<PAGE>
Lincoln Life(TM)
Emancipator
Life
Semiannual
Report 1996
<PAGE>
Lincoln Life (TM)
August 1996
Dear Emancipator Life policyowner:
This booklet contains the latest semiannual report of the Emancipator Life
Account D, covering the six-month period ending June 30, 1996. The five
underlying variable funds are investment options available to you under your
variable universal life policy.
The following table shows the change in unit values of the subaccounts over
several time periods. All of these figures are slightly different from those
appearing later in this report, as they reflect the deduction of asset charges
associated with your policy.
<TABLE>
<CAPTION>
Percent change in unit values/1/
Periods ending 6/30/96
-------------------------------------------------------------------
5-year average
annual compound Since inception
Emancipator Life subaccounts 6 months 1 year rate of return 2/6/87
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bond Fund -2.84% 3.64% 7.95% 7.35%
- ----------------------------------------------------------------------------------------------------------
Growth and Income Fund 9.06 24.45 14.69 12.02
- ----------------------------------------------------------------------------------------------------------
Managed Fund 4.08 15.63 10.97 9.21
- ----------------------------------------------------------------------------------------------------------
Money Market Fund 2.20 4.71 3.52 5.08
- ----------------------------------------------------------------------------------------------------------
Special Opportunities Fund 6.69 17.56 15.77 12.30
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The next several pages contain performance and investment commentary from the
investment management firms. The portfolio managers continue to use their
expertise to obtain favorable relative returns in any given market condition.
More detailed information about the five underlying funds follows the
commentary.
We invite you to read the accompanying reports, and we look forward to helping
you meet your long-term financial goals. If we can be of further service,
please call one of our customer service representatives on our toll free
number--1-800-348-0851.
Sincerely,
/s/ Reed P. Miller
Reed P. Miller
Vice President
1 All results shown represent the net investment results of the funds (gross
investment results minus asset management charges and miscellaneous expenses)
minus the mortality and expense risk charges made by the Separate Account.
Where results shown include periods prior to the date the Separate Account
actually began investing in any fund, such results have been derived by reducing
the historic net investment results of the fund by the mortality and expense
risk charges that would have been applicable had the Separate Account been
investing in the fund during that period.
An investment in the Money Market Fund is neither insured nor guaranteed by the
U.S. Government and there is no assurance that the subaccount will maintain a
stable $1.00 share price.
This material must be preceded or accompanied by a prospectus for the Lincoln
National Life Variable Life Account D.
Read the prospectus carefully before you invest or send money.
<PAGE>
BOND FUND
MANAGED BY:
[LOGO OF LINCOLN]
The economic and interest rate outlooks changed dramatically in the last six
months. The year began with a continued outlook for weak growth and the
potential for the Federal Reserve System to further lower rates. That soon
changed to an outlook for moderate growth and a potential for the Federal
Reserve System to increase interest rates. The result was a 1% increase in
interest rates. Although the duration of the fund's bond holdings was shortened
from 109% to approximately 104% of the index duration by the end of June,
duration did cause the fund to under perform the index in the first half of
1996.
The trend toward a gradual reduction in the fund's exposure to the corporate
bond sector continued. The narrow spread of corporate bonds makes it difficult
to find bonds that add value in this sector.
Economic signals continue to be very mixed, but it appears the economy is
growing at a moderate pace with stable inflation pressures. This should be good
for the bond market in the long run. Given this outlook for the economy and the
increase in interest rates that has already taken place this year, the fund
continues to have a slightly longer duration than the index. This is under the
assumption that we are closer to the top of the range of interest rates than the
bottom.
Tim Policinski
GROWTH AND INCOME
MANAGED BY:
[LOGO OF VANTAGE]
This has proven to be a successful year for stock market investors so far. After
a 37.6% return for the S&P 500 in 1995, few could have reasonably expected the
same in 1996. Nevertheless, year-to-date returns for the S&P 500 are again above
historical averages, although not at 1995 levels.
Economic news influenced the markets as good news was bad for the bond market
and bad news was good. Signs of strength in the economy led investors to
anticipate that inflation might follow and the Federal Reserve might raise
short-term interest to combat rising prices. As a result, the bond market
dropped and interest rates rose. The yield on long-term government bonds rose
from 5.9% to over 7%.
The stock market charged forward despite higher interest rates as smaller stocks
outperformed larger stocks in the first half of 1996. The market was also fueled
by record-breaking flows into mutual funds. For the first six months of 1996,
almost as much flowed into equity mutual funds as did in all of 1995.
The market outlook for the rest of 1996 depends largely on corporate earnings.
If the economy continues to show signs of strength and corporate earnings
continue to grow, the market could continue its bull run. However, should the
Federal Reserve interpret economic growth as inflationary and, in turn, raise
interest rates, the market could respond negatively, ending the impressive bull
period we have enjoyed.
With the uncertainty of the equity market, investors have been rewarded for
remaining fully invested and maintaining a long-term perspective. The Growth &
Income Fund is designed to provide consistent equity exposure, remaining fully
invested to maximize longer-term returns.
T. Scott Wittman
3
<PAGE>
MANAGED FUND
MANAGED BY:
[LOGO OF LINCOLN INVESTMENT MANAGEMENT]
The biggest surprise for the domestic capital markets has been the continued
strong equity gains despite the significant increase in bond yields. The S&P 500
is up over 10% while smaller capitalized issues as represented by the Russell
2000 Index are also up over 10%. Unfortunately, the Lehman Brothers
Government/Corporate Bond Index was down well over 3% for much of the second
quarter. It recovered somewhat in June and closed down 1.9% for the first half
of 1996.
We entered 1996 with a somewhat bullish perspective on the fixed income market
as we anticipated a slowdown in economic activity together with benign
inflationary pressures. Our moderate inflation forecast has been on target, but
we were blindsided by the "apparent" strength in the economy. Nowhere was this
more evident than in the monthly non-agricultural employment statistics. On
March 8, for example, the market was prepared for an employment jump of 300,000
workers, but was decimated when the report showed an increase of 705,000. The
impact on the bond and stock markets was dramatic. Bonds suffered one of their
worst days in history, while the Dow Jones Industrial Average fell as much as
217 points before rebounding slightly to a loss of 171.
The monthly employment reports continued to wreak havoc in subsequent months.
June's employment report helped to push the 30-year Treasury above 7% and was
instrumental in the small-cap stock correction.
Going forward we think the inflationary threat is overblown. It is our view that
we should be entering a period where past interest rate increases will
ultimately slow the economy to a modest growth rate. Inflation should continue
to remain under control. In our fixed income portfolio the duration of our
holdings are slightly longer than our index (the Lehman Brothers
Government/Corporate Bond Index) and will adjust the portfolio if the yield
curve flattens. As for equities, although valuation is concern, we still see
some room for further gains.
JAY YENTIS
SPECIAL OPPORTUNITIES FUND
MANAGED BY:
[LOGO OF VANTAGE GLOBAL ADVISORS]
The stock market continued its remarkable bull rally into the first half of
1996. While stocks in general had a strong first half, all investors in the
market were not treated equally. For the first time in a number of years,
investors in aggressive equities have been treated to better performance than
more conservative investors. Small company growth funds outperformed large
company growth & income funds by over three percentage points.
The ride was wild for the small company investors! The Russell 2000, an Index
that is representative of small company equities, had a 20% range from trough
(Jan. 16) to peak (May 22). By midyear, it had settled back near the midpoint of
the range. Technology stocks led smaller stocks up and down, with a 25% range
from trough (Jan. 15) to peak (May 20). Thus, as technology went, so went small
companies.
While some analysts were forecasting a recession for 1996, economic news has
proven otherwise with low unemployment and higher wages. The economy may
continue to grow steadily unless the higher wages begin to drive prices upward.
In such a case, the Federal Reserve may raise interest rates to keep the economy
under control, which may slow earnings in the long term and tame the market over
the short term. Given
4
<PAGE>
the long bull market in stocks, a near-term correction would not be a surprise.
However, longer term, equities should continue to provide attractive returns for
investors.
The Special Opportunities Fund participates in some of the upside of smaller
companies, but controls the downside by holding a diversified portfolio of
medium-sized companies. The resulting portfolio has some of the stability of
larger companies, while avoiding some of the troughs of small companies.
T. SCOTT WITTMAN
5
<PAGE>
BOND FUND
STATEMENT OF NET ASSETS - UNAUDITED
June 30, 1996
INVESTMENTS:
<TABLE>
<CAPTION>
Par Market
LONG-TERM DEBT INVESTMENTS: amount value
----------- -----------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS: 34.2%
Federal Home Loan Mortgage Corp.
. 6.3%, 4/8/99 $ 5,250,000 $ 5,221,178
. 7.3%,12/15/12 2,984,588 2,927,284
. 3.5%, 12/15/21 2,000,000 1,531,880
. 6.4265%, 10/15/06 2,000,000 1,910,340
- --------------------------------------------------
FNMA
. 7.56% Principal Strip, 12/20/01 4,000,000 3,886,040
. 7.6%, 7/25/05 1,266,598 1,282,430
. 6.8%, 8/1/05 949,389 925,208
. 7.175%, 10/1/05 2,585,020 2,582,875
. 6.665%, 11/1/05 994,943 959,373
. 6.66%, 12/1/05 1,990,972 1,908,984
. 7.0%, 4/12/06 6,000,000 4,821,540
. 7.175%, 10/1/15 2,956,305 2,904,659
. 8.0%, 4/1/17 391,600 398,363
. 7.0%, 10/1/25 2,934,601 2,818,772
- --------------------------------------------------
GNMA
. 9.0%, 5/15/17 241,176 255,186
. 9.0%, 9/15/19 895,969 944,611
. 6.5%, 11/15/23 924,950 869,564
- --------------------------------------------------
Tennessee Valley Authority Generic *
. 0.0%, 11/1/00 9,500,000 7,150,935
- --------------------------------------------------
U.S. Treasury Bonds
. 12.0%, 8/15/13 500,000 705,625
- --------------------------------------------------
U.S. Treasury Notes
. 5.375%, 11/30/97 2,000,000 1,983,120
. 6.375%, 5/15/99 11,800,000 11,829,500
. 6.25%, 2/15/03 14,400,000 14,138,928
- --------------------------------------------------
U.S. Treasury Strips
. 0.0%, 11/15/04 500,000 318,735
. 0.0%, 11/15/09 21,000,000 8,239,560
. 0.0%, 11/15/18 35,300,000 7,236,853
- -------------------------------------------------- -----------
87,751,543
COLLATERALIZED MORTGAGE OBLIGATIONS: 0.7%
Mid State Trust III
. 9.625%, 4/1/22 295,498 300,285
- --------------------------------------------------
Prudential Home Mortgage
. 6.7%, 11/25/07 1,500,000 1,472,085
- -------------------------------------------------- -----------
1,772,370
AIR TRANSPORTATION: 2.7%
American Airlines Equipment Trust
. 10.18%, 1/2/13 1,500,000 1,789,200
- --------------------------------------------------
Delta Air Lines Inc.
. 8.25%, Med. Term Note, 12/27/07 1,500,000 1,610,385
- --------------------------------------------------
Federal Express Corp.
. 7.96%, 3/28/17 2,000,000 2,005,280
- --------------------------------------------------
United Airline Inc. Equipment Trust
. 9.35%, 4/7/16 1,500,000 1,618,080
- -------------------------------------------------- -----------
7,022,945
ALUMINUM: 0.3%
Alcan Aluminum Ltd. - Debentures
. 9.7%, 10/15/96 250,000 252,655
. 8.875%, 1/15/22 500,000 530,805
- -------------------------------------------------- -----------
783,460
BANKING AND INSURANCE: 8.2%
Ahmanson H F & Co.
. 8.25%, 10/1/02 $ 2,000,000 $ 2,104,460
- --------------------------------------------------
Banc One Corp.
. 9.875%, 3/1/09 500,000 597,510
- --------------------------------------------------
Barnett Banks Inc.
. 6.5%, 9/1/05 1,500,000 1,454,040
- --------------------------------------------------
First America Bank Corp.
. 7.75% Subordinated Note, 7/15/04 2,000,000 2,045,880
- --------------------------------------------------
First Bank System Inc.
. 6.875% Subordinated Note, 9/15/07 1,000,000 956,300
- --------------------------------------------------
First Tennessee National Corp.
. 6.75% Subordinated Note, 11/15/05 1,600,000 1,518,976
- --------------------------------------------------
First Union Corp.
