minus (a ranking of common stocks from A+
through C on the basis of
growth and stability). We remain cautiously optimistic about
the stock market's
1997 potential, but hold some cash reserves to take
advantage of buying
opportunities from normal market volatility following two
years of very strong
performance.
UTILITIES PORTFOLIO
Utilities Portfolio seeks to provide current income and as a
secondary goal,
capital appreciation, by investing at least 25% of its
assets in the utilities
industry. For the year ended December 31, 1996, the
Utilities Portfolio had a
total return of 7.47%.
The past year was frustrating for electric utility
investors. As a group,
utilities underperformed the broad based equity market. A
strong stock market
combined with a relatively weak bond market caused attention
to move away from
defensive sectors such as utilities. Nevertheless, we
believe the electric
utility sector should continue to benefit from industry
restructuring and the
rapid pace of mergers and acquisitions. For example, several
state restructuring
proposals have focused on the need to
37
<pg$pcn>
ANNUAL REPORT FOR THE TRAVELERS SERIES TRUST
- ------------------------------------------------------------
- --------------------
lower customer rates and creating opportunities for electric
utilities to
recover their capital investments. In our opinion, these
proposals should create
a more positive environment for investors by removing some
of the uncertainty
that has plagued utilities over the past few years. The
consolidation of
electric utility and natural gas companies dominated merger
activity during 1996
as management teams attempted to enlarge their customer base
and become full
service energy providers in a more competitive industry.
Furthermore, several
electric utility companies continue to diversify by
aggressively expanding into
foreign markets.
We remain positive for electric utilities in 1997 based on
continued
clarification of the impact of deregulation and competition
in the industry and
its favorable defensive characteristics. In addition, we
expect more individual
state initiatives regarding electric utility industry
restructuring.
Consolidation should continue involving electric sector and
electric companies
with natural gas companies. In this dynamic and rapidly
changing environment,
individual stock selection will continue to be extremely
important in achieving
competitive total returns. We expect performance among
individual companies to
vary significantly. In our view, special situation
companies, with above average
dividend growth, favorable regulatory rulings or positive
deregulatory proposals
are exciting new investment opportunities. We continue to
focus on higher
quality companies with strong earnings and dividend growth,
superior management
teams and favorable environments. Moreover, we favor lower-
cost companies in
this more competitive environment. We believe investors
should view utility
investing from a total return perspective and not simply
evaluate the sector's
current yield.
The economic outlook for 1997 calls for a continuance of
slow to moderate U.S.
economic growth without renewed inflation and the long-term
U.S. Treasury bond
is expected to trade in a range of 6.25% to 7%. These
conditions should be
generally favorable for fixed-income markets and interest
rate-sensitive sectors
such as electric utilities. However, higher overall market
volatility may
increase if there is a surprise regarding the economy or
corporate earnings.
Our portfolio strategy continues to focus on income and long-
term growth. We
have increased our natural gas holdings and gradually
reduced telecommunications
holdings awaiting a clearer competitive picture or more
favorable valuations in
that industry. After two years of above historical returns,
an increase in stock
market volatility could enhance the appeal of electric
utilities as a stable
long-term investment vehicle.
In closing, we thank you for your investment in The
Travelers Series Trust
Portfolios. We look forward to continuing to help you
achieve your financial
goals.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
January 15, 1997
38
<pg$pcn>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- U.S. GOVERNMENT SECURITIES
PORTFOLIO AS OF 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 1.46%
1/24/92* through 12/31/96 5.84%
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
1/24/92* through 12/31/96 32.33%
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on
January
24, 1992 and assuming reinvestment of dividends through
December
31, 1996. The Lehman Government Bond Index is a broad-based
Index
of all public debt obligations of the U.S. Government and
its
agencies and has an average maturity of nine years. The
Consumer
Price Index is a measure of the average change in prices
over time
in a fixed market basket of goods and services.
<TABLE>
<CAPTION>
U.S. Gov-
ernment Lehman
Measurement Period Securities Government
Consumer
(Fiscal Year Covered) Portfolio Bond Index Price
Index
<S> <C> <C> <C>
1/24/92 10000 10000
10000
12/92 10290 10920
10275
12/93 11813 12125
10557
12/94 11147 11699
10840
12/95 13869 13950
11115
12/31/96 14077 14354
11484
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming
reinvestments of dividends. The returns do not reflect
expenses associated with
the subaccount such as administrative fees, account charges
and surrender
charges which, if reflected, would reduce the performance
shown.
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- SOCIAL AWARENESS STOCK PORTFOLIO
AS OF 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 19.98%
5/1/92* through 12/31/96 12.62%
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
5/1/92* through 12/31/96 73.33%
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on
May 1,
1992 assuming reinvestment of dividends through December 31,
1996.
The Standard & Poor's 500 Index is an unmanaged index
composed of
500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the over-the-counter
market.
The Consumer Price Index is a measure of the average change
in
prices over time in a fixed market basket of goods and
services.
<TABLE>
<CAPTION>
Social
Awareness Standard &
Measurement Period Stock Poor's 500
Consumer
(Fiscal Year Covered) Portfolio Index Price
Index
<S> <C> <C> <C>
5/1/92 10000 10000
10000
12/92 10850 10673
10157
12/93 11777 11745
10436
12/94 11461 11900
10716
12/95 16285 14509
10988
12/31/96 18340 17838
11353
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming
reinvestments of dividends. The returns do not reflect
expenses associated with
the subaccount such as administrative fees, account charges
and surrender
charges which, if reflected, would reduce the performance
shown.
