LEUTHOLD
ASSET ALLOCATION FUND
ANNUAL REPORT
September 30, 1996
DEAR FELLOW SHAREHOLDERS:
We appreciate having you as investors in the Leuthold Asset Allocation Fund.
While the Fund commenced operations on November 20, 1995, my associates and I
have a long documented history as investment managers with an asset allocation
focus. I started in this business back in 1961, initially as a stockbroker and
subsequently as a research analyst, an institutional investment strategist, a
hedge fund manager and a mutual fund portfolio manager for a Texas based firm.
Over the past 35 years, I've survived awful bear markets and benefited from
raging bull markets. While I am the most grizzled veteran in our organization,
the other key people on the Leuthold investment team average over 15 years of
investment experience.
Our prime concern is always investment risk. Our investment objective,
personally and with your investment, is to produce gains and KEEP them. Although
many have become accustomed to the current huge bull market, stocks can be a
terrifying roller coaster ride. Very long-term, stocks may be the best
performing asset class, but only if the investor has the extraordinary courage
and conviction to stay the course. From personal experience, we know that most
investors don't. Fear takes most investors out of stocks at the wrong time,
typically when the market is close to its low. For these investors, the courage
to reinvest only develops after a major new advance is well underway.
To date in 1996, the investment performance of the Leuthold Asset Allocation
Fund has lagged behind the stock market averages (as have other asset allocation
funds and balanced funds). Why? Because our Fund is "underinvested" in the
stock market. Currently, only about 25% of Fund assets are invested in common
stocks, with 50% in government bonds and 25% in cash equivalents. Why? Because
at current levels the stock market is a high risk investment.
- - NEVER BEFORE HAS THE STOCK MARKET GONE UP SO FAR FOR SO LONG.
- - "NEW STOCK MARKET VALUATION ERAS," BE THEY JAPAN IN THE LATE 1980S OR THE
U.S. IN THE LATE 1920S (OR TODAY), HAVE NEVER BEEN PERMANENT!
- - A DECLINE TO TYPICAL STOCK MARKET VALUATION LEVELS (1926 TO DATE) WOULD MEAN A
FALL OF 35% OR MORE FROM TODAY'S LEVELS.
Two old cliches about sum it up: Trees don't grow to the sky and the stock
market is NOT a one way street. I suspect our shareholders recognize these
realities and that is one reason you have invested in our Fund. But, many of
today's inexperienced new equity mutual fund investors are not so savvy. About
70% of all mutual fund investments have been made since 1991 and about 80% of
the money in equity mutual funds has yet to experience even a 10% decline in the
broad market averages.
Still another tired old cliche is, "The bigger they are, the harder they
fall." This cliche applies to bull markets as well as those trees that don't
grow to the sky. And, this has been the biggest bull market ever.
Since 1982, the S&P 500 has produced an annual compound return of 16.3% (848%
gain), an all time bull market record. In the last five year period of Main
Street market enthusiasm and huge equity mutual fund inflows, the S&P 500 has
produced a 15% annual compound return (101% gain). But, it is really quite
amazing how quickly these fat historical returns can shrink with a single bad
stock market year.
WHEN THE "NEW VALUATION ERA" ENDS...
- - A year from now, if the S&P 500 falls 25%, the trailing five year annualized
total return fades from today's 15% per year to 6.8% per year, and a 35% decline
(back to normal valuation levels) trims the five year annualized total return to
3.7%.
...TRAILING TEN YEAR TOTAL RETURNS (NOW 14.8% PER YEAR), WOULD SHRINK TO 7.9%
WITH A 25% DECLINE. ASSUMING A 35% DECLINE, THE TEN YEAR TOTAL RETURN
SHRIVELS TO 6.3% PER YEAR FROM THE CURRENT 14.8%.