. 8.0%, 8/15/09 2,000,000 2,063,340
- --------------------------------------------------
First USA Bank
. 5.75%, 1/15/99 2,000,000 1,950,700
- --------------------------------------------------
Fleet Financial Group
. 7.65%, 9/1/99 1,000,000 1,016,410
- --------------------------------------------------
Fleet/Norstar Financial Group Inc.
. 7.65%, 3/1/97 500,000 504,945
- --------------------------------------------------
Great Western Bank
. 10.25% Subordinated Notes, 6/15/00 500,000 537,595
- --------------------------------------------------
Harris Bankcorp Inc.
. 9.375% Subordinated Notes, 6/1/01 250,000 274,033
- --------------------------------------------------
National Westminster Bancorp
. 3.69%, 7/30/49 3,000,000 2,617,500
- --------------------------------------------------
National Westminster Bank plc
. 9.45% Debentures, 5/1/01 500,000 551,440
- --------------------------------------------------
Southtrust Bank Birmingham Alabama
. 7.69%, 5/15/25 2,750,000 2,855,050
- -------------------------------------------------- -----------
21,048,179
BROADCASTING: 0.2%
Viacom Inc.
. 8.75%, 5/15/01 500,000 506,250
- --------------------------------------------------
BUILDING MATERIALS: 0.4%
Georgia Pacific Corp.
. 10.1%, 6/15/02 1,000,000 1,132,470
- --------------------------------------------------
CONSUMER PRODUCTS AND SERVICES: 0.4%
Service Corp. International
. 7.0% Senior Note, 6/1/15 1,000,000 1,004,220
- --------------------------------------------------
ELECTRICAL AND ELECTRONICS: 0.6%
Litton Industries Inc.
. 6.98% Senior Debenture, 3/15/36 1,000,000 974,500
- --------------------------------------------------
Spiegel Charge Account Trust 2
. 6.95%, 12/17/01 500,000 504,130
- -------------------------------------------------- -----------
1,478,630
ENTERTAINMENT: 0.8%
Time Warner Inc.
. 8.88%, 10/1/12 500,000 516,370
. 9.125%, 1/15/13 1,500,000 1,567,230
- -------------------------------------------------- -----------
2,083,600
FINANCE: 5.7%
Aristar Finance
. 7.5% Senior Subordinated Note, 7/1/99 1,500,000 1,533,915
- --------------------------------------------------
Avco Financial Services Inc.
. 7.25%, 7/15/99 1,000,000 1,016,930
- --------------------------------------------------
Chrysler Financial Corp.
. 9.5%, 12/15/99 1,500,000 1,624,440
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
amount value
---------- -----------
<S> <C> <C>
Discover Credit Corp.
. 8.73% Med. Term Note, 8/15/96 $ 500,000 $ 501,930
- --------------------------------------------------
Dow Capital B V
. 9.0%, 5/15/10 3,000,000 3,344,700
- --------------------------------------------------
General Motors Acceptance Corp.
. 8.88%, 6/1/10 1,500,000 1,651,395
- --------------------------------------------------
Household Affinity Credit Card
. 6.05%, 5/15/01 1,000,000 976,650
- --------------------------------------------------
Household Finance Corp.
. 9.63% Senior Subordinated Note, 7/15/00 875,000 957,119
- --------------------------------------------------
International Lease Finance Co.
. 8.25%, 1/15/00 2,000,000 2,086,780
- --------------------------------------------------
Salomon Inc.
. 7.25%, 1/15/00 1,000,000 1,004,260
- -------------------------------------------------- ----------
14,698,119
FINANCIAL SERVICES: 2.1%
AT & T Capital Corp.
. 7.47%, 5/11/05 2,750,000 2,763,998
- --------------------------------------------------
Finova Capital Corp.
. 6.12% Med. Term Note, 5/28/02 1,000,000 951,410
- --------------------------------------------------
General Motors Acceptance Corp.
. 7.875% Med. Term Note, 3/7/01 1,500,000 1,553,355
- -------------------------------------------------- ---------
5,268,763
FOOD AND BEVERAGE: 0.7%
ConAgra Inc.
. 9.88%, 11/15/05 1,000,000 1,149,610
- --------------------------------------------------
Nabisco Inc.
. 7.55%, 6/15/15 750,000 719,085
- -------------------------------------------------- ---------
1,868,695
FOREIGN GOVERNMENT: 1.9%
Hydro-Quebec
. 7.2% Med. Term Note, 10/5/09 3,000,000 3,215,730
- --------------------------------------------------
Manitoba (Province of)
. 7.75%, 7/17/16 1,500,000 1,554,210
- -------------------------------------------------- ---------
4,769,940
MACHINERY AND ENGINEERING: 0.8%
Deere & Co.
. 8.27%, 8/8/95 2,000,000 2,163,820
- --------------------------------------------------
METALS AND MINING: 3.1%
Cyprus Amax Minerals Co.
. 7.375%, 5/15/07 2,500,000 2,446,550
- --------------------------------------------------
Inco Ltd.
. 9.6% Debenture, 6/15/22 1,300,000 1,400,321
- --------------------------------------------------
Newmont Gold Co.
. 8.91%, 1/5/09 750,000 797,205
- --------------------------------------------------
Noranda Inc.
. 8.13%, 6/15/04 2,000,000 2,088,220
- --------------------------------------------------
Placer Dome Inc.
. 7.37% Med. Term Note, 6/3/26 1,000,000 1,003,380
- --------------------------------------------------
Reynolds Metals Co.
. 9.0%, 8/15/03 250,000 272,708
- -------------------------------------------------- ---------
8,008,384
MISCELLANEOUS: 1.0%
Duquesne II Funding Corp.
. 8.7%, 6/1/16 2,474,000 2,532,337
- --------------------------------------------------
MOTOR VEHICLES AND EQUIPMENT: 0.3%
General Motors Corp.
. 8.17%, 1/2/00 862,153 878,706
- --------------------------------------------------
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 0.2%
Xerox Corp. - Euronote
. 8.375%, 9/25/96 $ 500,000 $ 501,085
- --------------------------------------------------
PAPER: 1.3%
Champion International Corp.
. 7.7%, 12/15/99 1,500,000 1,537,815
- --------------------------------------------------
James River Corp.
. 6.7%, 11/15/03 2,000,000 1,919,700
- -------------------------------------------------- ---------
3,457,515
PETROLEUM AND PETROLEUM RELATED: 2.1%
Arkla Inc.
. 11/15/19, 10.0% 1,000,000 1,089,670
- --------------------------------------------------
Atlantic Richfield Co.
. 10.25% Eurobond, 7/2/00 1,000,000 1,050,420
- --------------------------------------------------
Enron Corp.
. 9.5%, 6/15/01 1,000,000 1,100,840
- --------------------------------------------------
Noble Affiliates Inc.
. 7.25%, 10/15/23 600,000 541,068
- --------------------------------------------------
Petro Canada - Debentures
. 8.6%, 10/15/01 1,500,000 1,610,220
- -------------------------------------------------- ---------
5,392,218
PUBLIC UTILITIES: 12.3%
Central Maine Power Co.
. 6.5%, 7/22/97 1,500,000 1,494,780
- --------------------------------------------------
Cleveland Electric Illuminating Co.
. 8.26% Med. Term Note, 10/30/98 2,500,000 2,495,500
- --------------------------------------------------
Commonwealth Edison Co.
. 9.375%, 2/15/00 500,000 534,835
- --------------------------------------------------
Consumers Power Co.
. 8.75% 1st Mortgage, 2/15/98 1,000,000 1,027,400
- --------------------------------------------------
Consumers Power Co.
. 8.875% 1st Mortgage, 11/15/99 1,000,000 1,049,830
- --------------------------------------------------
Detroit Edison Co.
. 6.56%, 5/1/01 2,000,000 1,953,740
- --------------------------------------------------
Great Lakes Power Inc.
. 9.0%, 8/1/04 1,500,000 1,612,665
- --------------------------------------------------
Illinois Power Co.
. 5.85% 1st Mortgage Bonds, 10/1/96 625,000 625,000
- --------------------------------------------------
National Rural Utilities Cooperative Finance Corp.
. 7.2%, 10/1/15 1,000,000 955,400
- --------------------------------------------------
Nevada Power Co.
. 7.06%, 5/1/00 1,500,000 1,497,900
- --------------------------------------------------
New Jersey Bell Telephone
. 7.85%, 11/15/29 1,950,000 2,109,140
- --------------------------------------------------
Old Dominion Electric Co-op SE
. 8.76%, 12/1/22 1,600,000 1,728,768
- --------------------------------------------------
Pacificorp
. 9.15% Med. Term Note, 8/9/11 2,000,000 2,297,040
- --------------------------------------------------
Pennsylvania Power & Light
. 7.7%, 10/1/09 3,000,000 3,105,420
- --------------------------------------------------
PSI Energy Inc.
. 8.56% Med. Term Note, 12/27/11 2,000,000 2,142,700
- --------------------------------------------------
Public Service Co. of Colorado
. 6.375%, 11/1/05 1,500,000 1,393,035
- --------------------------------------------------
Texas Gas Transmission Corp.
. 8.63%, 4/4/04 1,000,000 1,077,290
- --------------------------------------------------
Utilicorp United Inc.
. 10.5%, 12/1/20 2,000,000 2,280,580
- --------------------------------------------------
Washington Water & Power Co.
. 8.01%, 12/17/01 2,000,000 2,087,660
- -------------------------------------------------- ----------
31,468,683
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
amount value
---------- -----------
<S> <C> <C>
RAILROADS: 0.7%
Burlington Northern Railroad
. 6.94%, 1/2/14 $ 500,000 $ 484,925
- --------------------------------------------------
Chicago & Northwestern Holdings Corp.
. 6.25%, 7/30/12 1,457,297 1,349,777
- -------------------------------------------------- ------------
1,834,702
RETAIL: 1.1%
Dayton Hudson Corp.
. 10.0% Debenture, 1/1/11 500,000 610,130
- --------------------------------------------------
Sears, Roebuck & Co.
. 9.05%, 2/6/12 2,000,000 2,264,100
- -------------------------------------------------- ------------
2,874,230
SAVINGS AND LOAN: 0.4%
First Security Corp. Bd
. 7.0%, 7/15/05 1,000,000 968,140
- --------------------------------------------------
SECURITIES DEALERS: 1.6%
Lehman Brothers Holding Co.
. 8.875% Senior Note, 3/1/02 1,000,000 1,071,170
- --------------------------------------------------
Smith Barney Holdings
. 7.88%, 10/1/99 3,000,000 3,096,720
- -------------------------------------------------- ------------
4,167,890
TELECOMMUNICATIONS: 5.1%
Bellsouth Telecommunications Corp. Euro
. 6.125%, 9/23/08 3,000,000 2,686,875
- --------------------------------------------------
Cable And Wireless plc Euro
. 6.5% Senior Debenture, 12/16/03 1,500,000 1,414,688
- --------------------------------------------------
GTE Hawaiian Telephone Co. Inc.
. 7.0% Senior Debenture, 2/1/06 2,000,000 1,935,120
- --------------------------------------------------
Nynex Corp.
. 7.63%, 10/15/09 3,000,000 3,137,190
. 9.55% Debentures, 5/1/10 1,549,360 1,728,404
- --------------------------------------------------
Rochester Telephone Corp.
. 9.0% Med. Term Note, 7/19/00 2,000,000 2,144,180
- -------------------------------------------------- ------------
13,046,457
------------
TOTAL LONG-TERM DEBT INVESTMENTS: 89.0%
(Cost $227,124,483) 228,483,349
- --------------------------------------------------
MONEY MARKET INSTRUMENTS:
G.E. Capital Corp.
. 5.37%, 7/8/96 4,000,000 3,993,437
- --------------------------------------------------
Merrill Lynch
. 5.499%, 7/1/96 6,400,000 6,393,342
. 5.554%, 7/8/96 4,000,000 3,992,800
- --------------------------------------------------
UBS Finance Inc.
