TRAVELERS SERIES TRUST, N-30D, 1997-03-31

TRAVELERS SERIES TRUST
N-30D, 1997-03-31

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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

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

ECONOMIC REVIEW AND OUTLOOK

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

The policy makers at the Fed decided to hold interest rates steady at their
September meeting and interest rates declined through the autumn as economic
growth once again slowed. The financial markets also responded positively to
the Republicans' success in retaining control of Congress in the November
election. Going into December, the bond and stock markets reflected a "best of
all worlds" scenario of moderate economic growth with low inflation, low
unemployment and a
benign to positive political landscape. Interest rates started to move back up
again in December as some economic indicators strengthened, but ended the year
well below the levels seen in the second and third quarters.
We expect real economic growth to average around 2% in 1997. The consumer
sector, which makes up two-thirds of Gross Domestic Product ("GDP"), should
show modest growth. The factors that would otherwise contribute to strong
consumer spending -- low unemployment, high consumer confidence, and the
wealth effects from the strong stock market -- should be muted by high
consumer debt levels (particularly at lower income levels) and lack of pent-up
demand. The export sector should continue to grow 5% to 10% in 1997, helped by
the United States' strong competitive position and continued robust growth in
emerging markets. Growth should improve slightly in Europe and Japan, helped
by the recent strengthening of the dollar against those currencies. The
stronger dollar is likely to be a mixed blessing, by making the prices of
foreign imports more attractive and thereby helping to dampen inflation. The
capital goods sector has slowed in recent quarters, but is still expected to
grow faster than the overall U.S. economy. The government sector should
continue to be a drag on GDP growth.
Overall, we believe that the U.S. economy is likely to remain on a path of
moderate non-inflationary growth in 1997. However, because of the current low
level of unemployment, we also expect that the Fed will remain cautious and
biased towards a tighter monetary policy. Whether the Fed acts may depend in
part on market psychology. Upward shifts in long-term bond yields have served
to moderate economic growth in recent years and reduced the need for any major
changes in Fed policy.

FIXED INCOME COMMENTARY

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

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

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

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

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

EQUITY COMMENTARY

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

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

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

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

We are taking a more cautious position toward the U.S. stock market at this
point. Over the past year, the price-to-earnings ratio of the S&P 500 on 12-
month forward earnings has increased from 15 to 17 times earnings per share.
This level of valuation is consistent with earlier periods of moderate growth
and low inflation, but leaves no cushion for earnings or inflation
disappointments. After a prolonged period of underperformance, relative
valuations for small company stocks are becoming more attractive. However, we
believe that caution should still be exercised since the small capitalization
segment of the equity market has a relatively high exposure to cyclical
industries and would be vulnerable to any combination of higher interest rates
and slower profit growth.
2
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ANNUAL REPORT FOR THE TRAVELERS VARIABLE PRODUCTS FUNDS ----------------------
- ----------------------------------------------------------
MANAGED ASSETS TRUST
The first nine months of 1996 were almost as bad as 1994 for bonds in general.
U.S. Treasuries performed poorly but there were much fewer problems in other
types of bonds. Stocks performed well through May of 1996, but suffered a
slight correction in June and July. Large capitalization stocks rebounded
smartly from the summer correction and reached new highs by November. Small
capitalization stocks, which clearly were doing well in May, recovered much
more slowly and still had not reached new highs by the end of 1996.
The fourth quarter of 1996 was the best quarter of the year for both the stock
and bond markets. Bonds rallied as the U.S. economy slowed down and the
Republicans maintained control of the U.S. Congress. Stocks benefited from the
decline in interest rates as well as ongoing expectations for high corporate
earnings growth.
Managed Assets Trust's total return was 13.78% gross for 1996, 0.23% behind
the 60% S&P 500 and 40% Lehman Government/Corporate blended benchmark.
However, for the fourth quarter, Managed Assets Trust outperformed the blended
benchmark by 0.05% (6.29% versus 6.24%). Managed Assets Trust was helped by
its stock portion outperforming the S&P 500 three out of four quarters and the
biggest drag on its performance was its underweighting in stocks during the
first half of 1996.
Looking ahead at 1997, we expect interest rates to stay in the relatively
narrow trading range established in 1996. In our view, low unemployment is the
biggest risk of higher interest rates but a 7% yield has proven to be
sufficient in attracting more investors to bonds and has helped to cool
interest-sensitive sectors of the economy. In our opinion, the biggest risk
ahead for stocks is if interest rates go above 7%. While stock valuations are
high, corporate earnings growth is expected to be slightly faster in 1997. In
addition, we also expect the U.S. dollar to be strong in 1997 and that could
pose a risk to future earnings growth. We plan on increasing the duration of
the bond portion of Managed Assets Trust if rates get closer to their 1996
highs and reduce its duration if rates go down. Moreover, we continue to hold
convertible bonds to provide some defensive characteristics and in keeping
with our relatively neutral stance regarding stocks.
HIGH YIELD BOND TRUST
High Yield Bond Trust closed out the year successfully, ending with a
particularly strong fourth quarter performance. For the year ended December
31, 1996, the High Yield Bond Trust generated a total return of 16.05%,
exceeding both the First Boston High-Yield Index and the Bear Stearns High-
Yield Index, both of which had a total return of approximately 12.40% for the
same period.
Investor interest in high yield bonds remained strong for the first three
quarters of the year. As mutual fund inflows into high yield bond funds
continued at a brisk pace, we viewed the fixed-income market in general as
skittish. Lower interest rate expectations and investor uncertainty of lower-
quality bonds caused many investors to gravitate toward the higher-rated
issues. We remained especially cautious toward lower-quality issues and
telecommunications issues that we believed may have disappointing earnings
reports. Our cautious stance with respect to these sectors allowed us to avoid
the heavy losses incurred in the fourth quarter by many high-profile and high-
yield issues such as Marvel Entertainment, MobileMedia, and CAI Wireless.
Although we maintained a relatively high cash position of 23%, this position
proved to be prudent during this volatile period.