- - Now let us suppose an investor, starting in January 1992, has diligently
invested $2,500 each quarter in a 401(k) plan and total returns have matched S&P
500 performance (better than most equity funds). By the end of September 1996,
the $47,500 invested has a portfolio value of $73,000, a nice gain of $25,500,
or about 54% over cost. The retirement nest egg is growing well.
...BUT, IF THE S&P 500 SLIDES 25% OVER THE NEXT YEAR, AS QUARTERLY INVESTMENT
CONTINUES, THE $57,500 TOTAL THEN CONTRIBUTED WOULD HAVE A PORTFOLIO VALUE OF
$64,250 (ABOUT 12% OVER COST), A MEAGER AND DEMORALIZING REWARD FOR SIX YEARS
OF DILIGENT RETIREMENT SAVING.
...AND WHAT'S MORE, A 35% DECLINE (STOCK MARKET RETREAT TO ITS MEDIAN
VALUATION LEVELS) WOULD SHRINK PORTFOLIO VALUE TO $56,200, ABOUT $1,300 LESS
THAN THE AMOUNT CONTRIBUTED OVER THE LAST SIX YEARS.
IS A BEAR MARKET STARTING NOW?
So, is the stock market about to begin a corrective descent of 25% or more in
the next twelve months? Currently, I have no strong conviction as to just when,
but I am certain it WILL happen. Even now there is some evidence that the stock
market is very close to topping out. Earnings momentum is slowing and the
current economic expansion will be six years old in February 1997 (the third
longest of this century). A recession, or fear of a recession, may be the
trigger that will shift stock market psychology to the negative side. Or perhaps
the confidence shaking catalyst could be some left field political or financial
development that only a fortune teller might anticipate.
WE ARE NOT CONGENITAL STOCK MARKET BEARS
Back in the late 1970s and early 1980s, Barron's and Louis Rukeyser labeled me
"Super Bull" during the same period Main Street was bailing out of mutual
funds and taking the pledge to stay out of the stock market forever. But this
was also a period when stocks sold at book value, yielded 6%, and carried
price/earnings multiples of eight and ten...an extraordinarily cheap stock
market. Today, stocks are priced at three or four times book value, yield 2%,
with price earnings multiples of 20 times earnings...And, Main Street ADORES the
stock market.
Obviously, selling low and buying high is not the way to invest in the stock
market, although this is what emotions often lead investors to do. As asset
allocators, we employ our disciplines to do it the right way. We view
significant market declines as great potential investment opportunities, as do
other investment professionals. But, what good are these opportunities to
professionals if they have no cash reserves available to take advantage of them?
Being able to take advantage of investment opportunities is why asset allocation
shifts can be so rewarding. Your Fund currently maintains 25% cash reserves, as
well as 50% in fixed income securities that can be shifted into stocks when
valuations do become more reasonable.
In ending this first letter to shareholders, I want to emphasize that we view
investment success as making money for you and NOT giving it back. If the stock
market is down 30% and we are down "only 15%," we have NOT done our job.
Relative to other mutual funds and the market itself, this might be considered
good in some quarters, BUT NOT HERE.
In the late stages of a bull market, there will be times when our performance
will not match the stock market averages or that of the typical equity fund. We
pull in our equity horns when perceived valuation risk is high, which is why we
currently favor bonds and equitized real estate (REITs). In these areas, the
calculated risk and reward trade off is much more favorable than with the
overinflated stock market. The fancy name for this is asset allocation, but in
reality it is just common sense.
Unfortunately, common sense is increasingly uncommon in today's investment
business. Shorter term quarterly and annual results have become paramount in the
intensifying mutual fund performance derby. In the current stock market
environment, superior performance is almost always achieved by escalating
investor risk.
At any rate, please call us if you have any questions. Also, considering current
stock market conditions, you might do well to seriously consider moving more of
your assets into our Fund.
Sincerely,
Steve Leuthold
Chairman
POST SCRIPT: This is important and I failed to mention it. Both my family and I
are among the largest shareholders in the Leuthold Asset
Allocation Fund. Like you, we want to make money...and keep it. We
don't like investment roller coasters!