. 5.39%, 7/2/96 10,400,000 10,389,100
- --------------------------------------------------
United States Treasury Note
. 6.5%, 9/3/96 3,000,000 3,009,360
- --------------------------------------------------
U.S. West Communications Group
. 5.43%, 7/9/96 5,300,000 5,291,206
- -------------------------------------------------- ------------
TOTAL MONEY MARKET INSTRUMENTS: 12.9%
(Cost $33,069,047) 33,069,245
- -------------------------------------------------- ------------
TOTAL INVESTMENTS: 101.9%
(Cost $260,193,530) 261,552,594
Other assets under liabilities: (1.9)% (4,759,727
- -------------------------------------------------- ------------
NET ASSETS: 100.0%
(equivalent to $11.555 per share based on
22,223,613 shares issued and outstanding) $256,792,867
- -------------------------------------------------- ------------
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS - UNAUDITED
June 30, 1996
INVESTMENTS:
Number Market
COMMON STOCKS: of shares value
---------- -----------
AEROSPACE: 2.1%
McDonnell Douglas Corp. 557,600 $27,043,600
- --------------------------------------------------
United Technologies Corp. 157,300 18,089,500
- -------------------------------------------------- -----------
45,133,100
AIR TRANSPORTATION: 1.5%
AMR Corp. * 215,100 19,574,100
- --------------------------------------------------
Northwest Airlines Corp. * 309,900 12,241,050
- -------------------------------------------------- -----------
31,815,150
BANKING AND INSURANCE: 11.0%
AllState Corp. 87,849 4,008,111
- --------------------------------------------------
Bank of Boston Corp. 586,300 29,021,850
- --------------------------------------------------
Bank of New York Inc. 502,500 25,753,125
- --------------------------------------------------
Chase Manhattan Corp. New 528,200 37,304,125
- --------------------------------------------------
Cigna Corp. 273,700 32,262,388
- --------------------------------------------------
First Chicago NBD Corp. 615,943 24,098,770
- --------------------------------------------------
Marsh & McLennan Companies Inc. 165,600 15,980,400
- --------------------------------------------------
Nations Bank Corp. 227,500 18,797,188
- --------------------------------------------------
Transamerica Corp. 189,700 15,365,700
- --------------------------------------------------
Travelers Inc. 846,450 38,619,281
- -------------------------------------------------- -----------
241,210,937
BROADCASTING: 0.5%
King World Productions Inc. * 328,900 11,963,738
- --------------------------------------------------
BUILDING MATERIALS: 1.0%
Dover Corp. 465,400 21,466,575
- --------------------------------------------------
BUILDING AND CONSTRUCTION: 0.1%
Kaufman & Broad Home Corp. 138,500 2,008,250
- --------------------------------------------------
CHEMICALS: 6.9%
Dow Chemical Co. 251,000 19,076,000
- --------------------------------------------------
Eastman Chemical Co. 118,300 7,201,513
- --------------------------------------------------
Olin Corp. 179,400 16,011,450
- -------------------------------------------------- -----------
42,288,963
CONSUMER PRODUCTS AND SERVICES: 6.9%
American Brands Inc. 153,500 6,965,063
- --------------------------------------------------
Black & Decker Corp. 323,000 12,475,875
- --------------------------------------------------
Johnson & Johnson 533,800 26,423,100
- --------------------------------------------------
Omnicom Group Inc. 232,800 10,825,200
- --------------------------------------------------
Philip Morris Co. Inc. 622,100 64,698,400
- --------------------------------------------------
Procter & Gamble Co. 320,700 29,063,438
- -------------------------------------------------- -----------
150,451,075
DRUG AND HOSPITAL SUPPLIES: 8.7%
Abbott Laboratories 504,100 21,928,350
- --------------------------------------------------
Advanced Technology Laboratories Inc. * 169,800 6,197,700
- --------------------------------------------------
Baxter International Inc. 637,500 30,121,875
- --------------------------------------------------
Bristol Myers Squibb Co. 510,000 45,900,000
- --------------------------------------------------
Lilly (Eli) & Co. 260,000 16,900,000
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of shares value
--------- ------------
<S> <C> <C>
Merck & Co. Inc. 359,100 $ 23,206,838
- -------------------------------------------------
Pharmacia & Upjohn Inc. 180,190 7,995,931
- -------------------------------------------------
Schering-Plough Corp. 614,100 38,534,775
- ------------------------------------------------- ------------
190,785,469
ELECTRICAL AND ELECTRONICS: 7.6%
Analog Devices Inc. * 475,600 12,127,800
- -------------------------------------------------
Applied Materials Inc. * 711,200 21,691,600
- -------------------------------------------------
General Electric Co. 676,300 58,499,950
- -------------------------------------------------
Harris Corp. 306,300 18,684,300
- -------------------------------------------------
International Rectifier Corp. * 845,700 13,636,913
- -------------------------------------------------
KLA Instruments Corp. * 265,100 6,163,575
- -------------------------------------------------
Komag Inc. * 1,063,000 28,036,625
- -------------------------------------------------
Silicon Valley Group Inc. * 446,600 8,373,750
- ------------------------------------------------- ------------
167,214,513
ENTERTAINMENT: 2.2%
Brunswick Corp. 299,700 5,994,000
- -------------------------------------------------
Callaway Golf Co. 496,200 16,498,650
- -------------------------------------------------
Mirage Resorts Inc. * 473,100 25,547,400
- ------------------------------------------------- ------------
48,040,050
FINANCIAL SERVICES: 1.0%
Student Loan Marketing Association 297,300 22,000,200
- -------------------------------------------------
FOOD AND BEVERAGE: 7.1%
Campbell Soup Co. 70,300 4,956,150
- -------------------------------------------------
Coca Cola Co. 659,400 32,228,175
- -------------------------------------------------
ConAgra Inc. 331,900 15,059,963
- -------------------------------------------------
CPC International Inc. 146,100 10,519,200
- -------------------------------------------------
Heinz H.J. Co. 407,150 12,367,181
- -------------------------------------------------
IBP Inc. 710,600 19,630,325
- -------------------------------------------------
RJR Nabisco Holding Corp. 862,920 26,750,520
- -------------------------------------------------
Safeway Inc. * 862,000 28,446,000
- -------------------------------------------------
Universal Foods Corp. 142,600 5,258,375
- ------------------------------------------------- ------------
155,215,889
MACHINERY AND ENGINEERING: 0.8%
Novellus Systems Inc. * 464,000 16,704,000
- -------------------------------------------------
METALS AND MINING: 1.5%
Cyprus Amax Minerals Co. 413,200 9,348,650
- -------------------------------------------------
Phelps Dodge Corp. 378,600 23,615,175
- ------------------------------------------------- ------------
32,963,825
MOTOR VEHICLES AND EQUIPMENT: 2.9%
Chrysler Corp. 602,800 37,373,600
- -------------------------------------------------
Dana Corp. 280,800 8,704,800
- -------------------------------------------------
Ford Motor Co. 204,900 6,633,638
- -------------------------------------------------
Goodrich BF Co. 308,600 11,533,925
- ------------------------------------------------- ------------
64,245,963
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 7.3%
Adaptec Inc. * 122,200 5,789,225
- -------------------------------------------------
Cabletron Systems Inc. 315,900 21,678,638
- -------------------------------------------------
Cadence Design Systems Inc. * 616,575 20,809,406
- -------------------------------------------------
Cisco Systems Inc. * 300,600 17,021,475
- -------------------------------------------------
Computer Associates International Inc. 95,300 6,790,125
- -------------------------------------------------
Digital Equipment Corp. * 126,500 5,692,500
- -------------------------------------------------
Honeywell Inc. 227,200 12,382,400
- -------------------------------------------------
Parametric Technology Corp. * 40,800 1,769,700
- -------------------------------------------------
Pitney Bowes Inc. 481,700 23,001,175
- -------------------------------------------------
Reynolds & Reynolds Co. 209,200 11,139,900
- -------------------------------------------------
Structural Dynamics Research Corp. * 182,100 4,006,200
- -------------------------------------------------
Sun Microsystems Inc. * 488,000 28,731,000
- ------------------------------------------------- ------------
158,811,744
PAPER: 2.1%
Avery Dennison Corp. 204,100 $ 11,199,988
- -------------------------------------------------
Bowater Inc. 546,800 20,573,350
- -------------------------------------------------
Stone Container Corp. 465,500 6,400,625
- -------------------------------------------------
Union Camp Corp. 151,600 7,390,500
- ------------------------------------------------- ------------
45,564,463
PETROLEUM AND PETROLEUM RELATED: 9.9%
Amoco Corp. 328,000 23,739,000
- -------------------------------------------------
Atlantic Richfield Co. 92,900 11,008,650
- -------------------------------------------------
Exxon Corp. 574,400 49,901,000
- -------------------------------------------------
Halliburton Co. 277,800 15,417,900
- -------------------------------------------------
Mobil Corp. 292,300 32,774,138
- -------------------------------------------------
Occidental Petroleum Corp. 940,300 23,272,425
- -------------------------------------------------
Royal Dutch Petroleum Co. 147,600 22,693,500
- -------------------------------------------------
Seagull Energy Corp. * 209,500 5,237,500
- -------------------------------------------------
Texaco Inc. 67,000 5,619,625
- -------------------------------------------------
Williams Companies Inc. 554,300 27,437,850
- ------------------------------------------------- ------------
217,101,588
PRINTING AND PUBLISHING: 1.0%
Deluxe Corp. 145,900 5,179,450
- -------------------------------------------------
Harcourt General Inc. 128,000 6,400,000
- -------------------------------------------------
New York Times Co. 321,800 10,498,725
- ------------------------------------------------- ------------
22,078,175
PUBLIC UTILITIES: 3.7%
Baltimore Gas & Electric Co. 150,900 4,281,788
- -------------------------------------------------
Consolidated Edison Co. 806,600 23,593,050
- -------------------------------------------------
Edison International 203,700 3,590,213
- -------------------------------------------------
General Public Utilities Corp. 272,450 9,603,863
- -------------------------------------------------
New York State Electric & Gas Corp. 331,300 8,075,438
- -------------------------------------------------
Texas Utilities Co. 239,600 10,242,900
- -------------------------------------------------
Unicom Corp. 740,300 20,635,863
- ------------------------------------------------- ------------
80,023,113
RETAIL: 3.7%
Eckerd Corp. * 230,600 5,217,325
- -------------------------------------------------
Jostens Inc. 56,100 1,107,975
- -------------------------------------------------
Pier 1 Imports Inc. 466,700 6,942,163
- -------------------------------------------------
Ross Stores Inc. 166,300 5,778,925
- -------------------------------------------------
Sears, Roebuck & Co. 228,200 11,096,225
- -------------------------------------------------
Staples Inc. * 875,700 17,076,150
- -------------------------------------------------
The Gap Inc. 854,200 27,441,175
- -------------------------------------------------
Waban Inc. * 252,500 6,028,438
- ------------------------------------------------- ------------
80,688,375
SECURITIES DEALERS: 1.6%
Bear, Stearns & Co. Inc. 847,455 20,021,124
- -------------------------------------------------
Morgan Stanley Group Inc. 122,900 6,037,463
- -------------------------------------------------
Paine Webber Group Inc. 367,900 8,737,625
------------
34,796,212
SHOES: 0.9%
Nike Inc. 187,500 19,265,625
- -------------------------------------------------
SOAPS, CLEANER AND COSMETICS: 1.2%
Clorox Co. 303,400 26,888,825
- -------------------------------------------------
TELECOMMUNICATIONS: 8.1%
American Telephone & Telegraph Co. 345,200 21,402,400
- -------------------------------------------------
Ameritech Corp. 607,500 36,070,313
- -------------------------------------------------
Bell Atlantic Corp. 112,500 7,171,875
- -------------------------------------------------
Bellsouth Corp. 573,600 24,306,300
- -------------------------------------------------
GTE Corp. 788,700 35,294,325
- -------------------------------------------------
Nynex Corp. 276,100 13,114,750
- -------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of shares value
----------- ---------------
<S> <C> <C>
Pacific Telesis Group 995,800 $ 33,608,250
- --------------------------------------------------
SBC Communications Inc. 135,800 6,688,150
- -------------------------------------------------- --------------
177,656,363
TRANSPORTATION: 0.2%
PHH Corp. 92,700 5,283,900
- -------------------------------------------------- --------------
TOTAL COMMON STOCKS: 96.5%
(Cost $1,636,486,675) 2,111,666,075
- --------------------------------------------------
Par
MONEY MARKET INSTRUMENTS: amount
-----------
A.I. Credit Corp.
. 5.35%, 7/1/96 $ 7,400,000 7,395,601
- --------------------------------------------------
G.E. Capital Corp.
. 5.37%, 7/16/96 1,000,000 997,017
- --------------------------------------------------
Merrill Lynch
. 5.554%, 7/8/96 12,600,000 12,551,315
. 5.37%, 7/9/96 6,800,000 6,773,676
. 5.551%, 7/11/96 4,100,000 4,089,545
- --------------------------------------------------
Nalco Chemical Co.
. 5.34%, 7/15/96 15,000,000 14,924,350
- --------------------------------------------------
Pepsico
. 5.36%, 7/16/96 2,700,000 2,692,764
- --------------------------------------------------
PHH Corp.
. 5.33%, 7/15/96 10,700,000 10,644,553
- --------------------------------------------------
Prudential Funding inc.