39
<pg$pcn>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- UTILITIES PORTFOLIO AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
<S> <C>
Year Ended 12/31/96 7.47%
2/4/94* through 12/31/96 11.24%
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
<S> <C>
2/4/94* through 12/31/96 36.26%
* Commencement of operations
</TABLE>
This chart assumes an initial investment of $10,000 made on
February 4, 1994 assuming reinvestment of dividends through
December 31, 1996. Standard & Poor's 500 Index is an
unmanaged
index composed of 500 widely held common stocks listed on
the New
York Stock Exchange, American Stock Exchange and over-the-
counter
market. The Consumer Price Index is a measure of the average
change
in prices over time in a fixed market basket of goods and
services.
<TABLE>
<CAPTION>
Standard &
Measurement Period Utilities Poor's 500
Consumer
(Fiscal Year Covered) Portfolio Index Price
Index
<S> <C> <C> <C>
2/4/94 10000 10000
10000
12/94 10170 10072
10205
12/95 13149 13852
10464
12/31/96 14139 17031
10811
</TABLE>
- ------------------------------------------------------------
- --------------------
Past performance is not predictive of future performance.
Investment return and
principal value of an investment will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than their original
cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming
reinvestments of dividends. The returns do not reflect
expenses associated with
the subaccount such as administrative fees, account charges
and surrender
charges which, if reflected, would reduce the performance
shown.
40
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 89.8%
$ 1,000,000 U.S. Treasury Bond, 9.250% due
2/15/16...................................... $ 1,269,950
700,000 U.S. Treasury Bond, 8.125% due
5/15/21...................................... 813,281
3,000,000 U.S. Treasury Bond, 6.875% due
8/15/25...................................... 3,058,440
10,000,000 U.S. Treasury Strip, zero coupon due
2/15/15................................ 2,940,700
2,955,466 FHLMC, 6.000% due
3/1/26....................................................
2,749,500
988,365 FHLMC, 8.000% due
5/1/26....................................................
1,008,131
2,019,999 FNMA, 7.000% due
6/1/24.....................................................
1,977,075
2,964,852 FNMA, 7.500% due
11/1/26@...................................................
2,964,850
392,192 GNMA, 8.500% due
3/15/18....................................................
406,530
595,113 GNMA, 8.500% due
5/15/18....................................................
616,871
251,104 GNMA, 8.500% due
6/15/18....................................................
260,285
177,531 GNMA, 8.500% due
7/15/18....................................................
184,022
1,974,160 GNMA, 7.000% due
6/15/24....................................................
1,931,578
3,000,000 Tennessee Valley Authority Debenture, 5.980%
due 4/1/36..................... 3,041,250
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $23,037,806).......... 23,222,463
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 10.2%
2,626,000 Citibank, 6.900% due 1/2/97; Proceeds at
maturity -- $2,627,007;
(Fully collateralized by U.S. Treasury Notes,
5.750% due 12/31/98;
Market value -- $2,686,638) (Cost --
$2,626,000)............................ 2,626,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$25,663,806*)............................ $25,848,463
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
@ Date shown represents the last in range of maturity dates
of mortgage
certificates owned.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
COMMON STOCKS -- 83.7%
- ------------------------------------------------------------
- ---------------------------------------------
BASIC MATERIALS -- 3.8%
2,000 Air Products & Chemicals,
Inc..................................................... $
138,250
5,000 Engelhard
Corp........................................................
............ 95,625
4,000 Praxair,
Inc.........................................................
............. 184,500
- ------------------------------------------------------------
- ---------------------------------------------
418,375
- ------------------------------------------------------------
- ---------------------------------------------
CAPITAL GOODS -- 2.9%
1,500 AMP,
Inc.........................................................
................. 57,562
2,000 Pitney Bowes,
Inc.........................................................
........ 109,000
2,800 York International,
Inc.........................................................
.. 156,450
- ------------------------------------------------------------
- ---------------------------------------------
323,012
- ------------------------------------------------------------
- ---------------------------------------------
COMMUNICATION -- 1.1%
800 Bell Atlantic
Corp........................................................
........ 51,800
2,300 MCI Communications
Corp........................................................
... 75,181
- ------------------------------------------------------------
- ---------------------------------------------
126,981
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER CYCLICALS -- 11.6%
2,900 Fleetwood Enterprises,
Inc........................................................
79,750
2,900 Home Depot,
Inc.........................................................
.......... 145,363
3,500 Kaufman & Broad Home
Corp........................................................
. 45,063
1,864 Lucas Variety
PLC+........................................................
........ 70,832
3,000 May Department
Stores......................................................
....... 140,250
2,000 Nine West Group,
Inc.+.......................................................
..... 92,750
6,000 Olsten
Corp........................................................
............... 90,750
4,000 Pep Boys -- Manny, Moe &
Jack.....................................................
123,000
4,000 Toys "R" Us,
Inc.+.......................................................
......... 120,000
1,900 Tribune
Co..........................................................
.............. 149,862
3,500 Wal-Mart Stores,
Inc.........................................................
..... 80,062
3,000 Xerox
Corp........................................................
................ 157,875
- ------------------------------------------------------------
- ---------------------------------------------
1,295,557
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER STAPLES -- 10.5%
2,000 Coca-Cola
Co..........................................................
............ 105,250
2,000 Gillette
Co..........................................................
............. 155,500
3,000 Kroger
Co.+........................................................
............... 139,500
2,000 McDonald's
Corp........................................................
........... 90,500
5,000 Newell
Co..........................................................
............... 157,500
4,800 PepsiCo,
Inc.........................................................
............. 141,000
2,800 Sysco
Corp........................................................
................ 91,350
1,000 Unilever
N.V.........................................................
............. 175,250
1,600 Walt Disney
Co..........................................................
.......... 111,400
- ------------------------------------------------------------
- ---------------------------------------------
1,167,250
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 1.6%
2,800 Anadarko Petroleum
Corp........................................................