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

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

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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.

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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

<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>

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

<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>

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

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.

<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
- -------------------------------------------------------------------------------------------------------
-
14,325,1
12
- -------------------------------------------------------------------------------------------------------
- -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.

<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
- -------------------------------------------------------------------------------------------------------
-
8,489,9
39
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,349,6
41
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
15,371,6
14
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
11,147,8
25
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
5,758,4
99
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
9,843,7
45
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
13,489,7
26
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
3,484,0
32
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
8,449,0
38
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
10,912,9
36
- -------------------------------------------------------------------------------------------------------
-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
- -------------------------------------------------------------------------------------------------------
-
901,3
90
- -------------------------------------------------------------------------------------------------------

- -</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<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
- -------------------------------------------------------------------------------------------------------
-
2,953,9
19
- -------------------------------------------------------------------------------------------------------
-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
- -------------------------------------------------------------------------------------------------------
-
8,454,7
45
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
3,955,0
00
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
6,334,2
00
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
3,692,5
00
- -------------------------------------------------------------------------------------------------------
- -TRANSPORTATION -- 0.5%
929,255 Delta Airlines, Inc., 9.250% due 1/2/07....................................
960,376
- -------------------------------------------------------------------------------------------------------

- -</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<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
- -------------------------------------------------------------------------------------------------------
-
7,843,7
50
- -------------------------------------------------------------------------------------------------------
-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
- -------------------------------------------------------------------------------------------------------
-
1,100,7
75
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,356,8
75
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
5,992,3
32
- -------------------------------------------------------------------------------------------------------
- -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.

<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.

<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
- --------------------------------------------------------------------------------------------------------
-
995,0
00
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
1,725,0
00
- --------------------------------------------------------------------------------------------------------
- -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................................................................ ----------
- -----------------------------------------------------------------------------------------------
633,3
13
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
911,1
34
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
1,476,2
50
- --------------------------------------------------------------------------------------------------------
- -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.

<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
- --------------------------------------------------------------------------------------------------------
-
972,5
00
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
711,2
50
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
1,436,6
25
- --------------------------------------------------------------------------------------------------------
- -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.

<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
- --------------------------------------------------------------------------------------------------------
-
10,722,4
66
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
26,163,6
24
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
13,237,7
12
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
10,040,7
06
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
14,043,7
37
- --------------------------------------------------------------------------------------------------------

- -</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<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
- --------------------------------------------------------------------------------------------------------
-
24,500,0
81
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
19,124,7
42
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
9,255,9
40
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
11,243,1
02
- --------------------------------------------------------------------------------------------------------
- -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.

<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
- --------------------------------------------------------------------------------------------------------
-
11,607,5
06
- --------------------------------------------------------------------------------------------------------
- -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
- --------------------------------------------------------------------------------------------------------
-
9,520,7
41
- --------------------------------------------------------------------------------------------------------
-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.

<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.

<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.

<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.

<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.

<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.

<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.

<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>

<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

<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

<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

<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.

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

<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

<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

<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>

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

<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
- -------------------------------------------------------------------------------------------------------
-
418,3
75
- -------------------------------------------------------------------------------------------------------
- -CAPITAL GOODS -- 2.9%
1,500 AMP, Inc..........................................................................
57,562
2,000 Pitney Bowes, Inc.................................................................
109,000
2,800 York International, Inc...........................................................
156,450
- -------------------------------------------------------------------------------------------------------
-
323,0
12
- -------------------------------------------------------------------------------------------------------
- -COMMUNICATION -- 1.1%
800 Bell Atlantic Corp................................................................
51,800
2,300 MCI Communications Corp...........................................................
75,181
- -------------------------------------------------------------------------------------------------------
-
126,9
81
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,295,5
57
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,167,2
50
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,989,4
38
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,152,9
38
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
2,286,4
74
- -------------------------------------------------------------------------------------------------------
- -</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
- -------------------------------------------------------------------------------------------------------
-
218,2
01
- -------------------------------------------------------------------------------------------------------
- -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)............................ ------------
- --------------------------------------------------------------------------------------------
$11,154,0
26
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.

<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
- -------------------------------------------------------------------------------------------------------
-
11,573,2
51
- -------------------------------------------------------------------------------------------------------
- -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
- -------------------------------------------------------------------------------------------------------
-
1,942,5
00
- -------------------------------------------------------------------------------------------------------

- -</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<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
- -------------------------------------------------------------------------------------------------------
-
1,143,5
00
- -------------------------------------------------------------------------------------------------------
-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
- -------------------------------------------------------------------------------------------------------
-
401,0
00
- -------------------------------------------------------------------------------------------------------
-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.

<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.

<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.

<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.

<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.

<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