. 5.37%, 7/18/96 14,000,000 13,951,968
- --------------------------------------------------
Smith Barney
. 5.37%, 7/16/96 2,600,000 2,589,529
- --------------------------------------------------
Sony Capital Corp.
. 5.32%, 7/2/96 11,300,000 11,254,913
- --------------------------------------------------
Temple-Inland Inc
. 5.498%, 7/16/96 1,680,000 1,671,278
. 5.531%, 7/24/96 5,800,000 5,770,584
- --------------------------------------------------
Toyota Motor Credit
. 5.32%, 7/11/96 3,600,000 3,587,232
- -------------------------------------------------- --------------
TOTAL MONEY MARKET INSTRUMENTS: 4.5%
(Cost $98,894,326) 98,894,326
- -------------------------------------------------- --------------
TOTAL INVESTMENTS: 101.0% 2,210,560,401
(Cost $1,735,381,001)
- --------------------------------------------------
Other assets under liabilities: (1.0)% (22,704,488)
- -------------------------------------------------- --------------
NET ASSETS: 100.0%
(equivalent to $30.582 per share based on
71,540,210 shares issued and outstanding) $2,187,855,913
- -------------------------------------------------- ==============
</TABLE>
MANAGED FUND
STATEMENT OF NET ASSETS - UNAUDITED
June 30, 1996
INVESTMENTS:
<TABLE>
<CAPTION>
Par Market
LONG-TERM DEBT INVESTMENTS: amount value
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS: 17.5%
Federal Home Loan Mortgage Corp.
. 6.3%, 4/8/99 $ 9,320,000 $ 9,268,833
. 6.4265%, 10/15/06 2,000,000 1,910,340
. 7.3%,12/15/12 2,984,588 2,927,284
. 8.5%, 1/1/17 1,090,112 1,120,275
- --------------------------------------------------
FNMA
. 7.56% Principal Strip, 12/20/01 4,000,000 3,886,040
. 7.6%, 7/25/05 1,266,598 1,282,430
. 6.73%, 8/1/05 2,134,175 2,069,958
. 7.175%, 10/1/05 3,979,097 3,975,794
. 6.665%, 11/1/05 994,943 959,373
. 6.66%, 12/1/05 1,990,972 1,908,984
. 7.0% Principal Strip, 4/12/06 6,000,000 4,821,540
. 0.0% Debenture, 7/5/14 * 2,500,000 671,875
. 7.175%, 10/1/15 2,956,305 2,904,659
. 7.5%, 5/25/20 4,000,000 3,956,760
. 7.0%, 10/1/25 2,934,601 2,818,772
- --------------------------------------------------
GNMA
. 6.5%, 12/15/23 1,348,644 1,267,888
Tennessee Valley Authority Generic *
. 0.0%, 11/1/00 11,500,000 8,656,395
- --------------------------------------------------
U.S. Treasury Notes
. 5.375%, 11/30/97 2,000,000 1,983,120
. 5.375%, 5/31/98 5,000,000 4,932,800
. 6.375%, 5/15/99 20,800,000 20,852,000
. 6.25%, 2/15/03 13,600,000 13,353,432
. 0.0%, 11/15/09 27,000,000 10,593,720
. 0.0%, 11/15/18 33,200,000 6,806,332
- -------------------------------------------------- -----------
112,928,604
COLLATERALIZED MORTGAGE OBLIGATIONS: 0.3%
Mid State Trust III
. 9.625%, 4/1/22 295,498 300,285
- --------------------------------------------------
Prudential Home Mortgage
. 6.7%, 11/25/07 1,500,000 1,472,085
- -------------------------------------------------- -----------
1,772,370
AIR TRANSPORTATION: 1.1%
American Airlines Equipment Trust
. 10.18%, 1/2/13 1,500,000 1,789,200
- --------------------------------------------------
Delta Air Lines Inc.
. 8.25%, Med. Term Note, 12/27/07 1,500,000 1,610,385
- --------------------------------------------------
Federal Express Corp.
. 7.96%, 3/28/17 2,000,000 2,005,280
- --------------------------------------------------
United Airline Inc. Equipment Trust
. 9.35%, 4/7/16 1,500,000 1,618,080
- -------------------------------------------------- -----------
7,022,945
BANKING AND INSURANCE: 4.0%
Ahmanson H F & Co.
. 8.25%, 10/1/02 2,000,000 2,104,460
- --------------------------------------------------
Banc One Corp.
. 9.875%, 3/1/09 500,000 597,510
- --------------------------------------------------
Barnett Banks Inc.
. 6.5%, 9/1/05 1,500,000 1,454,040
- --------------------------------------------------
Chase Manhattan Corp.
. 6.5% Subordinated Note, 1/15/09 3,000,000 2,754,150
- --------------------------------------------------
First America Bank Corp.
. 7.75% Subordinated Note, 7/15/04 2,000,000 2,045,880
- --------------------------------------------------
First Tennessee National Corp.
. 6.75% Subordinated Note, 11/15/05 1,600,000 1,518,976
- --------------------------------------------------
First Union Corp.
. 8.0%, 8/15/09 2,000,000 2,063,340
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
amount value
---------- -----------
<S> <C> <C>
First USA Bank
. 5.75%, 1/15/99 $2,000,000 $ 1,950,700
- --------------------------------------------------
Fleet Financial Group
. 7.65%, 9/1/99 1,000,000 1,016,410
- --------------------------------------------------
National Westminster Bancorp
. 3.69%, 7/30/49 3,000,000 2,617,500
- --------------------------------------------------
National Westminster Bank plc
. 9.45% Debentures, 5/1/01 500,000 551,440
- --------------------------------------------------
Nations Bank Corp.
. 8.125% Subordinated Debentures, 6/15/02 1,000,000 1,051,080
- --------------------------------------------------
Southtrust Bank Birmingham Alabama
. 7.69%, 5/15/25 2,750,000 2,855,050
- --------------------------------------------------
Travelers Inc.
. 8.63%, 2/1/07 3,000,000 3,242,040
- -------------------------------------------------- ----------
25,822,576
BROADCASTING: 0.1%
Viacom Inc.
. 8.75%, 5/15/01 500,000 506,250
- --------------------------------------------------
CONSUMER PRODUCTS AND SERVICES: 0.2%
Service Corp. International
. 7.0% Senior Note, 6/1/15 1,000,000 1,004,220
- --------------------------------------------------
ELECTRICAL AND ELECTRONICS: 0.2%
Litton Industries Inc.
. 6.98% Senior Debenture, 3/15/36 1,000,000 974,500
- --------------------------------------------------
ENTERTAINMENT: 0.3%
Time Warner Inc.
. 8.88%, 10/1/12 500,000 516,370
. 9.125%, 1/15/13 1,500,000 1,567,230
- -------------------------------------------------- ---------
2,083,600
FINANCE: 3.7%
Aristar Finance
. 7.5% Senior Subordinated Note, 7/1/99 1,500,000 1,533,915
- --------------------------------------------------
Avco Financial Services Inc.
. 7.25%, 7/15/99 1,000,000 1,016,930
- --------------------------------------------------
Chrysler Financial Corp.
. 9.5%, 12/15/99 1,500,000 1,624,440
- --------------------------------------------------
Discover Credit Corp.
. 8.73% Med. Term Note, 8/15/96 500,000 501,930
- --------------------------------------------------
Dow Capital B V
. 9.0%, 5/15/10 3,000,000 3,344,700
- --------------------------------------------------
Duquesne II Funding Corp.
. 8.7%, 6/1/16 2,475,000 2,533,361
- --------------------------------------------------
Ford Motor Credit Co.
. 7.95% Med. Term Notes, 5/17/99 2,000,000 2,066,120
- --------------------------------------------------
General Electric Capital Corp.
. 7.875% Med. Term Note, 3/7/01 1,500,000 1,553,355
. 8.3%, 9/20/09 3,000,000 3,272,400
- --------------------------------------------------
General Motors Acceptance Corp.
. 8.88%, 6/1/10 1,500,000 1,651,395
- --------------------------------------------------
Household Finance Corp.
. 9.63% Senior Subordinated Note, 7/15/00 875,000 957,119
- --------------------------------------------------
International Lease Finance Co.
. 8.25%, 1/15/00 2,000,000 2,086,780
- --------------------------------------------------
National Rural Utilities Cooperative Finance Corp.
. 8.5%, 2/15/98 1,000,000 1,031,020
- --------------------------------------------------
Salomon Inc.
. 7.25%, 1/15/00 1,000,000 1,004,260
- -------------------------------------------------- ----------
24,177,724
FINANCIAL SERVICES: 0.2%
Finova Capital Corp.
. 6.12% Med. Term Note, 5/28/02 1,000,000 951,410
- --------------------------------------------------
Spiegel Charge Account Trust 2
. 6.95%, 12/17/01 500,000 504,130
- -------------------------------------------------- ---------
1,455,540
FOOD AND BEVERAGE: 0.1%
Nabisco Inc.
. 7.55%, 6/15/15 750,000 719,085
- --------------------------------------------------
FOREIGN GOVERNMENT: 0.7%
Hydro-Quebec
. 7.2% Med. Term Note, 10/5/09 3,000,000 3,215,730
- --------------------------------------------------
Manitoba (Province of)
. 7.75%, 7/17/16 1,500,000 1,554,210
- -------------------------------------------------- ---------
4,769,940
MACHINERY AND ENGINEERING: 0.3%
Deere & Co.
. 8.27%, 8/8/95 2,000,000 2,163,820
- --------------------------------------------------
METALS AND MINING: 1.2%
Cyprus Amax Minerals Co.
. 7.375%, 5/15/07 2,500,000 2,446,550
- --------------------------------------------------
Inco Ltd.
. 9.6% Debenture, 6/15/22 1,300,000 1,400,321
- --------------------------------------------------
Newmont Gold Co.
. 8.91%, 1/5/09 750,000 797,205
- --------------------------------------------------
Noranda Inc.
. 8.13%, 6/15/04 2,000,000 2,088,220
- --------------------------------------------------
Placer Dome Inc.
. 7.37% Med. Term Note, 6/3/26 1,000,000 1,003,380
- -------------------------------------------------- ---------
7,735,676
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 0.1%
Xerox Corp. - Euronote
. 8.375%, 9/25/96 500,000 501,085
- --------------------------------------------------
PAPER: 0.6%
Champion International Corp.
. 7.7%, 12/15/99 1,500,000 1,537,815
- --------------------------------------------------
Westvaco Corp.
. 8.3%, 8/1/22 2,500,000 2,519,600
- -------------------------------------------------- ---------
4,057,415
PETROLEUM AND PETROLEUM RELATED: 0.5%
Enron Corp.
. 9.5%, 6/15/01 1,000,000 1,100,840
- --------------------------------------------------
Noble Affiliates Inc.
. 7.25%, 10/15/23 600,000 541,068
- --------------------------------------------------
Petro Canada - Debentures
. 8.6%, 10/15/01 1,500,000 1,610,220
- -------------------------------------------------- ---------
3,252,128
PUBLIC UTILITIES: 3.5%
Baltimore Gas & Electric Co.
. 8.92% Med. Term Note, 7/16/98 1,000,000 1,045,100
- --------------------------------------------------
Central Maine Power Co.
. 6.5%, 7/22/97 1,500,000 1,494,780
- --------------------------------------------------
Commonwealth Edison Co.
. 9.375%, 2/15/00 500,000 534,835
- --------------------------------------------------
Detroit Edison Co.
. 6.56%, 5/1/01 2,000,000 1,953,740
- --------------------------------------------------
Great Lakes Power Inc.
. 9.0%, 8/1/04 1,500,000 1,612,665
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
amount value
---------- ------------
<S> <C> <C>
Illinois Power Co.
. 5.85% 1st Mortgage Bonds, 10/1/96 $ 625,000 $ 625,000
- --------------------------------------------------
Nevada Power Co.
. 7.06%, 5/1/00 1,500,000 1,497,900
- --------------------------------------------------
Old Dominion Electric Co-op
. 7.48%, 12/1/13 1,500,000 1,487,580
- --------------------------------------------------
Pacificorp
. 9.15% Med. Term Note, 8/9/11 1,500,000 1,722,780
- --------------------------------------------------
Pennsylvania Power & Light
. 7.7%, 10/1/09 3,000,000 3,105,420
- --------------------------------------------------
Public Service Co. of Colorado
. 6.375%, 11/1/05 1,500,000 1,393,035
- --------------------------------------------------
Public Service Co. of Indiana Inc.
. 8.57% 1st Mortgage Bonds, 12/27/11 500,000 536,120
- --------------------------------------------------
Texas Gas Transmission Corp.