... 181,300
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
FINANCE -- 17.8%
1,600 Aetna
Inc.........................................................
................ $ 128,000
3,500 American Express
Co..........................................................
..... 197,750
1,250 American International Group
Inc..................................................
135,313
3,000 Associates 1st Capital
Corp.......................................................
132,375
2,700 Bank of Boston
Corp........................................................
....... 173,475
3,000 Barnett Banks,
Inc.........................................................
....... 123,375
1,800
Citicorp....................................................
...................... 185,400
1,200 Federal Home Loan Mortgage
Corp...................................................
132,150
3,000 H. F. Ahmanson &
Co..........................................................
..... 97,500
2,500 Lincoln National
Corp........................................................
..... 131,250
2,200 NationsBank
Corp........................................................
.......... 215,050
3,400 State Street Boston
Corp........................................................
.. 219,300
1,500 Transamerica
Corp........................................................
......... 118,500
- ------------------------------------------------------------
- ---------------------------------------------
1,989,438
- ------------------------------------------------------------
- ---------------------------------------------
HEALTH CARE -- 10.3%
2,200 Amgen
Inc.+.......................................................
................ 119,625
3,750 Columbia/HCA Healthcare
Corp......................................................
152,813
3,300 DENTSPLY International,
Inc.......................................................
156,750
3,600 Johnson &
Johnson.....................................................
............ 179,100
2,300 Merck & Co.,
Inc.........................................................
......... 182,275
1,200 Pfizer,
Inc.........................................................
.............. 99,450
1,200 Schering-Plough
Corp........................................................
...... 77,700
6,200 Stryker
Corp........................................................
.............. 185,225
- ------------------------------------------------------------
- ---------------------------------------------
1,152,938
- ------------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY -- 20.5%
4,500 Belden,
Inc.........................................................
.............. 166,500
4,400 Cabletron Systems,
Inc.+.......................................................
... 146,300
2,000 Compaq Computer
Corp.+......................................................
...... 148,500
3,000 Computer Associates
International...............................................
.. 149,250
3,000 DSC Communications,
Inc.+.......................................................
.. 53,625
2,500 Electronic Data Systems
Corp......................................................
108,125
7,000 EMC
Corp.+......................................................
.................. 231,875
2,000 Intel
Corp........................................................
................ 261,875
700 International Business Machines
Corp..............................................
105,700
3,600 Lucent Technologies
Corp........................................................
.. 166,500
2,000 Madge Networks
N.V.+.......................................................
....... 19,750
3,300 Marshall
Industries+.................................................
............. 101,062
2,800 Microsoft
Corp.+......................................................
............ 231,350
3,500 Oracle
Corp.+......................................................
............... 146,125
2,500 Perkin-Elmer
Corp........................................................
......... 147,187
4,000 Sun Microsystems
Inc.+.......................................................
..... 102,750
- ------------------------------------------------------------
- ---------------------------------------------
2,286,474
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SOCIAL AWARENESS STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
TRANSPORTATION -- 2.0%
4,500 Mesaba Holdings,
Inc.+.......................................................
..... $ 66,938
1,400 Norfolk Southern Corp.
...........................................................
122,500
1,300 Southwest
Airlines....................................................
............ 28,763
- ------------------------------------------------------------
- ---------------------------------------------
218,201
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 1.6%
4,000 Enron
Corp........................................................
................ 172,500
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$6,883,357)..........................................
9,332,026
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
REPURCHASE AGREEMENT -- 16.3%
$1,822,000 CS First Boston, 6.48% due 1/2/97; Proceeds at
maturity -- $1,822,658; $ 1,822,000
(Fully collateralized by U.S. Treasury Notes,
7.25% due 2/15/98;
Market value -- $1,861,755) (Cost --
$1,822,000)............................
- ------------------------------------------------------------
- ---------------------------------------------
$11,154,026
TOTAL INVESTMENTS -- 100% (Cost --
$8,705,357*).............................
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
COMMON STOCKS -- 82.9%
- ------------------------------------------------------------
- ---------------------------------------------
ELECTRIC - UTILITY -- 65.5%
15,000 Allegheny Power System,
Inc.................................................... $
455,625
11,000 American Electric Power
Co.....................................................
452,375
7,500 Baltimore Gas & Electric
Co....................................................
200,625
15,000 Carolina Power &
Light.......................................................
.. 547,500
9,000 Central & Southwest Corp.
.....................................................
230,625
15,000 CINergy
Corp........................................................
........... 500,625
5,000 CIPSCO, Inc.
............................................................
...... 180,625
15,000 CMS Energy
Corp........................................................
........ 504,375
10,000 Dominion Resources, Inc.
......................................................
385,000
10,000 DPL
Inc.........................................................
............... 245,000
12,750 DQE
Inc.........................................................
............... 369,750
20,000 Edison
International...............................................
............ 397,500
15,000 Entergy Corp.
............................................................
..... 416,250
10,000 Florida Progress
Corp........................................................
.. 322,500
12,000 FPL Group
Inc.........................................................
......... 552,000
12,000 GPU
Inc.........................................................
............... 403,500
11,000 Houston
Industries..................................................
........... 248,875
12,000 Illinova Corp.
............................................................
.... 330,000
15,000 Long Island
Lighting....................................................
....... 331,875
10,000 NIPSCO Industries,
Inc.........................................................
396,250
18,000 PacifiCorp.
............................................................
....... 369,000
15,000 Pinnacle West
Capital.....................................................
..... 476,250
7,500 Public Service Co. of
Colorado.................................................
291,563
15,000 Public Service Co. of New
Mexico...............................................
294,375
15,000 SCANA
Corp........................................................
............. 401,250
15,000 Sierra Pacific
Resources...................................................