11/20/95 3/31/96 9/30/96
-------- ------- -------
S&P 500 $10,000 $10,989 $11,836
Leuthold $10,000 $10,141 $10,543
LB Govt./CORP. $10,000 $10,072 $10,322
For the period ended September 30, 1996
Cumulative Since Commencement
of Operations
-------------------------------
Leuthold Asset
Allocation Fund 5.4%
S&P 500 18.4%
LB Govt./Corp. 3.2%
The Standard & Poor's 500 Index (S&P 500) is a capital-weighted index,
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The Lehman Brothers
Government/Corporate Index (LB Govt./Corp.) is a weighted index comprised of
publicly-traded intermediate and long-term government and corporate debt with an
average maturity of 11 years. This chart assumes an initial gross investment of
$10,000 made on 11/20/95 (commencement of operations). Returns shown include the
reinvestment of all dividends. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than the original cost.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
LEUTHOLD FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities of Leuthold
Funds, Inc. (a Maryland corporation, which includes the Leuthold Asset
Allocation Fund), including the schedule of investments, as of September 30,
1996, and the related statements of operations and changes in net assets from
November 20, 1995 (commencement of operations) through September 30, 1996, and
the financial highlights for the period from November 20, 1995 (commencement of
operations) through September 30, 1996. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 September 30, 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
audit provides 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
Leuthold Funds, Inc. as of September 30, 1996, and the results of its operations
and changes in its net assets for the period from November 20, 1995
(commencement of operations) through September 30, 1996 and its financial
highlights for the period from November 20, 1995 (commencement of operations)
through September 30, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
October 15, 1996.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
ASSETS:
Investments, at value
(cost $31,195,588) $31,422,671
Interest receivable 273,096
Dividends receivable 31,244
Organizational expenses, net
of accumulated amortization 35,571
Receivable from adviser 4,087
Other assets 19,875
-----------
Total Assets 31,786,544
-----------
LIABILITIES:
Dividend payable 10,229
Accrued expenses and
other liabilities 35,814
-----------
Total Liabilities 46,043
-----------
NET ASSETS $31,740,501
===========
NET ASSETS CONSIST OF:
Capital stock $30,594,407
Accumulated undistributed
net investment income 81,802
Accumulated undistributed net
realized gain on investments 837,209
Net unrealized appreciation
on investments 227,083
-----------
Total Net Assets $31,740,501
===========
Shares outstanding
(250,000,000 shares of
$.0001 par value authorized) 3,118,196
Net Asset Value, Redemption Price
and Offering Price Per Share $10.18
======
See notes to the financial statements.
STATEMENT OF OPERATIONS
NOVEMBER 20, 1995<F1> THROUGH SEPTEMBER 30, 1996
INVESTMENT INCOME:
Dividend income $ 214,084
Interest income 1,275,576
-----------
Total investment income 1,489,660
-----------
EXPENSES:
Investment advisory fee 236,333
Administration fee 24,689
Shareholder servicing and
accounting costs 44,130
Custody fees 14,151
Federal and state registration 27,651
Professional fees 24,234
Amortization of
organizational expenses 7,448
Reports to shareholders 13,169
Directors' fees and expenses 5,405
Other 8,754
-----------
Total expenses before reimbursement 405,964
Less: Reimbursement from Adviser (77,769)
-----------
Net expenses 328,195
-----------
NET INVESTMENT INCOME 1,161,465
-----------
REALIZED AND UNREALIZED
GAINON INVESTMENTS:
Net realized gain on investments 172,238
Change in unrealized
appreciation on investments 227,083
-----------
Net realized and unrealized
gain on investments 399,321
-----------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $1,560,786
==========
<F1> Commencement of operations.
See notes to the financial statements.