. 8.63%, 4/4/04 2,000,000 2,154,580
- --------------------------------------------------
Texas Utilities Electric Co.
. 7.375%, 8/1/01 1,500,000 1,523,985
- --------------------------------------------------
Utilicorp United Inc.
. 10.5%, 12/1/20 1,000,000 1,140,290
- --------------------------------------------------
Washington Water Power Co.
. 8.01%, 12/17/01 1,000,000 1,043,830
- -------------------------------------------------- -----------
22,871,640
RAILROADS: 0.3%
Burlington Northern Railroad
. 6.94%, 1/2/14 500,000 484,925
- --------------------------------------------------
Chicago & Northwestern Holdings Corp.
. 6.25%, 7/30/12 1,457,297 1,349,777
- -------------------------------------------------- -----------
1,834,702
RETAIL: 0.5%
Dayton Hudson Corp.
. 10.0 % Debenture, 1/1/11 500,000 610,130
- --------------------------------------------------
Sears, Roebuck & Co.
. 9.05%, 2/6/12 2,500,000 2,830,125
- -------------------------------------------------- -----------
3,440,255
SECURITIES DEALERS: 0.6%
Lehman Brothers Holding Co.
. 8.875% Senior Note, 3/1/02 1,000,000 1,071,170
- --------------------------------------------------
Smith Barney Holdings
. 7.88%, 10/1/99 3,000,000 3,096,720
- -------------------------------------------------- -----------
4,167,890
TELECOMMUNICATIONS: 1.4%
Bellsouth Telecommunications Corp. Euro
. 6.125%, 9/23/08 3,000,000 2,686,875
- --------------------------------------------------
Cable And Wireless plc Euro
. 6.5% Senior Debenture, 12/16/03 1,500,000 1,414,688
- --------------------------------------------------
GTE Hawaiian Telephone Co. Inc.
. 7.0% Senior Debenture, 2/1/06 2,000,000 1,935,120
- --------------------------------------------------
NYNEX Capital Funding
. 7.63%, 10/15/09 3,000,000 3,137,190
- -------------------------------------------------- -----------
9,173,873
-----------
TOTAL LONG-TERM DEBT INVESTMENTS: 37.5%
(Cost $240,406,707) 242,435,838
- --------------------------------------------------
Number Market
COMMON STOCKS: of shares Value
---------- ------------
AEROSPACE: 1.1%
McDonnell Douglas Corp. 89,200 4,326,200
United Technologies Corp. 25,400 2,921,000
- -------------------------------------------------- -----------
7,247,200
AIR TRANSPORTATION: 1.1%
America West Airlines Inc. Cl B * 31,100 $ 684,200
- --------------------------------------------------
AMR Corp. * 32,800 2,984,800
- --------------------------------------------------
Continental Airlines Holdings Inc. * 9,400 580,450
- --------------------------------------------------
Mesa Airlines Inc. * 44,000 522,500
- --------------------------------------------------
Northwest Airlines Corp. * 59,200 2,338,400
- -------------------------------------------------- -----------
7,110,350
BANKING AND INSURANCE: 6.7%
AllState Corp. 11,310 516,019
- --------------------------------------------------
American Bankers Insurance Group Inc. 15,000 654,375
- --------------------------------------------------
Bank of Boston Corp. 85,500 4,232,250
- --------------------------------------------------
Bank of New York Inc. 69,400 3,556,750
- --------------------------------------------------
BankAmerica Corp. 12,500 946,875
- --------------------------------------------------
Chase Manhattan Corp. New 78,100 5,515,813
- --------------------------------------------------
Cigna Corp. 39,400 4,644,275
- --------------------------------------------------
Deposit Guaranty Corp. 11,700 514,800
- --------------------------------------------------
First Chicago NBD Corp. 96,835 3,788,669
- --------------------------------------------------
Healthcare Compare Corp. 34,300 1,672,125
- --------------------------------------------------
Maic Holdings Inc. * 17,804 663,199
- --------------------------------------------------
Marsh & McLennan Companies Inc. 34,900 3,367,850
- --------------------------------------------------
Nations Bank Corp. 39,700 3,280,213
- --------------------------------------------------
Onebancorp Inc. 18,900 618,975
- --------------------------------------------------
Peoples Heritage Financial Group Inc. 25,700 523,638
- --------------------------------------------------
Provident Bancorp 15,750 555,188
- --------------------------------------------------
Transamerica Corp. 30,200 2,446,200
- --------------------------------------------------
Travelers Inc. 129,450 5,906,156
- -------------------------------------------------- -----------
43,403,368
BROADCASTING: 0.3%
King World Productions Inc. * 56,700 2,062,463
- --------------------------------------------------
BUILDING MATERIALS: 0.6%
Dover Corp. 80,100 3,694,613
- --------------------------------------------------
BUILDING AND CONSTRUCTION: 0.1%
Kaufman & Broad Home Corp. 21,000 304,500
- --------------------------------------------------
U.S. Home Corp. * 22,300 549,138
- -------------------------------------------------- -----------
853,638
CHEMICALS: 1.4%
- --------------------------------------------------
Bio Rad Laboratories Inc. * 16,500 591,938
- --------------------------------------------------
Dow Chemical Co. 59,400 4,514,400
- --------------------------------------------------
Eastman Chemical Co. 9,100 553,963
- --------------------------------------------------
Immunex Corp. * 9,200 125,350
- --------------------------------------------------
International Specialty Products * 44,400 488,400
- --------------------------------------------------
Learonal Inc. 21,300 532,500
- --------------------------------------------------
Olin Corp. 20,100 1,793,925
- --------------------------------------------------
Somatogen Inc. * 40,300 569,238
- -------------------------------------------------- ----------
9,169,713
COAL AND GAS: 0.2%
Louis Dreyfus Natural Gas Corp. * 41,300 619,500
- --------------------------------------------------
Zeigler Coal Holding Co. 38,200 611,200
- -------------------------------------------------- ----------
1,230,700
CONSUMER PRODUCTS AND SERVICES: 3.6%
American Brands Inc. 17,800 807,675
- --------------------------------------------------
Black & Decker Corp. 26,300 1,015,838
- --------------------------------------------------
Gibson Greetings Inc. * 35,800 492,250
- --------------------------------------------------
Johnson & Johnson 73,400 3,633,300
- --------------------------------------------------
Nash Finch Co. 35,100 561,600
- --------------------------------------------------
Omnicom Group Inc. 18,000 837,000
- --------------------------------------------------
Philip Morris Co. Inc. 89,000 9,256,000
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of shares value
--------- -----------
<S> <C> <C>
Procter & Gamble Co. 69,400 $ 6,289,375
- --------------------------------------------------
Russ Berrie & Co. Inc. 30,300 556,763
- -------------------------------------------------- -----------
23,449,800
DRUG AND HOSPITAL SUPPLIES: 5.1%
Abbott Laboratories 75,000 3,262,500
- --------------------------------------------------
Adac Laboratories 26,400 600,600
- --------------------------------------------------
Baxter International Inc. 101,800 4,810,050
- --------------------------------------------------
Bristol Myers Squibb Co. 71,800 6,462,000
- --------------------------------------------------
Dura Pharmaceuticals Inc. * 12,500 700,000
- --------------------------------------------------
Lilly (Eli) & Co. 62,400 4,056,000
- --------------------------------------------------
Medtronic Inc. 24,000 1,344,000
- --------------------------------------------------
Merck & Co. Inc. 61,600 3,980,900
- --------------------------------------------------
Omnicare Inc. 19,600 519,400
- --------------------------------------------------
Schering-Plough Corp. 94,000 5,898,500
- --------------------------------------------------
Sybron International Corp. * 24,000 600,000
- --------------------------------------------------
Target Therapeutics Inc. * 12,700 520,700
- --------------------------------------------------
Watson Pharmaceuticals Inc. * 12,000 454,500
- -------------------------------------------------- -----------
33,209,150
ELECTRICAL AND ELECTRONICS: 4.4%
Alliant Computer Systems Corp. * 12,700 598,488
- --------------------------------------------------
Applied Materials Inc. * 109,300 3,333,650
- --------------------------------------------------
Fusion Systems Corp. * 19,700 487,575
- --------------------------------------------------
General Electric Co. 101,900 8,814,350
- --------------------------------------------------
Harris Corp. 44,600 2,720,600
- --------------------------------------------------
Helix Technology Corp. 16,100 623,875
- --------------------------------------------------
International Rectifier Corp. * 135,400 2,183,325
- --------------------------------------------------
KLA Instruments Corp. * 83,500 1,941,375
- --------------------------------------------------
Komag Inc. * 162,700 4,291,213
- --------------------------------------------------
LTX Corp. * 59,800 373,750
- --------------------------------------------------
MEMC Electrical Materials Inc. * 13,300 515,375
- --------------------------------------------------
Rexel Inc. * 43,600 615,850
- --------------------------------------------------
Sierra Semi Conductor Corp. * 48,800 567,300
- --------------------------------------------------
Silicon Valley Group Inc. * 38,500 721,875
- --------------------------------------------------
Wyle Electronics 15,000 496,875
- -------------------------------------------------- -----------
28,285,475
ENTERTAINMENT: 1.2%
Brunswick Corp. 16,200 324,000
- --------------------------------------------------
Callaway Golf Co. 86,200 2,866,150
- --------------------------------------------------
Grand Casinos Inc. * 19,900 512,425
- --------------------------------------------------
Mirage Resorts Inc. * 80,800 4,363,200
- -------------------------------------------------- -----------
8,065,775
FINANCE: 0.1%
One Valley Bancorp West Virginia Inc. 17,700 610,650
- --------------------------------------------------
FINANCIAL SERVICES: 0.6%
Olympic Financial Ltd. * 26,100 600,300
- --------------------------------------------------
Student Loan Marketing Association 41,300 3,056,200
- -------------------------------------------------- -----------
3,656,500
FOOD AND BEVERAGE: 4.1%
Campbell Soup Co. 23,800 1,677,900
- --------------------------------------------------
Coca Cola Co. 81,200 3,968,650
- --------------------------------------------------
ConAgra Inc. 84,800 3,847,800
- --------------------------------------------------
CPC International Inc. 23,000 1,656,000
- --------------------------------------------------
Heinz H.J. Co. 94,150 2,859,806
- --------------------------------------------------
Hudson Foods Inc. 28,000 392,000
- --------------------------------------------------
IBP Inc. 107,600 2,972,450
- --------------------------------------------------
RJR Nabisco Holding Corp. 111,580 3,458,980
- --------------------------------------------------
Robert Mondavi Corp. * 18,100 570,150
- --------------------------------------------------
Safeway Inc. * 119,000 3,927,000
- --------------------------------------------------
Smithfield Foods Inc. * 22,100 $ 558,025
- --------------------------------------------------
WLR Foods Inc. 27,300 382,200
- -------------------------------------------------- -----------
26,270,961
HEALTH AND PERSONAL CARE: 0.1%
Herbalife International 37,300 550,175
- --------------------------------------------------
HOSPITAL AND HEALTH CARE: 0.1%
Universal Health Services Inc. * 22,000 574,750
- --------------------------------------------------
INDUSTRIAL: 0.1%
Gencorp Inc. 39,800 601,975
- --------------------------------------------------
MACHINERY AND ENGINEERING: 0.8%
Butler Manufacturing Co. 16,700 563,625
- --------------------------------------------------
Energy Ventures Inc. * 18,100 588,250
- --------------------------------------------------
Graco Inc. 25,650 519,413
- --------------------------------------------------
Imo Industries Inc. * 81,000 465,750
- --------------------------------------------------
Novellus Systems Inc. * 74,200 2,671,200
- --------------------------------------------------
Valmont Industries 17,700 601,800
- -------------------------------------------------- -----------
5,410,038
METALS AND MINING: 1.2%
ASARCO Inc. 66,200 1,828,775
- --------------------------------------------------
Chaparral Steel Co. 38,100 500,063
- --------------------------------------------------
Cyprus Amax Minerals Co. 15,600 352,950
- --------------------------------------------------
Intermet Corp. * 38,000 529,606
- --------------------------------------------------
Phelps Dodge Corp. 50,000 3,118,750
- --------------------------------------------------
Texas Industries Inc. 9,300 638,213
- --------------------------------------------------
Tredegar Industries Inc. 17,800 538,450
- -------------------------------------------------- -----------
7,506,806
MISCELLANEOUS: 0.2%
Anthony Industries Inc. 19,700 534,363
- --------------------------------------------------
Ultratech Stepper Inc. * 28,800 540,000
- -------------------------------------------------- -----------
1,074,363
MOTOR VEHICLES AND EQUIPMENT: 1.8%