.... 431,250
12,500 Southern
Co..........................................................
.......... 282,813
15,000 Texas Utilities Co.
...........................................................
611,250
10,000 Unicom
Corp........................................................
............ 271,250
12,000 UtiliCorp. United,
Inc.........................................................
324,000
13,000 Wisconsin Energy
Corp........................................................
.. 349,375
- ------------------------------------------------------------
- ---------------------------------------------
11,573,251
- ------------------------------------------------------------
- ---------------------------------------------
NATURAL GAS -- 11.0%
10,000 Coastal Corp.
............................................................
..... 488,750
10,000 Enron Corp.
............................................................
....... 431,250
5,000 Equitable Resources Inc.
......................................................
148,750
10,000 Pacific
Enterprises.................................................
........... 303,750
15,000 Southwest Gas Corp.
...........................................................
288,750
7,500 Williams
Cos.........................................................
.......... 281,250
- ------------------------------------------------------------
- ---------------------------------------------
1,942,500
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<pg$pcn>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
UTILITIES PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
TELEPHONE -- 6.4%
15,000 Frontier
Corp........................................................
.......... $ 339,375
7,500 GTE
Corp........................................................
............... 341,250
2,000 MCI
Communications..............................................
............... 65,375
10,000 Teleport
Communications+.............................................
.......... 305,000
5,000 US West Media
Group+......................................................
..... 92,500
- ------------------------------------------------------------
- ---------------------------------------------
1,143,500
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$12,839,147)......................................
14,659,251
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C>
CORPORATE BONDS -- 3.6%
- ------------------------------------------------------------
- ---------------------------------------------
TELEPHONE -- 1.3%
$ 230,000 MCI Communication Corp., 7.75% due
3/23/25................................... 232,875
- ------------------------------------------------------------
- ---------------------------------------------
UTILITY - ELECTRIC -- 2.3%
200,000 Arizona Public Service Co., 7.25% due
8/1/23................................. 188,750
200,000 Philadelphia Electric, 8.75% due
4/1/22...................................... 212,250
- ------------------------------------------------------------
- ---------------------------------------------
401,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CORPORATE BONDS (Cost --
$605,853)..................................... 633,875
- ------------------------------------------------------------
- ---------------------------------------------
U.S. TREASURY OBLIGATIONS -- 3.0%
500,000 U.S. Treasury Notes, 7.75% due 11/30/99 (Cost
- -- $499,802)................... 522,605
- ------------------------------------------------------------
- ---------------------------------------------
SUB-TOTAL INVESTMENTS (Cost --
$13,944,802).................................. 15,815,731
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 10.5%
1,859,000 CS First Boston Corp., 6.50% due 1/2/97;
Proceeds at maturity -- $1,859,671;
(Fully collateralized by U.S. Treasury Note,
7.25% due 2/15/98; Market
value -- $1,898,260) (Cost --
$1,859,000)....................................
1,859,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$15,803,802*)............................. $17,674,731
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
46
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
ASSETS:
Investments -- Cost....................................
$23,037,806 $ 6,883,357 $13,944,802
Repurchase agreements -- Cost..........................
2,626,000 1,822,000 1,859,000
- ------------------------------------------------------------
- ------------------------------------------------
Investments, at value..................................
$23,222,463 $ 9,332,026 $15,815,731
Repurchase agreements, at value........................
2,626,000 1,822,000 1,859,000
Cash...................................................
268 697 519,418
Receivable from affiliate..............................
- -- 25,093 --
Dividends and interest receivable......................
239,298 8,769 60,046
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL ASSETS...........................................
26,088,029 11,188,585 18,254,195
- ------------------------------------------------------------
- ------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased......................
35,299 30,508 13,724
Investment advisory fees payable.......................
9,932 -- 9,697
Payable for securities purchased.......................
- -- 77,340 --
Accrued expenses.......................................
34,264 40,742 16,548
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL LIABILITIES......................................
79,495 148,590 39,969
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET ASSETS.........................................
$26,008,534 $11,039,995 $18,214,226
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS:
Paid-in capital........................................
$26,527,392 $ 8,594,239 $16,338,333
Undistributed (overdistributed) net investment
income..............................................
(2,726) -- 4,964
Accumulated net realized loss on security
transactions........................................
(700,789) (2,913) --
Net unrealized appreciation of investments.............
184,657 2,448,669 1,870,929
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET ASSETS.........................................
$26,008,534 $11,039,995 $18,214,226
- ------------------------------------------------------------
- ------------------------------------------------
SHARES OUTSTANDING.......................................
2,393,878 700,357 1,490,143
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, PER SHARE...............................
$10.86 $15.76 $12.22
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
INVESTMENT INCOME:
Interest...................................................
$ 1,705,367 $ 42,150 $ 209,151
Dividends..................................................
- -- 107,312 647,584
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL INVESTMENT
INCOME.................................... 1,705,367
149,462 856,735
- ------------------------------------------------------------
- -----------------------------------------------
EXPENSES:
Investment advisory fees (Note
2).......................... 86,625 58,250
113,601
Administration fees (Note
2)............................... 24,429
23,155 23,970
Audit and
legal............................................
24,309 24,075 18,415
Shareholder
communications.................................
11,714 15,063 11,714
Custody....................................................
8,711 18,907 7,335
Trustees'
fees.............................................
6,544 6,544 6,544
Shareholder and system servicing
fees...................... 1,000 1,000
1,000
Registration
fees..........................................
212 212 212
Other......................................................
1,436 1,500 2,998
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL
EXPENSES.............................................
164,980 148,706 185,789
Less: Expense reimbursement (Note
2)....................... -- (36,367)
- --
- ------------------------------------------------------------
- -----------------------------------------------
NET
EXPENSES...............................................