STATEMENT OF CHANGES IN NET ASSETS
NOVEMBER 20, 1995<F2> THROUGH SEPTEMBER 30, 1996
OPERATIONS:
Net investment income $ 1,161,465
Net realized gain on investments 172,238
Change in unrealized appreciation
on investments 227,083
-----------
Net increase in net assets
from operations 1,560,786
-----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME (1,084,877)
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 11,738,348
Proceeds from collective and
common trust funds conversions 29,115,588
Shares issued to holders in
reinvestment of dividends 1,037,552
Cost of shares redeemed (10,626,896)
-----------
Net increase in net assets from
capital share transactions 31,264,592
-----------
TOTAL INCREASE IN NET ASSETS 31,740,501
-----------
NET ASSETS:
Beginning of period 0
-----------
End of period (including
undistributed net investment
income of $81,802) $31,740,501
===========
<F2> Commencement of operations.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS
NOV. 20, 1995<F3>
THROUGH
PER SHARE DATA: SEPT. 30, 1996
----------------
Net asset value, beginning of period $10.00
------
Income from investment operations:
Net investment income 0.38
Net realized and unrealized
gain on investments 0.16
------
Total from investment operations 0.54
------
Less distributions from
net investment income (0.36)
------
Net asset value, end of period $10.18
======
Total return <F4> 5.43%
Supplemental data and ratios:
Net assets, end of period $31,740,501
Ratio of expenses to average
net assets <F5> 1.25%
Ratio of net investment income
to average net assets <F5> 4.44%
Portfolio turnover rate 103.30%
Average commission rate paid $0.0600
<F3> Commencement of operations.
<F4> Not annualized for the period November 20, 1995 through September 30, 1996.
<F5> Annualized for the period November 20, 1995 through September 30, 1996.
Without expense reimbursements of $77,769 for the period November 20, 1995
through September 30, 1996, the ratio of expenses to average net assets
would have been 1.55% and the ratio of net investment income to average net
assets would have been 4.14%.
See notes to the financial statements.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
NUMBER MARKET
OF SHARES VALUE
--------- -----
COMMON STOCKS - 25.5%
BUILDING MATERIALS - 0.5%
3,500 Martin Marietta Materials $ 74,812
1,300 Medusa Corp. 39,975
600 Texas Industries, Inc. 35,925
-----------
150,712
-----------
CHEMICALS SPECIALTY - 0.5%
3,300 Calgon Carbon Corp. 34,237
3,000 Cytec Industries, Inc.<F6> 116,625
-----------
150,862
-----------
CONSUMER/COMMERCIAL SERVICES - 1.6%
3,300 B.I., Inc.<F6> 27,225
6,100 Corrections Corp. of America 190,625
5,300 Safety-Kleen Corp. 87,450
4,250 U.S. Filter Corp.<F6> 145,031
2,400 Wackenhut Corrections Corp.<F6> 53,400
-----------
503,731
-----------
DIVERSIFIED TECHNOLOGY - 0.8%
5,700 Checkpoint Systems, Inc. <F6> 151,050
2,400 Dionex Corp.<F6> 91,200
-----------
242,250
-----------
ENERGY - EQUIPMENT & SERVICES - 1.3%
3,400 Baker-Hughes, Inc. 103,275
3,500 Dresser Industries, Inc. 104,125
7,100 Global Marine, Inc.<F6> 111,825
1,900 Halliburton Co. 98,087
-----------
417,312
-----------
NUMBER MARKET
OF SHARES VALUE
--------- -----
ENERGY - OIL & GAS - 1.9%
1,800 Burlington Resources, Inc. $ 79,875
2,200 Louisiana Land & Exploration 115,775
1,400 Mobil Corp. 162,050
1,900 Noble Affiliates, Inc. 80,275
5,100 Oryx Energy Co.<F6> 90,525
2,700 Ultramar Corp. 81,675
-----------
610,175
-----------
LIFE INSURANCE - 1.3%
4,100 Equitable Companies, Inc. 105,575
1,800 Jefferson-Pilot Corp. 93,150
2,600 Provident Companies, Inc. 97,500