Champion Enterprises Inc. * 22,600 471,775
- --------------------------------------------------
Chrysler Corp. 93,300 5,784,600
- --------------------------------------------------
Dana Corp. 53,800 1,667,800
- --------------------------------------------------
Ford Motor Co. 18,700 605,413
- --------------------------------------------------
Goodrich BF Co. 53,000 1,980,875
- --------------------------------------------------
Simpson Industries Inc. 51,800 479,150
- --------------------------------------------------
Wynns International Inc. 22,650 639,863
- -------------------------------------------------- -----------
11,629,475
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 4.6%
Adaptec Inc. * 54,200 2,567,725
- --------------------------------------------------
Boole & Babbage Inc. * 22,600 542,400
- --------------------------------------------------
Cabletron Systems Inc. * 48,200 3,307,725
- --------------------------------------------------
Cadence Design Systems Inc. * 69,225 2,336,344
- --------------------------------------------------
CDW Computer Centers Inc. * 9,300 646,350
- --------------------------------------------------
Cisco Systems Inc. * 55,200 3,125,700
- --------------------------------------------------
Computer Associates International Inc. 18,150 1,293,188
- --------------------------------------------------
Computervision Corp. * 53,700 537,000
- --------------------------------------------------
Gateway 2000 Inc. * 15,400 523,600
- --------------------------------------------------
Global Village Communication * 29,400 242,550
- --------------------------------------------------
Health Management Systems Inc. * 18,900 600,075
- --------------------------------------------------
Honeywell Inc. 13,800 752,100
- --------------------------------------------------
Hunt Manufacturing 29,500 438,813
- --------------------------------------------------
In Focus Systems Inc. * 17,600 426,800
- --------------------------------------------------
Kronos Inc. * 19,450 690,475
- --------------------------------------------------
Medic Computer Systems Inc. * 6,700 543,538
- --------------------------------------------------
Moore Corp. Ltd. 16,600 313,325
- --------------------------------------------------
Pitney Bowes Inc. 73,000 3,485,750
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of shares value
--------- ------------
<S> <C> <C>
Project Software & Development Inc. * 12,700 $ 595,313
- --------------------------------------------------
Reynolds & Reynolds Co. 21,800 1,160,850
- --------------------------------------------------
Robert Half International Inc. * 21,600 602,100
- --------------------------------------------------
Sun Microsystems Inc. * 75,700 4,456,838
- --------------------------------------------------
U.S. Robotics Corp. * 9,600 820,800
- -------------------------------------------------- --------------
30,009,356
PAPER: 1.1%
Avery Dennison Corp. 71,500 3,923,563
- --------------------------------------------------
Bowater Inc. 35,000 1,316,875
- --------------------------------------------------
Republic Group 40,900 582,825
- --------------------------------------------------
Stone Container Corp. 85,400 1,174,250
- -------------------------------------------------- --------------
6,997,513
PETROLEUM AND PETROLEUM RELATED: 5.7%
Amoco Corp. 62,500 4,523,438
- --------------------------------------------------
Atlantic Richfield Co. 13,600 1,611,600
- --------------------------------------------------
Exxon Corp. 88,900 7,723,188
- --------------------------------------------------
Halliburton Co. 38,800 2,153,400
- --------------------------------------------------
Mesa Inc. * 130,600 718,300
- --------------------------------------------------
Mitchell Energy & Development Corp. 34,500 655,500
- --------------------------------------------------
Mobil Corp. 57,300 6,424,763
- --------------------------------------------------
Nabors Industries Inc. * 41,400 672,750
- --------------------------------------------------
Occidental Petroleum Corp. 132,500 3,279,375
- --------------------------------------------------
Royal Dutch Petroleum Co. 19,000 2,921,250
- --------------------------------------------------
Seagull Energy Corp. * 40,000 1,000,000
- --------------------------------------------------
Texaco Inc. 23,400 1,962,675
- --------------------------------------------------
Valero Energy Corp. 22,000 550,000
- --------------------------------------------------
Williams Companies Inc. 37,500 1,856,250
- --------------------------------------------------
Yankee Energy System Inc. 24,400 530,700
- -------------------------------------------------- --------------
36,583,188
PLASTICS: 0.3%
Foamex International Inc. * 43,200 529,200
- --------------------------------------------------
LCI International Inc. * 21,000 658,875
- --------------------------------------------------
Safeskin Corp. * 15,200 630,800
- -------------------------------------------------- --------------
1,818,875
PRINTING AND PUBLISHING: 0.5%
American Business Products Inc. 29,000 634,375
- --------------------------------------------------
Bowne & Co. Inc. 29,100 600,188
- --------------------------------------------------
New York Times Co. 36,300 1,184,288
- --------------------------------------------------
Pulitzer Publishing Co. 9,800 580,650
- -------------------------------------------------- --------------
2,999,500
PUBLIC UTILITIES: 2.5%
Black Hills Corp. 19,900 495,013
- --------------------------------------------------
Consolidated Edison Co. 102,800 3,006,900
- --------------------------------------------------
Edison International 142,100 2,504,513
- --------------------------------------------------
General Public Utilities Corp. 40,200 1,417,050
- --------------------------------------------------
Green Mountain Power Corp. 20,300 492,275
- --------------------------------------------------
Laclede Gas Co. 24,200 541,475
- --------------------------------------------------
Northwestern Public Service Co. 21,300 572,438
- --------------------------------------------------
Ohio Edison Co. 24,200 529,375
- --------------------------------------------------
Southern California Water Co. 28,900 635,800
- --------------------------------------------------
Texas Utilities Co. 60,500 2,586,375
- --------------------------------------------------
TNP Enterprises Inc. 23,900 678,163
- --------------------------------------------------
Unicom Corp. 86,400 2,408,400
- -------------------------------------------------- --------------
15,867,775
RESTAURANT: 0.1%
CKE Restaurants Inc. 24,600 627,300
- --------------------------------------------------
RETAIL: 2.9%
Carson Pirie Scott & Co. * 22,600 604,550
- --------------------------------------------------
Claire's Stores Inc. 21,700 599,463
- --------------------------------------------------
CompUSA Inc. * 16,300 556,238
- --------------------------------------------------
Eckerd Corp. * 43,800 990,975
- --------------------------------------------------
Fabri Centers of America * 44,000 726,000
- --------------------------------------------------
Fileness Basement Corp. * 27,800 135,525
- --------------------------------------------------
Jostens Inc. 129,500 2,557,625
- --------------------------------------------------
National Media Corp. * 31,100 548,138
- --------------------------------------------------
Pier 1 Imports Inc. 60,000 892,500
- --------------------------------------------------
Sears, Roebuck & Co. 52,900 2,572,263
- --------------------------------------------------
Staples Inc. * 190,200 3,708,900
- --------------------------------------------------
The Gap Inc. 98,600 3,167,525
- --------------------------------------------------
Waban Inc. * 51,200 1,222,400
- --------------------------------------------------
Zale Corp. * 28,800 486,000
- -------------------------------------------------- --------------
18,768,100
SECURITIES DEALERS: 0.9%
Bear, Stearns & Co. Inc. 125,685 2,969,308
- --------------------------------------------------
Morgan Stanley Group Inc. 25,400 1,247,775
- --------------------------------------------------
Paine Webber Group Inc. 64,800 1,539,000
- -------------------------------------------------- --------------
5,756,083
SHOES: 0.6%
Nike Inc. 37,800 3,883,950
- --------------------------------------------------
SOAPS, CLEANER AND COSMETICS: 0.4%
Clorox Co. 31,400 2,782,825
- --------------------------------------------------
TELECOMMUNICATIONS: 4.6%
American Telephone & Telegraph Co. 56,100 3,478,200
- --------------------------------------------------
Ameritech Corp. 89,800 5,331,875
- --------------------------------------------------
Bellsouth Corp. 99,000 4,195,125
- --------------------------------------------------
C Cube Microsystems Inc. * 18,300 603,900
- --------------------------------------------------
Cincinnati Bell Inc. 71,800 3,742,575
- --------------------------------------------------
Comnet Cellular Inc. * 16,500 495,000
- --------------------------------------------------
DSP Communications Inc. * 13,300 683,288
- --------------------------------------------------
GTE Corp. 73,300 3,280,175
- --------------------------------------------------
Nynex Corp. 63,300 3,006,750
- --------------------------------------------------
Pacific Telesis Group 139,300 4,701,375
- -------------------------------------------------- --------------
29,518,263
TEXTILES-APPAREL MANUFACTURING: 0.1%
Nautica Enterprises Inc. * 24,000 690,000
- --------------------------------------------------
TRANSPORTATION: 0.2%
PHH Corp. 21,300 1,214,100
- --------------------------------------------------
WASTE MANAGEMENT: 0.1%
United Waste System Inc. * 22,400 722,400
- -------------------------------------------------- --------------
TOTAL COMMON STOCKS: 59.4%
(Cost $567,709,917) 383,907,163
- --------------------------------------------------
Par
MONEY MARKET INSTRUMENTS: amount
-----------
Suntrust Banks Inc.
. 5.74%, 7/1/96 $12,000,000 11,994,420
- --------------------------------------------------
Merrill Lynch
. 5.499%, 7/1/96 2,700,000 2,697,191
- --------------------------------------------------
United States Treasury Notes
. 6.5%, 9/30/96 13,000,000 13,040,560
- -------------------------------------------------- --------------
TOTAL MONEY MARKET INSTRUMENTS: 4.3%
(Cost $27,768,799) 27,732,171
- -------------------------------------------------- --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market
value
-------------
<S> <C>
TOTAL INVESTMENTS: 101.1%
(Cost $567,709,917) $654,075,172
- --------------------------------------------------
Other assets under liabilities: (1.1)% (7,276,871)
- -------------------------------------------------- -------------
NET ASSETS: 100.0%
(equivalent to $15.420 per share based on
41,945,871 shares issued and outstanding) $646,798,301
- -------------------------------------------------- =============
</TABLE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS - UNAUDITED
June 30, 1996
INVESTMENTS:
<TABLE>
<CAPTION>
Par Market
MONEY MARKET INSTRUMENTS: amount value
---------- ------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS: 22.5%
Federal Home Loan Bank
. 5.61%, 9/20/96 $7,000,000 $ 6,998,181
- --------------------------------------------------
Federal Home Loan Mortgage Corp.
. 7.699%, 12/15/96 1,500,000 1,514,814
- --------------------------------------------------
FNMA
. 7.07%, 11/18/96 1,400,000 1,408,133
. 5.05%, 3/14/97 2,000,000 1,992,702
- --------------------------------------------------
U.S. Treasury Bill
. 5.063%, 2/6/97 5,000,000 4,765,938
. 5.395%, 3/6/97 3,000,000 2,846,550
- -------------------------------------------------- ------------
19,526,318
BANKING AND INSURANCE: 14.5%
Comerical Bank Detroit Michigan
. 5.293%, 2/14/97 3,500,000 3,500,000
- --------------------------------------------------
First Bank N.A. Floater
. 5.451%, 3/7/97 4,000,000 4,000,000
- --------------------------------------------------
Metlife Funding Inc
. 5.468%, 8/5/96 1,500,000 1,486,750
- --------------------------------------------------
PNC Banking Corp.
. 5.233%, 2/20/97 3,600,000 3,598,870
- -------------------------------------------------- ------------
12,585,620
BUILDING MATERIALS: 4.6%
Vermont American Corp
. 5.27%, 7/11/96 4,000,000 3,974,236
- --------------------------------------------------
CHEMICALS: 4.6%
Monsanto Company
. 5.3%, 8/1/96 4,000,000 3,967,022
- --------------------------------------------------
FARM SUPPLIES: 3.4%
Cargill Incorporated
. 5.33%, 7/16/96 3,000,000 2,991,561
- --------------------------------------------------
FINANCE: 4.0%
G.E. Capital Corp
. 5.38%, 8/8/96 3,500,000 3,476,986
- --------------------------------------------------
FINANCIAL SERVICES: 17.5%
American Express Centurian Bank
. 5.814%, 11/29/96 3,800,000 3,799,731
- --------------------------------------------------
Bell Atlantic Financial Services
. 5.31%, 7/1/96 4,200,000 4,183,893
- --------------------------------------------------
Caterpillar Financial Services Corp.
- --------------------------------------------------
. 6.117% Medium Term Note, 7/25/96 $4,000,000 $ 4,000,000
- --------------------------------------------------
Unilever Capital Corp.