164,980 112,339 185,789
- ------------------------------------------------------------
- -----------------------------------------------
NET INVESTMENT
INCOME........................................
1,540,387 37,123 670,946
- ------------------------------------------------------------
- -----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain (Loss) From Security Transactions (excluding
short-term securities):
Proceeds from
sales..................................... 125,294,879
2,106,414 6,065,073
Cost of securities
sold................................. 125,999,485
1,705,595 5,235,457
- ------------------------------------------------------------
- -----------------------------------------------
NET REALIZED GAIN
(LOSS)................................... (704,606)
400,819 829,616
- ------------------------------------------------------------
- -----------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of
year....................................... 797,061
1,289,613 2,093,137
End of
year.............................................
184,657 2,448,669 1,870,929
- ------------------------------------------------------------
- -----------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION......... (612,404) 1,159,056
(222,208)
- ------------------------------------------------------------
- -----------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS............................... (1,317,010)
1,559,875 607,408
- ------------------------------------------------------------
- -----------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS....................... $ 223,377
$1,596,998 $1,278,354
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
OPERATIONS:
Net investment
income...................................... $ 1,540,387
$ 37,123 $ 670,946
Net realized gain
(loss)................................... (704,606)
400,819 829,616
Increase (decrease) in net unrealized
appreciation......... (612,404) 1,159,056
(222,208)
- ------------------------------------------------------------
- -----------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS..................... 223,377
1,596,998 1,278,354
- ------------------------------------------------------------
- -----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment
income...................................... (3,539,054)
(233,199) (1,107,181)
Net realized
gains.........................................
(423,418) (525,148) (974,527)
- ------------------------------------------------------------
- -----------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................
(3,962,472) (758,347) (2,081,708)
- ------------------------------------------------------------
- -----------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of
shares........................... 6,750,676
4,848,116 7,458,285
Net asset value of shares issued for reinvestment of
dividends...............................................
3,962,472 758,347 2,081,708
Cost of shares
reacquired.................................. (9,157,807)
(2,459,930) (5,862,088)
- ------------------------------------------------------------
- -----------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........ 1,555,341 3,146,533
3,677,905
- ------------------------------------------------------------
- -----------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS............................ (2,183,754)
3,985,184 2,874,551
NET ASSETS:
Beginning of
year.......................................... 28,192,288
7,054,811 15,339,675
- ------------------------------------------------------------
- -----------------------------------------------
END OF
YEAR*...............................................
$26,008,534 $11,039,995 $18,214,226
- ------------------------------------------------------------
- -----------------------------------------------
* Includes undistributed (overdistributed) net investment
income
of:.................................................
$(2,726) -- $4,964
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<pg$pcn>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. SOCIAL
GOVERNMENT AWARENESS
SECURITIES STOCK UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
OPERATIONS:
Net investment
income....................................... $ 1,520,848
$ 55,079 $ 441,157
Net realized
gain...........................................
1,110,792 265,239 144,953
Increase in net unrealized
appreciation..................... 3,171,708
1,316,045 2,170,686
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS...................... 5,803,348
1,636,363 2,756,796
- ------------------------------------------------------------
- ------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment
income....................................... (1,404,917)
(51,494) (150,491)
Net realized
gains.......................................... -
- - (68,327) --
- ------------------------------------------------------------
- ------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS... (1,404,917) (119,821)
(150,491)
- ------------------------------------------------------------
- ------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of
shares............................ 5,439,282
2,552,645 9,178,587
Net asset value of shares issued for reinvestment of
dividends................................................
1,404,917 119,821 150,491
Cost of shares
reacquired................................... (7,572,507)
(1,013,468) (2,352,367)
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS.............................................
(728,308) 1,658,998 6,976,711
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET
ASSETS........................................ 3,670,123
3,175,540 9,583,016
NET ASSETS:
Beginning of
year...........................................
24,522,165 3,879,271 5,756,659
- ------------------------------------------------------------
- ------------------------------------------------
END OF
YEAR*................................................
$28,192,288 $7,054,811 $15,339,675
- ------------------------------------------------------------
- ------------------------------------------------
* Includes undistributed net investment income
of:............ $1,520,848 $55,079
$441,157
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The U.S. Government Securities, Social Awareness Stock
and Utilities
Portfolios (collectively, "Portfolio(s)") are separate
investment portfolios of
The Travelers Series Trust ("Trust"). The Trust is a
Massachusetts business
trust registered under the Investment Company Act of 1940, as
amended, as a
diversified, open-end management investment company and
consists of these
portfolios and ten other separate investment portfolios:
Travelers Quality Bond,
Lazard International Stock, MFS Emerging Growth, Federated
High Yield, Federated
Stock, Large Cap, Equity Income, Zero Coupon Bond Fund
Portfolio Series 1998,
Zero Coupon Bond Fund Portfolio Series 2000 and Zero Coupon
Bond Fund Portfolio
Series 2005 Portfolios. Shares of the Trust are offered only
to insurance
company separate accounts that fund certain variable annuity
and variable life
insurance contracts. The financial statements and financial
highlights for the
other portfolios are presented in separate annual reports.