3,200 SunAmerica, Inc. 110,400
-----------
406,625
-----------
MACHINERY - DIVERSIFIED - 1.2%
1,200 Caterpillar, Inc. 90,450
1,900 Deere & Co. 79,800
3,100 Harnischfeger Industries, Inc. 117,025
2,000 Ingersoll-Rand Co. 95,000
-----------
382,275
-----------
REAL ESTATE INVESTMENT TRUSTS - 12.1%
9,500 BREProperties Class A 190,000
6,800 Bradley Real Estate, Inc. 110,500
5,900 CBL & Associates Properties, Inc. 135,700
8,500 Chelsea GCARealty, Inc. 260,312
7,400 Colonial Properties Trust 194,250
9,600 Cousins Properties, Inc. 211,200
6,400 Crescent Real Estate Equities, Inc. 263,200
3,200 Developers Diversified Realty Corporation 102,800
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
NUMBER MARKET
OF SHARES VALUE
--------- -----
REAL ESTATE INVESTMENT
TRUSTS - 12.1% (CONTINUED)
8,200 Equity Residential Properties Trust $ 293,150
9,000 Excel Realty Trust, Inc. 194,625
6,100 First Industrial Realty Trust 157,837
3,700 Health Care Property Investors, Inc. 120,713
3,450 Kimco Realty Corporation 102,638
13,100 Koger Equity, Inc. <F6> 204,688
10,200 Nationwide Health Properties, Inc. 224,400
5,000 Post Properties, Inc. 183,125
6,700 RFS Hotel Investors, Inc. 104,688
6,100 Reckson Associates Realty Corp. 226,463
7,300 Regency Realty Corp. 163,338
6,100 Summit Properties, Inc. 120,475
9,400 Sun Communities, Inc. 267,900
-----------
3,832,002
-----------
RESTAURANTS - 0.2%
5,200 Foodmaker, Inc. <F6> 52,000
-----------
RETAIL - SPECIALTY - 0.9%
4,600 Good Guys, Inc. <F6> 36,800
8,400 Price/Costco, Inc. <F6> 172,200
2,300 Ross Stores, Inc. 82,800
-----------
291,800
-----------
RETAIL STORES - DRUG Store - 0.1%
900 Longs Drug Stores, Inc. 39,150
-----------
NUMBER MARKET
OF SHARES VALUE
--------- -----
RETAIL STORES - FOOD CHAINS - 0.5%
1,200 Safeway, Inc. <F6> $ 51,150
2,500 Vons Companies, Inc. <F6> 107,187
-----------
158,337
-----------
UTILITIES - 1.3%
4,900 CalEnergy, Inc. <F6> 156,187
4,200 Coastal Corp. 173,250
2,500 KNEnergy, Inc. 88,125
-----------
417,562
-----------
WASTE Management - 1.3%
9,600 U.S.A. Waste Services, Inc. <F6> 302,400
3,800 WMXTechnologies, Inc. 124,925
-----------
427,325
-----------
Total common stocks
(cost $7,438,431) 8,082,118
-----------
CONTRACTS (100 shares PER CONTRACT)
PUT OPTIONS PURCHASED - 0.7%
S&P 500:
108 Expiration December 1996, Exercise Price $675 137,700
57 Expiration December 1996, Exercise Price $680 85,500
-----------
Total put options purchased (cost $310,274) 223,200
-----------
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----
FIXED INCOME SECURITIES - 49.4%
U.S. TREASURY OBLIGATIONS - 49.4%
$21,565,000 U.S. Treasury Strip, due 2/15/2018 <F7> $ 4,668,171
-----------
U.S. Treasury Bonds:
7,730,000 7.50%, 11/15/2016 8,092,344
2,615,000 8.125%, 8/15/2019 2,922,263
-----------
11,014,607
-----------
Total fixed income securities
(cost $16,012,308) 15,682,778
-----------
SHORT-TERM INVESTMENTS - 23.4%
VARIABLE RATE DEMAND NOTES - 9.2%
1,366,438 Johnson Controls 1,366,438
1,568,137 Wisconsin Electric Power Co. 1,568,137
-----------
2,934,575
-----------
SCHEDULE OF INVESTMENTS
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----
COMMERCIAL PAPER - 14.2%
$1,500,000 American Express Corp. $ 1,500,000
1,500,000 CIT Group Corp. 1,500,000
1,500,000 GECapital Corp. 1,500,000
-----------
4,500,000
-----------
Total short-term investments
(cost $7,434,575) 7,434,575
-----------
Total investments - 99.0%
(cost $31,195,588) 31,422,671
-----------
Other assets in excess
of liabilities - 1.0% 317,830
-----------
TOTAL NET ASSETS - 100.0% $31,740,501
===========
<F6> Non-income producing security.