. 5.35%, 7/25/96 3,200,000 3,183,356
- -------------------------------------------------- ------------
15,166,979
FOOD AND BEVERAGE: 3.2%
Philip Morris
. 5.464%, 7/19/96 799,000 792,883
. 5.541%, 7/29/96 2,000,000 1,990,734
- -------------------------------------------------- ------------
2,783,618
FOREST PRODUCTS: 4.6%
Weyerhaeuser Co
. 5.463%, 7/24/96 4,000,000 3,955,329
- --------------------------------------------------
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 1.6%
International Lease Finance
. 5.32%, 7/11/96 1,400,000 1,393,793
- --------------------------------------------------
PAPER: 4.6%
Temple-Inland Inc
. 5.32%, 7/8/96 4,000,000 3,981,084
- --------------------------------------------------
RETAIL: 1.1%
Walmart Stores Inc
. 5.26%, 7/1/96 1,000,000 996,493
- --------------------------------------------------
SECURITIES DEALERS: 6.4%
Merrill Lynch
. 5.4%, 7/8/96 2,600,000 2,594,540
- --------------------------------------------------
Smith Barney
. 5.33%, 7/10/96 3,000,000 2,986,675
- -------------------------------------------------- ------------
5,581,215
SOAPS, CLEANER AND COSMETICS: 4.5%
Colgate Palmolive Co
. 5.32%, 7/22/96 4,000,000 3,942,071
- --------------------------------------------------
TRANSPORTATION: 4.6%
PHH Corp.
. 5.84% Medium Term Floater, 8/21/96 4,000,000 3,999,774
- -------------------------------------------------- ------------
TOTAL MONEY MARKET INSTRUMENTS: 101.8%
(Cost $88,322,099) 88,322,099
- -------------------------------------------------- ------------
TOTAL INVESTMENTS: 101.8%
(Cost $88,322,099) 88,322,099
- --------------------------------------------------
Other assets under liabilities: (1.8)% (1,520,403)
- -------------------------------------------------- ------------
NET ASSETS: 100.0%
(equivalent to $10.000 per share based on
8,680,170 shares issued and outstanding) $ 86,801,696
- -------------------------------------------------- ============
</TABLE>
SPECIAL OPPORTUNITIES FUND
STATEMENT OF NET ASSETS - UNAUDITED
June 30, 1996
INVESTMENTS:
<PAGE>
<TABLE>
<CAPTION>
Number Market
COMMON STOCKS: of shares value
--------- -----------
<S> <C> <C>
AEROSPACE: 2.0%
McDonnell Douglas Corp. 120,800 $ 5,858,800
- --------------------------------------------------
United Technologies Corp. 50,800 5,842,000
- -------------------------------------------------- -----------
11,700,800
AIR TRANSPORTATION: 1.9%
AMR Corp. * 61,600 5,605,600
- --------------------------------------------------
Northwest Airlines Corp. * 136,000 5,372,000
- -------------------------------------------------- -----------
10,977,600
BANKING AND INSURANCE: 12.2%
Bank of Boston Corp. 119,800 5,930,100
- --------------------------------------------------
Chase Manhattan Corp. New 84,900 5,996,063
- --------------------------------------------------
Cigna Corp. 53,100 6,259,163
- --------------------------------------------------
First Chicago NBD Corp. 141,494 5,535,953
- --------------------------------------------------
Healthcare Compare Corp. 124,000 6,045,000
- --------------------------------------------------
Marsh & McLennan Companies Inc. 59,000 5,693,500
- --------------------------------------------------
Mercury General Corp. 126,300 5,525,625
- --------------------------------------------------
Mid Ocean Ltd. 139,200 5,707,200
- --------------------------------------------------
Nations Bank Corp. 71,100 5,874,638
- --------------------------------------------------
Star Banc Corp. 80,000 5,390,000
- --------------------------------------------------
Transamerica Corp. 70,400 5,702,400
- --------------------------------------------------
Travelers Inc. 139,350 6,357,844
- -------------------------------------------------- -----------
70,017,484
BUILDING MATERIALS: 1.0%
Dover Corp. 127,500 5,880,938
- --------------------------------------------------
CHEMICALS: 1.9%
Eastman Chemical Co. 88,700 5,399,613
- --------------------------------------------------
Union Carbide Corp. 133,000 5,286,750
- -------------------------------------------------- -----------
10,686,363
CONSUMER PRODUCTS AND SERVICES: 4.0%
American Brands Inc. 127,200 5,771,700
- --------------------------------------------------
Leggett & Platt Inc. 214,900 5,963,475
- --------------------------------------------------
The Stanley Works 200,800 5,973,800
- --------------------------------------------------
Universal Corp. 202,500 5,366,250
- -------------------------------------------------- -----------
23,075,225
DRUG AND HOSPITAL SUPPLIES: 4.0%
Baxter International Inc. 118,700 5,608,575
- --------------------------------------------------
Becton, Dickinson & Co. 72,400 5,810,100
- --------------------------------------------------
Medtronic Inc. 101,400 5,678,400
- --------------------------------------------------
Pharmacia & Upjohn Inc. 137,090 6,083,369
- -------------------------------------------------- -----------
23,180,444
ELECTRICAL AND ELECTRONICS: 6.0%
Applied Materials Inc. * 135,900 4,144,950
- --------------------------------------------------
Atmel Corp. * 190,000 5,723,750
- --------------------------------------------------
EG&G Inc. 276,400 5,908,050
- --------------------------------------------------
KLA Instruments Corp. 183,200 4,259,400
- --------------------------------------------------
Komag Inc. * 224,600 5,923,825
- --------------------------------------------------
Lam Research Corp. * 130,600 3,395,600
- --------------------------------------------------
Silicon Valley Group Inc. * 268,500 5,034,375
- -------------------------------------------------- -----------
34,389,950
ENTERTAINMENT: 2.9%
Callaway Golf Co. 168,600 5,605,950
- --------------------------------------------------
MGM Grand Inc. * 133,700 5,331,288
- --------------------------------------------------
Mirage Resorts Inc. * 107,200 5,788,800
- -------------------------------------------------- -----------
16,726,038
Financial services: 1.0%
Student Loan Marketing Association 78,700 5,823,800
- --------------------------------------------------
FOOD AND BEVERAGE: 4.5%
Great Atlantic & Pacific Tea Inc. 162,500 $ 5,342,188
- --------------------------------------------------
Heinz H.J. Co. 170,900 5,191,088
- --------------------------------------------------
IBP Inc. 205,800 5,685,225
- --------------------------------------------------
International Multifoods Corp. 224,000 4,088,000
- --------------------------------------------------
Von Companies Inc. * 151,900 5,677,263
- -------------------------------------------------- -----------
25,983,763
INDUSTRIAL: 1.0%
Measurex Corp. 200,400 5,861,700
- --------------------------------------------------
MACHINERY AND ENGINEERING: 1.4%
Carpenter Technology Corp. 154,900 4,956,800
- --------------------------------------------------
Novellus Systems Inc. * 92,100 3,315,600
- -------------------------------------------------- -----------
8,272,400
METALS AND MINING: 5.7%
ASARCO Inc. 205,500 5,676,938
- --------------------------------------------------
Ball Corp. 195,500 5,620,625
- --------------------------------------------------
Cleveland-Cliffs Inc. 139,700 5,465,763
- --------------------------------------------------
Hecla Mining Co. * 727,100 5,089,700
- --------------------------------------------------
Phelps Dodge Corp. 76,400 4,765,450
- --------------------------------------------------
Snap On Inc. 123,800 5,865,025
- -------------------------------------------------- -----------
32,483,500
MOTOR VEHICLES AND EQUIPMENT: 2.9%
Dana Corp. 168,000 5,208,000
- --------------------------------------------------
Fleetwood Enterprises Inc. 192,000 5,952,000
- --------------------------------------------------
Goodrich BF Co. 145,000 5,419,375
- -------------------------------------------------- -----------
16,579,375
OFFICE AND BUSINESS EQUIPMENT AND SERVICES: 9.0%
Cabletron Systems Inc. * 82,900 5,689,013
- --------------------------------------------------
Cadence Design Systems Inc. * 168,475 5,686,031
- --------------------------------------------------
Honeywell Inc. 104,200 5,678,900
- --------------------------------------------------
Moore Corp. Ltd. 285,200 5,383,150
- --------------------------------------------------
New England Business Services Inc. 324,400 6,325,800
- --------------------------------------------------
Reynolds & Reynolds Co. 109,000 5,804,250
- --------------------------------------------------
Sun Microsystems Inc. * 93,200 5,487,150
- --------------------------------------------------
U.S. Robotics Corp. * 68,000 5,814,000
- --------------------------------------------------
Western Digital Corp. * 228,200 5,961,725
- -------------------------------------------------- -----------
51,830,019
PAPER: 3.5%
Avery Dennison Corp. 105,800 5,805,775
- --------------------------------------------------
Boise Cascade Corp. 129,500 4,742,938
- --------------------------------------------------
Chesapeake Corp. 127,900 3,357,375
- --------------------------------------------------
Stone Container Corp. 216,500 2,976,875
- --------------------------------------------------
Westvaco Corp. 102,850 3,072,644
- -------------------------------------------------- -----------
19,955,606
PETROLEUM AND PETROLEUM RELATED: 5.9%
Occidental Petroleum Corp. 214,300 5,303,925
- --------------------------------------------------
Phillips Petroleum Co. 141,400 5,921,125
- --------------------------------------------------
Smith International Inc. * 186,900 5,630,363
- --------------------------------------------------
Union Texas Petroleum 304,900 5,945,550
- --------------------------------------------------
USX Marathon Group Inc. 274,500 5,524,313
- --------------------------------------------------
Williams Companies Inc. 115,000 5,692,500
- -------------------------------------------------- -----------
34,017,775
PRINTING AND PUBLISHING: 1.8%
Banta Corp. 188,250 4,753,313
- --------------------------------------------------
New York Times Co. 167,800 5,474,475
- -------------------------------------------------- -----------
10,227,788
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of shares value
--------- ------------
<S> <C> <C>
PUBLIC UTILITIES: 9.0%
Baltimore Gas & Electric Co. 201,700 $ 5,723,238
- --------------------------------------------------
Edison International 260,400 4,589,550
- --------------------------------------------------
General Public Utilities Corp. 171,300 6,038,325
- --------------------------------------------------
Portland General 193,900 5,986,663
- --------------------------------------------------
Rochester Gas & Electric Corp. 283,100 6,086,650
- --------------------------------------------------
Sierra Pacific Resources 233,300 5,919,988
- --------------------------------------------------
Southwestern Public Service Co. 178,500 5,823,563
- --------------------------------------------------
Texas Utilities Co. 135,700 5,801,175
- --------------------------------------------------
Unicom Corp. 207,900 5,795,213
- -------------------------------------------------- ------------
51,764,363
RAILROADS: 0.9%
Norfolk Southern Corp. 64,100 5,432,475
- --------------------------------------------------
RETAIL: 4.9%
Eckerd Corp. * 255,400 5,778,425
- --------------------------------------------------
Mercantile Stores Co. Inc. 91,700 5,375,913
- --------------------------------------------------
Staples Inc. * 307,775 6,001,613
- --------------------------------------------------
Tiffany & Co. 78,200 5,708,600
- --------------------------------------------------
Waban Inc. * 217,300 5,188,038
- -------------------------------------------------- ------------
28,052,588
SECURITIES DEALERS: 2.1%
Bear, Stearns & Co. Inc. 251,895 5,951,019
- --------------------------------------------------
Edwards (A G) Inc. 225,800 6,124,825
- -------------------------------------------------- ------------
12,075,844
SHOES: 1.0%
Nike Inc. 58,500 6,010,875
- --------------------------------------------------
SOAPS, CLEANER AND COSMETICS: 1.8%
Clorox Co. 68,300 6,053,088
- --------------------------------------------------
International Flavors & Fragrances Inc. 94,000 4,476,750
- -------------------------------------------------- ------------
10,529,838
TELECOMMUNICATIONS: 2.0%
Cincinnati Bell Inc. 108,300 5,645,138
- --------------------------------------------------
Pacific Telesis Group 165,100 5,572,125
- -------------------------------------------------- ------------
11,217,263
TEXTILES-APPAREL MANUFACTURING: 1.0%
Liz Claiborne Inc. 170,200 5,893,175
- -------------------------------------------------- ------------
TOTAL COMMON STOCKS: 95.5%
(Cost $469,029,131) 548,646,985
- --------------------------------------------------
Par Market
amount value
----------- ------------
MONEY MARKET INSTRUMENTS:
Cargill Inc.