The significant accounting policies consistently
followed by the Portfolios
are: (a) security transactions are accounted for on trade
date; (b) securities
traded on national securities markets are valued at the
closing prices on such
markets; securities for which no sales prices were reported
and U.S. Government
and Agency obligations are valued at the mean between the
last reported bid and
ask prices or on the basis of quotations received from
reputable brokers or
other recognized sources; (c) securities maturing within 60
days are valued at
cost plus accreted discount and, or minus amortized premium,
which approximates
market value; (d) securities that have a maturity of 60 days
or more are valued
at prices based on market quotations for securities of
similar type, yield and
maturity; (e) interest income, adjusted for amortization of
premium and
accretion of discount, is recorded on the accrual basis and
dividend income is
recorded on the ex-dividend date; (f) gains or losses on the
sale of securities
are calculated by using the specific identification method;
(g) dividends and
distributions to shareholders are recorded on the ex-
dividend date; (h) the
Portfolios intend to comply with the requirements of the
Internal Revenue Code
of 1986, as amended, pertaining to regulated investment
companies and to make
distributions of taxable income sufficient to relieve it
from substantially all
Federal income and excise taxes; (i) the character of income
and gains to be
distributed are determined in accordance with income tax
regulations which may
differ from generally accepted accounting principles. At
December 31, 1996,
reclassifications were made to the Portfolio capital
accounts to reflect
permanent book/tax differences and income and gains
available for distribution
under income tax regulations. Accordingly, a portion of
overdistributed net
investment income and accumulated net realized loss
amounting to $6,915 and
$9,045, respectively, were reclassified to paid-in capital
for Social Awareness
Stock Portfolio. Net investment income, net realized gains
and net assets for
each Portfolio were not affected by these changes; and (j)
estimates and
assumptions are required to be made regarding assets,
liabilities and changes in
net assets resulting from operations when financial
statements are prepared.
Changes in the economic environment, financial markets and
any other parameters
used in determining these estimates could cause actual
results to differ.
In addition, for the year ended December 31, 1996,
distributions from
realized gains include both net realized short-term and long-
term capital gains.
Previous to 1996 net realized short-term capital gains were
included in
distributions from net investment income.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER
TRANSACTIONS
Travelers Asset Management International Corporation
("TAMIC"), an indirect
wholly owned subsidiary of Travelers Group Inc., acts as
investment manager and
advisor to the U.S. Government Securities Portfolio
("USGS"). USGS pays TAMIC an
investment management and advisory fee calculated at the
annual rate of 0.3233%
of its average daily net assets. This fee is calculated
daily and paid monthly.
Greenwich Street Advisors ("GSA"), a division of Smith
Barney Mutual Funds
Management Inc. ("SBMFM") which is a subsidiary of Smith
Barney Holdings Inc.
("SBH") and an indirect wholly owned subsidiary of Travelers
Group Inc., acts as
investment manager and advisor to the Social Awareness Stock
("SAS") and
Utilities ("Utilities") Portfolios. SAS pays GSA an
investment management and
advisory fee calculated at an annual rate of : 0.65% on the
first $50 million,
0.55% on the next $50 million, 0.45% on the next $100
million and 0.40% on
amounts over $200 million of the average daily net assets.
Utilities pays GSA an
investment management and advisory fees calculated at an
annual rate of 0.65% of
the average daily net assets. These fees are calculated
daily and paid monthly.
For the year ended December 31, 1996, GSA waived $11,274 of
investment advisory
fee and has agreed to reimburse expenses in the amount of
$25,093 for SAS.
51
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Travelers Insurance Company ("Travelers Insurance")
acts as administrator
to the Portfolios. The Portfolios pay Travelers Insurance an
administration fee
calculated at an annual rate of 0.06% of the average daily
net assets. Travelers
Insurance has entered into a sub-administrative services
agreement with SBMFM.
Travelers Insurance pays SBMFM, as sub-administrator, a fee
calculated at an
annual rate of 0.06% of the average daily net assets of each
Portfolio. This fee
is calculated daily and paid monthly.
One Trustee and all officers of the Trust are employees
of Travelers Group
Inc., or its subsidiaries.
3. INVESTMENTS
During the year ended December 31, 1996, the aggregate
cost of purchases
and proceeds from sales of investments (including
maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
USGS SAS UTILITIES
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
Purchases...................................................
.... $123,349,711 $3,047,308 $8,414,809
- ------------------------------------------------------------
- -----------------------------------------------
Sales.......................................................
.... 125,294,879 2,106,414 6,065,073
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
At December 31, 1996, aggregate gross unrealized
appreciation and
depreciation of investments were as follows:
<TABLE>
<CAPTION>
USGS SAS UTILITIES
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C>
Gross unrealized
appreciation*...................................... $239,436
$2,624,768 $2,025,482
Gross unrealized
depreciation*......................................
(54,779) (176,099) (154,553)
- ------------------------------------------------------------
- -----------------------------------------------
Net unrealized
appreciation*........................................
$184,657 $2,448,669 $1,870,929
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
* Substantially the same for Federal income tax purposes.
4. REPURCHASE AGREEMENTS
The Portfolios purchase (and their custodian takes
possession of) U.S.
Government securities from banks and securities dealers
subject to agreements to
resell the securities to the sellers at a future date
(generally, the next
business day) at an agreed-upon higher repurchase price. The
Portfolios require
continual maintenance of the market value of the collateral
in amounts at least
equal to 102% of the repurchase price.
5. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures
contracts are
recognized as assets. The initial margin is segregated by
the custodian and is
noted in the schedule of investments. During the period the
futures contract is
open, changes in the value of the contract are recognized as
unrealized gains or
losses by "marking-to-market" on a daily basis to reflect
the market value of
the contract at the end of each day's trading. Variation
margin payments are
made or received and recognized as assets due from or
liabilities due to broker,
depending upon whether unrealized gains or losses are
incurred. When the
contract is closed, the Portfolios record a realized gain or
loss equal to the
difference between the proceeds from (or cost of) the
closing transactions and
the Portfolio's basis in the contract. The Portfolios bear
the market risk that
arises from changes in the value of the financial
instruments and securities
indices (futures contracts) and the credit risk should a
counterparty fail to
perform under such contracts.