<F7> Principal only.
See notes to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Leuthold Funds, Inc. (the "Company") was incorporated on August 30, 1995,
as a Maryland Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940. The Company
currently consists of one series, Leuthold Asset Allocation Fund (the
"Fund"). The investment objective of the Fund is to seek high total return
consistent with reasonable risk over the long term. The Fund commenced
operations on November 20, 1995.
The costs incurred in connection with the organization, initial registration
and public offering of shares, aggregating $43,019, have been paid by the
Fund. These costs are being amortized over the period of benefit, but not to
exceed sixty months from the Fund's commencement of operations.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) Investment Valuation - Common stocks that are listed on a securities
exchange are valued at the last quoted sales price on the day the valuation
is made. Price information on listed stocks is taken from the exchange where
the security is primarily traded. Options and securities which are listed on
an exchange but which are not traded on the valuation date are valued at the
most recent bid prices. Unlisted securities for which market quotations are
readily available are valued at the latest quoted bid price. Debt securities
are valued at the latest bid prices furnished by independent pricing
services. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the
Directors. Short-term instruments (those with remaining maturities of 60
days or less) are valued at amortized cost, which approximates market.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund intends to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and intends to distribute
investment company net taxable income and net capital gains to shareholders.
c) Distributions to Shareholders - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains, if
any, will be declared at least annually.
d) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
e) Purchased Option Accounting - Option contracts purchased are included in the
Statement of Assets and Liabilities as an asset and are valued at the last
bid price reported on the date of valuation. When option contracts expire or
are closed, realized gains or losses are recognized without regard to any
unrealized gains or losses on the underlying securities. Option contracts
are held by the Fund for trading and hedging purposes.
f) Foreign Currency Translations - Values of investments denominated in foreign
currencies are converted into U.S. dollars using the spot market rate of
exchange at the time of valuation. Purchases and sales of investments and
dividend and interest income are translated into U.S. dollars using the spot
market rate of exchange prevailing on the respective dates of such
transactions. The gain or loss resulting from changes in foreign exchange
rates is included with net realized and unrealized gain or loss from
investments, as appropriate.
g) Other - Investment and shareholder transactions are recorded no later than
the first business day after the trade date. The Fund determines the gain or
loss realized from the investment transactions by comparing the original
cost of the security lot sold with the net sales proceeds. Dividend income
is recognized on the ex-dividend date or as soon as information is available
to the Fund, and interest income is recognized on an accrual basis.
Discounts and premiums on bonds are amortized over the life of the
respective bond. Generally accepted accounting principles require that
permanent financial reporting and tax differences be reclassified to capital
stock.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the period November 20, 1995 through
September 30, 1996, were as follows:
Shares sold 1,167,497
Shares issued as a result of collective
and common trust fund conversions 2,905,504
Shares issued to holders
in reinvestment of dividends 102,850
Shares redeemed (1,057,655)
---------
Net increase 3,118,196
=========
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Fund for the period November 20, 1995 through September
30, 1996, were $42,744,741 and $19,203,046, respectively.