At December 31, 1996, the Portfolios had no open
futures contracts.
52
<pg$pcn>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. OPTIONS CONTRACTS
Premiums paid when put or call options are purchased by
the Portfolios,
represent investments, which are "marked-to-market" daily.
When a purchased
option expires, the Portfolios will realize a loss in the
amount of the premium
paid. When the Portfolios enter into closing sales
transactions, the Portfolios
will realize a gain or loss depending on whether the
proceeds from the closing
sales transactions are greater or less than the premium paid
for the option.
When the Portfolios exercise a put option, they will realize
a gain or loss from
the sale of the underlying security and the proceeds from
such sale will be
decreased by the premium originally paid. When the
Portfolios exercise a call
option, the cost of the security which the Portfolios
purchase upon exercise
will be increased by the premium originally paid.
As of December 31, 1996, the Portfolios had no open
purchased call or put
options contracts.
7. CAPITAL LOSS CARRYFORWARD
At December 31, 1996, U.S. Government Securities
Portfolio had, for Federal
income tax purposes, approximately $715,000 of capital loss
carryforwards
available to offset future capital gains through 2004. To
the extent that these
carryforward losses are used to offset capital gains, it is
probable that the
gains so offset will not be distributed.
8. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an
unlimited number of
shares of beneficial interest without par value.
Transactions in shares of each
Portfolio were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Shares
sold....................................................
606,114 484,178
Shares issued on
reinvestment..................................
355,511 138,279
Shares
redeemed................................................
(834,803) (672,686)
- ------------------------------------------------------------
- --------------------------------------------
Net Increase
(Decrease)........................................
126,822 (50,229)
- ------------------------------------------------------------
- --------------------------------------------
SOCIAL AWARENESS STOCK PORTFOLIO
Shares
sold....................................................
323,694 205,312
Shares issued on
reinvestment..................................
51,251 10,913
Shares
redeemed................................................
(167,210) (74,604)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
207,735 141,621
- ------------------------------------------------------------
- --------------------------------------------
UTILITIES PORTFOLIO
Shares
sold....................................................
590,496 822,640
Shares issued on
reinvestment..................................
169,391 14,594
Shares
redeemed................................................
(463,451) (209,288)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
296,436 627,946
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
53
<pg$pcn>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO
1996 1995 1994 1993 1992(1)
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.....................
$12.43 $10.58 $11.63 $10.79 $10.00
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................................
0.68 0.65 0.60 0.57 0.53
Net realized and unrealized gain (loss)..............
(0.52) 1.80 (1.23) 0.44 0.26
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations....................
0.16 2.45 (0.63) 1.01 0.79
- ------------------------------------------------------------
- ------------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment income................................
(1.55) (0.60) (0.39) (0.17) --
Net realized gains...................................
(0.18) -- (0.03) -- --
- ------------------------------------------------------------
- ------------------------------------------------
Total Distributions....................................
(1.73) (0.60) (0.42) (0.17) --
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, END OF YEAR...........................
$10.86 $12.43 $10.58 $11.63 $10.79
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN...........................................
1.46% 24.42% (5.64)% 9.48% 7.90%++
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S)........................
$26,009 $28,192 $24,522 $25,520 $9,017
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3).........................................
0.62% 0.56% 0.71% 0.58% 0.38%+
Net investment income................................
5.68 5.80 5.56 5.04 4.72+
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE................................
501% 214% 16% 51% 25%
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SOCIAL AWARENESS STOCK PORTFOLIO
1996 1995 1994 1993 1992(4)
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.....................
$14.32 $11.05 $11.64 $10.95 $10.00
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (5)............................
0.31 0.12 0.16 0.17 0.16
Net realized and unrealized gain (loss)..............
2.42 3.47 (0.45) 0.65 0.79
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations....................
2.73 3.59 (0.29) 0.82 0.95
- ------------------------------------------------------------
- ------------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment income................................
(0.43) (0.14) (0.24) (0.13) --
Net realized gains...................................
(0.86) (0.18) (0.06) -- --
- ------------------------------------------------------------
- ------------------------------------------------
Total Distributions....................................
(1.29) (0.32) (0.30) (0.13) --
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, END OF YEAR...........................
$15.76 $14.32 $11.05 $11.64 $10.95
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN...........................................
19.98% 33.37% (2.69)% 7.55% 9.50%++
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S)........................
$11,040 $7,055 $3,879 $3,361 $1,394
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (5)(6)......................................
1.25% 1.25% 1.25% 1.05% 0.71%+
Net investment income................................
0.43 0.99 1.43 1.50 2.22+
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE................................
26% 73% 137% 60% 56%
- ------------------------------------------------------------
- ------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS(7)............................
$0.06 -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
(1) For the period from January 24, 1992 (commencement of
operations) to
December 31, 1992.
(2) For the year ended December 31, 1996, distributions from
realized gains
include both net realized short-term and long-term
capital gains. Previous
to 1996 net realized short-term capital gains were
included in distributions
from net investment income.
(3) The expense ratios for the year ended December 31, 1993
and the period ended
December 31, 1992 reflect expense reimbursement by The
Travelers in
connection with voluntary expense limitations. Without
the expense
reimbursement, the expense ratios would have been 0.77%
and 0.72%
(annualized), respectively.
(4) For the period from May 1, 1992 (inception date) to
December 31, 1992.
(5) For the year ended December 31, 1996, The Travelers
reimbursed the Portfolio
for $25,093 in expenses. If such fees were not waived
and expenses not
reimbursed, the per share decrease of net investment
income would have been
$0.06 and the expense ratio would have been 1.69%.