At September 30, 1996, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation $1,109,608
(Depreciation) (643,830)
--------
Net appreciation on investments $ 465,778
========
At September 30, 1996, the cost of investments for federal income tax
purposes was $30,956,893.
At the close of business on January 19, 1996, the unit holders of the Piper
Trust Common Leuthold Flexible Fund transferred their assets to the Fund. As
a result of the tax-free transfer, the Fund acquired $860,971 of unrealized
appreciation for tax purposes. As of September 30, 1996, the Fund realized
$664,971 of the appreciation. At September 30, 1996, the realized
appreciation is included in accumulated undistributed net realized gain on
investments on the Statement of Assets and Liabilities.
4. INVESTMENT ADVISORY AND
OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Leuthold &
Anderson, Inc. Pursuant to its advisory agreement with the Fund, the
Investment Adviser is entitled to receive a fee, calculated daily and
payable monthly, at the annual rate of 0.90% as applied to the Fund's daily
net assets.
The Investment Adviser has voluntarily agreed to reimburse the Fund to the
extent necessary to ensure that total operating expenses (exclusive of
interest, taxes, brokerage commissions and other costs incurred in
connection with the purchase or sale of portfolio securities, and
extraordinary items) do not exceed the annual rate of 1.25% of the net
assets of the Fund, computed on a daily basis.
Firstar Trust Company, a subsidiary of Firstar Corporation, a publicly held
bank holding company, serves as custodian, transfer agent, administrator and
accounting services agent for the Fund.
For the period ended September 30, 1996, the Fund paid Weeden & Co., L.P.,
an affiliate of the Adviser $27,821 of brokerage commissions.
5. DISTRIBUTIONS
Nineteen percent of the dividends paid qualifies for the dividend received
deduction available to corporate shareholders.
LEUTHOLD
ASSET ALLOCATION FUND
INVESTMENT ADVISER:
Leuthold & Anderson, Inc., Minnesota
ADMINISTRATOR, TRANSFER AGENT,
DIVIDEND PAYING AGENT, SHAREHOLDER
SERVICING AGENT & CUSTODIAN:
Firstar Trust Company, Wisconsin
COUNSEL:
Foley & Lardner, Wisconsin
AUDITORS:
Arthur Andersen LLP, Wisconsin
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
[ARTICLE] 6
[CIK] 0001000351
[NAME] LEUTHOLD FUNDS, INC.
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1996
[PERIOD-START] NOV-20-1995
[PERIOD-END] SEP-30-1996
[INVESTMENTS-AT-COST] 31195588
[INVESTMENTS-AT-VALUE] 31422671
[RECEIVABLES] 308427
[ASSETS-OTHER] 55446
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 31786544
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 46043
[TOTAL-LIABILITIES] 46043
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 30594095
[SHARES-COMMON-STOCK] 3118196
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 81802
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 837209
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 227083
[NET-ASSETS] 31740501
[DIVIDEND-INCOME] 214084
[INTEREST-INCOME] 1275576
[OTHER-INCOME] 0
[EXPENSES-NET] 328195
[NET-INVESTMENT-INCOME] 1161465
[REALIZED-GAINS-CURRENT] 172238
[APPREC-INCREASE-CURRENT] 227083
[NET-CHANGE-FROM-OPS] 1560786
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1084877
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4073001
[NUMBER-OF-SHARES-REDEEMED] 1057655
[SHARES-REINVESTED] 102850
[NET-CHANGE-IN-ASSETS] 31740501
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 236333
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 405964
[AVERAGE-NET-ASSETS] 30327187
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] .38
[PER-SHARE-GAIN-APPREC] .16
[PER-SHARE-DIVIDEND] (.36)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.18
[EXPENSE-RATIO] 1.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>