(6) The expense ratios for the years ended December 31,
1995, 1994, 1993 and the
period ended December 31, 1992 reflect expense
reimbursement by The
Travelers in connection with voluntary expense
limitations. Without the
expense reimbursement, the expense ratios would have
been 1.75%, 3.34%,
3.73% and 2.19% (annualized), respectively.
(7) For the fiscal years beginning after 1995, the SEC
instituted new guidelines
requiring the disclosure of average commissions per
share on Funds which
held more than 10% of their assets in commissionable
equity securities.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
54
<pg$pcn>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
UTILITIES PORTFOLIO
1996 1995 1994(1)
- ------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR....................................... $12.85
$10.17 $10.00
- ------------------------------------------------------------
- --------------------------------------------
INCOME FROM OPERATIONS:
Net investment
income..................................................
0.47 0.48 0.35
Net realized and unrealized gain
(loss)................................ 0.47 2.44
(0.18)
- ------------------------------------------------------------
- --------------------------------------------
Total Income From
Operations.............................................
0.94 2.92 0.17
- ------------------------------------------------------------
- --------------------------------------------
LESS DISTRIBUTIONS FROM (2):
Net investment
income..................................................
(0.84) (0.24) --
Net realized
gains.....................................................
(0.73) -- --
- ------------------------------------------------------------
- --------------------------------------------
Total
Distributions...............................................
....... (1.57) (0.24) --
- ------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE, END OF
YEAR............................................. $12.22
$12.85 $10.17
- ------------------------------------------------------------
- --------------------------------------------
TOTAL
RETURN......................................................
....... 7.47% 29.29% 1.70%++
- ------------------------------------------------------------
- --------------------------------------------
NET ASSETS, END OF YEAR
(000'S).......................................... $18,214
$15,340 $5,757
- ------------------------------------------------------------
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses
(3).........................................................
.. 1.07% 1.25% 1.25%+
Net investment
income..................................................
3.88 4.29 3.86+
- ------------------------------------------------------------
- --------------------------------------------
PORTFOLIO TURNOVER
RATE..................................................
39% 25% 32%
- ------------------------------------------------------------
- --------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON EQUITY TRANSACTIONS
(4)............ $0.06 -- --
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
(1) For the period from February 4, 1994 (commencement of
operations) to
December 31, 1994.
(2) For the year ended December 31, 1996, distributions from
realized gains
include both net realized short-term and long-term
capital gains. Previous
to 1996 net realized short-term capital gains were
included in distributions
from net investment income.
(3) The ratios of expenses to average net assets for the
year ended December 31,
1995 and the period ended December 31, 1994 reflect
expense reimbursements
by The Travelers in connection with voluntary expense
limitations. Without
the expense reimbursements, the ratios of expenses to
average net assets
would have been 1.27% and 3.49% (annualized),
respectively.
(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.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized
- ------------------------------------------------------------
- --------------------
TAX INFORMATION (UNAUDITED)
The amount of long-term capital gains paid for the
fiscal year ended
December 31, 1996, are $479,773 for the Social Awareness
Stock Portfolio and
$638,099 for Utilities Portfolio.
55
<pg$pcn>
- ------------------------------------------------------------
- --------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Travelers Series Trust:
We have audited the accompanying statements of assets and
liabilities of the
U.S. Government Securities Portfolio, Social Awareness Stock
Portfolio and the
Utilities Portfolio of The Travelers Series Trust, including
the schedules of
investments as of December 31, 1996, and the related
statements of operations
for the year then ended, the statements of changes in net
assets for the periods
ended December 31, 1996 and 1995, and the financial
highlights for each of the
applicable periods ended December 31, 1996, 1995, 1994, 1993
and 1992. These
financial statements and financial highlights are the
responsibility of
management. Our responsibility is to express an opinion on
these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian and
also with brokers
for the Social Awareness Stock Portfolio. An audit also
includes assessing the
accounting principles used and significant estimates made by
management, as well
as evaluating the overall financial statement presentation.
We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of the
U.S. Government Securities Portfolio, Social Awareness Stock
Portfolio, and
Utilities Portfolio of The Travelers Series Trust as of
December 31, 1996, the
results of their operations for the year then ended, the
changes in their net
assets for the periods ended December 31, 1996 and 1995, and
the financial
highlights for each of the applicable periods ended December
31, 1996, 1995,
1994, 1993 and 1992, in conformity with generally accepted
accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 24, 1997
56
<pg$pcn>
Investment Advisers
--------------------
CAPITAL APPRECIATION FUND
THE TRAVELERS INVESTMENT MANAGEMENT
COMPANY
Hartford, Connecticut
MANAGED ASSETS TRUST, HIGH YIELD BOND TRUST, CASH
INCOME TRUST AND
THE TRAVELERS SERIES TRUST: U.S. GOVERNMENT
SECURITIES PORTFOLIO
TRAVELERS ASSET MANAGEMENT INTERNATIONAL
CORPORATION
Hartford, Connecticut
THE TRAVELERS SERIES TRUST: SOCIAL AWARENESS STOCK
PORTFOLIO AND UTILITIES
PORTFOLIO
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
New York, New York
Independent Accountants
-------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
----------
PNC BANK, N.A.
This report is prepared for the general information of
contract owners and is
not an offer of shares of Managed Assets Trust, High Yield
Bond Trust, Capital
Appreciation Fund, Cash Income Trust, The Travelers Series
Trust: U.S.
Government Securities Portfolio, Social Awareness Stock
Portfolio or Utilities
Portfolio. It should not be used in connection with any
offer except in
conjunction with the Prospectuses for the Variable Annuity
and Variable
Universal Life Insurance products offered by The Travelers
Insurance Company and
the Prospectuses for the underlying funds, which
collectively contain all
pertinent information, including the applicable sales
commissions.
VG-181 (Annual)(12-96) Printed in U.S.A.