. 5.32%, 7/2/96 $ 1,200,000 $ 1,198,049
- --------------------------------------------------
Merrill Lynch
. 5.499%, 7/1/96 12,500,000 12,486,105
. 5.524%, 7/8/96 8,700,000 8,684,340
- --------------------------------------------------
U S West Communications Group
. 5.43%, 7/9/96 6,100,000 6,089,879
- --------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 5.0%
(Cost $28,458,373) 28,458,373
- --------------------------------------------------
TOTAL INVESTMENTS: 100.5%
(Cost $497,487,504) 577,105,358
- --------------------------------------------------
Other assets under liabilities: (0.5)% (2,642,283)
- -------------------------------------------------- -------------
Net assets: 100.0%
(equivalent to $27.167 per share based on
21,145,772 shares issued and outstanding) $574,463,075
- -------------------------------------------------- =============
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS--UNAUDITED
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Growth
and Money Special
Bond Income Managed Market Opportunities
Fund Fund Fund Fund Fund
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 9,042,000 $ 2,679,681 $ 8,309,571 $2,273,446 $ 909,447
- -------------------------------------------------------------------------------------------------------------
Dividends - 22,809,838 3,790,478 - 5,728,223
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 9,042,000 25,489,519 12,100,049 2,273,446 6,637,670
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 593,028 3,329,575 1,211,274 193,613 1,095,915
- -------------------------------------------------------------------------------------------------------------
Directors fees 1,500 1,500 1,500 1,500 1,500
- -------------------------------------------------------------------------------------------------------------
Reporting and distribution 17,763 137,059 45,821 7,248 37,237
- -------------------------------------------------------------------------------------------------------------
Other 20,557 14,303 22,997 15,027 9,240
- -------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 632,848 3,482,437 1,281,592 217,388 1,143,892
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,409,152 22,007,082 10,818,457 2,056,058 5,493,778
- -------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investment transactions (3,727,939) 58,456,941 6,707,849 - 17,933,789
- -------------------------------------------------------------------------------------------------------------
Options written - - - - 201,831
- -------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON
INVESTMENTS (3,727,939) 58,456,941 6,707,849 - 18,135,620
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation on:
Investments (11,755,455) 101,527,684 9,834,811 - 13,278,657
- -------------------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OR DEPRECIATION ON INVESTMENTS (11,755,455) 101,527,684 9,834,811 - 13,278,657
- -------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (15,483,394) 159,984,625 16,542,660 - 31,414,277
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (7,074,242) $181,991,707 $27,361,117 $2,056,058 $36,908,055
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of changes in net assets--unaudited
Six Months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Growth
and Money Special
Bond Income Managed Market Opportunities
Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at January 1, 1995 $195,009,766 $1,161,324,307 $442,139,584 $77,177,437 $318,417,174
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from operations:
Net investment income 7,580,682 18,110,910 11,259,645 2,305,686 4,649,832
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 2,123,321 34,664,505 9,207,676 -- 13,545,428
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments 14,002,702 201,891,132 53,019,636 -- 47,327,562
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 23,706,705 254,666,547 73,486,957 2,305,686 65,522,822
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (7,580,682) (18,110,910) (11,259,645) (2,305,686) (4,649,832)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (69,061,295) (718,100) -- (15,004,876)
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholder (7,580,682) (87,172,205) (11,977,745) (2,305,686) (19,654,708)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from capital share transactions 17,481,449 165,804,088 19,837,346 7,568,577 52,719,151
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 33,607,472 333,298,430 81,346,558 7,568,577 98,587,265
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at June 30, 1995 $228,617,238 $1,494,622,737 $523,486,142 $84,746,014 $417,004,439
===================================================================================================================================
Net assets at January 1, 1996 $250,816,054 $1,833,450,457 $589,164,601 $75,319,387 $505,754,680
Changes from operations:
Net investment income 8,409,152 22,007,082 10,818,457 2,056,058 5,493,778
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (3,727,939) 58,456,941 6,707,849 - 18,135,620
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments (11,755,455) 101,527,684 9,834,811 - 13,278,657
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations (7,074,242) 181,991,707 27,361,117 2,056,058 36,908,055
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (8,409,152) (22,007,082) (10,818,457) (2,056,058) (5,493,778)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments - (112,217,388) (37,948,391) - (38,158,400)
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholder (8,409,152) (134,224,470) (48,766,848) (2,056,058) (43,652,178)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from capital share transactions 21,460,207 306,638,219 79,039,431 11,482,309 75,452,518
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 5,976,813 354,405,456 57,633,700 11,482,309 68,708,395
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at June 30, 1996 $256,792,867 $2,187,855,913 $646,798,301 $86,801,696 $574,463,075
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
Notes to financial statements--unaudited
June 30, 1996
1. Significant Accounting Policies
The Funds: Bond Fund, Growth and Income Fund, Managed Fund, and Money Market
Fund, are registered as open-end, diversified management investment companies
and Special Opportunities Fund, is registered as an open-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended. The Funds' shares are sold only to The Lincoln National Life Insurance
Company (Lincoln Life) for allocation to its Variable Annuity Account C, which
was established for the purpose of funding variable annuity contracts, and to
its Flexible Premium Variable Life Accounts D, G, and K, which were established
for the purpose of funding variable universal life contracts.
The Funds' investment objectives are as follows:
<TABLE>
<CAPTION>
Fund Investment Objective
- --------------------------------------------------------------------------------
<S> <C>
Bond Fund The investment objective is to maximize current
income consistent with prudent investment
strategy. The Fund invests primarily in medium
and long-term corporate and government bonds.
Growth and Income Fund The investment objective is to maximize long-term
capital appreciation. The Fund buys stocks of
established companies.
Managed Fund The investment objective is to maximize long-term
total return (capital gains plus income)
consistent with prudent investment strategy. The
Fund invests in a mix of stocks, bonds, and money
market securities, as determined by an investment
committee.
Money Market Fund The investment objective is to maximize current
income consistent with the preservation of
capital. The Fund invests in short-term
obligations issued by U.S. corporations. The U.S.
Government, and federally-chartered banks and U.S.
branches of foreign banks.
Special Opportunities Fund The investment objective is to maximize capital
appreciation. The Fund primarily invests in
mid-size companies whose stocks have significant
growth potential. Current income is a secondary
consideration.
</TABLE>
Investment Valuation: Investments are stated at value. Portfolio securities
which are traded on stock exchanges are valued at the last reported sale price
on the exchange or market where primarily traded or listed or, in the absence of
recent sales, at the mean between the last reported bid and asked prices. Long-
term debt investments are valued at their bid quotations. The Funds hedge
certain portions of their exposure to fluctuations in interest and market risks
by entering into derivative transactions. These hedges include options and
financial futures. Options traded on exchanges are valued at the last bid price
for options purchased and the last sale price for options written. Options
traded in the over-the-counter market are valued at the last bid price for
options purchased and the last asked price for options written. Financial
futures are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Other securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the funds' Board of
Directors. Money market instruments in securities are stated at amortized cost,
which approximates market value.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Interest income
includes premium and discount amortization on money market instruments and
mortgage-backed securities; it also includes original issue and market discount
amortization on long-term debt investments. Realized gains or losses from
investment transactions are reported on an identified cost basis. Gains and
losses on premiums from expired options are recognized on the date of
expiration.
<PAGE>
Notes to financial statements--unaudited (continued)
Expenses: The custodian bank of the Bond Fund, Growth and Income Fund, Managed
Fund, Money Market Fund, and Special Opportunities Fund has agreed to waive its
custodial fees when the funds maintain a prescribed amount of cash on deposit in
certain non-interest bearing accounts. For the six months ended June 30, 1996,
the custodial fees offset arrangements were not material to either total
expenses or the calculation of average net assets and the ratio of expenses to
average net assets.
Taxes: Each Fund has complied with the special provisions of the Internal
Revenue Code for regulated investment companies. As such, each Fund is not
subject to U.S. federal income taxes to the extent that it distributes all of
its taxable income for its fiscal year.
2. Other assets under liabilities
The statement of net assets accounts "Other assets under liabilities" at June
30, 1996 consisted of the following assets (liabilities):
<TABLE>
<CAPTION>
Growth
and Money Special
Bond Income Managed Market Opportunities
Fund Fund Fund Fund Fund
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash (overdraft) $17,667 $(155,258) $(8,204) $61,008 $421,044
Receivable for dividends earned - 4,658,349 757,407 - 1,173,794
Receivable for interest earned 3,755,293 223,569 3,881,435 528,568 22,194
Receivable for securities sold - 669,405 1,222,742 - 2,316,065
Dividends declared and unpaid (8,409,152) (22,007,082) (10,818,457) (2,056,058) (5,493,778)
Payable for securities purchased - (5,453,202) (2,068,642) - (873,075)
Management fees payable (96,741) (586,146) (205,452) (34,114) (187,259)
Other, net (26,794) (54,123) (37,700) (19,807) (21,268)
-------------------------------------------------------------------------
$(4,759,727) $(22,704,488) $(7,276,871) $(1,520,403) $(2,642,283)
-------------------------------------------------------------------------
</TABLE>
3. Management fees and other transactions with affiliates
Lincoln Investment Management, Inc. (the Advisor) manages the Funds' investment
portfolios, maintains their accounts and records, and furnishes the services of
individuals to perform executive and administrative functions of the Funds. In
return for these services, the Advisor receives a management fee at an annual
rate of .48% of the first $200,000,000 of the average daily net asset value of
the Funds, .40% of the next $200,000,000, and .30% of the average daily net
asset value of the Funds in excess of $400,000,000. If the aggregate annual
expenses of the Funds, including the management fee, but excluding taxes,
interest, brokerage commissions relating to the purchase or sale of portfolio
securities and extraordinary non-recurring expenses, exceeds 1-1/2% of the
average daily net asset value of the Fund, the Advisor will reimburse the Funds
in the amount of such excess. No reimbursement was due for the six months ended
June 30, 1996.
Certain officers and directors of the Funds are also officers or directors of
Lincoln Life. The compensation of unaffiliated directors of the Funds is borne
by the Funds.
<PAGE>
Notes to financial statements--unaudited (continued)
4. Analysis of net assets
Net assets at June 30, 1996 consisted of the following:
<TABLE>
<CAPTION>
Growth
and Money Special
Bond Income Managed Market Opportunities
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common stock, par value
$.01 per share** $ 222,238 $ 716,001 $ 419,458 $ 86,802 $ 211,458
Paid-in capital in excess of par
value of shares issued 263,291,541 1,653,503,571 553,305,740 86,714,894 476,498,143
Undistributed net realized
gain(loss) on investments (8,079,976) 58,456,941 6,707,849 - 18,135,620
Net unrealized appreciation
on investments 1,359,064 475,179,400 86,365,254 - 79,617,854
--------------------------------------------------------------------------------------
$256,792,867 $2,187,855,913 $646,798,301 $86,801,696 $574,463,075
======================================================================================
</TABLE>
** Each Fund has 50,000,000 authorized shares except for the Growth and Income
Fund which has 100,000,000.
5. Investments
The cost of investments for federal income tax purposes is the same as for book
purposes. The aggregate cost of investments purchased, the aggregate proceeds
from investments sold, the aggregate gross unrealized appreciation, the
aggregate gross unrealized depreciation and the net unrealized appreciation of
investments and other financial instruments at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
cost of proceeds unrealized unrealized unrealized
purchases from sales appreciation depreciation appreciation
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bond Fund $247,114,179 $242,531,522 $ 4,559,196 $ 3,200,132 $ 1,359,064
Growth and Income Fund 713,422,091 539,782,745 518,417,339 43,237,939 475,179,400
Managed Fund 434,421,862 404,552,906 97,082,586 10,717,332 86,365,254
Special Opportunities Fund 272,273,604 231,693,372 93,586,219 13,968,365 79,617,854
</TABLE>
6. Supplemental financial instrument information
Options: The Funds purchase or write options which are exchange traded to hedge
fluctuation risks in the price of certain securities. When the funds write a
call or put option, an amount equal to the premium received is reflected as a
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The premium paid by the
Funds for the purchase of a call or put option is recorded as an investment and
subsequently "marked-to-market" to reflect the current market value of the
option purchased.
<PAGE>
notes to financial statements--unaudited (continued)
The Funds are subject to the risk of an imperfect correlation between movement
in the price of the instrument and the price of the underlying security or
transaction. Risks may also arise due to illiquid secondary markets for the
instruments. Written call option activity for 1996 is summarized as follows:
<TABLE>
<CAPTION>
Special Opportunities
Fund
-----------------------------
Number of Premiums
shares received
-----------------------------
<S> <C> <C>
Options outstanding at January 1, 1996 -- $ --
Options written 355,000 794,917
Options exercised (88,500) (177,182)
Options closed (266,500) (617,735)
-----------------------------
Options outstanding at June 30, 1996 $ --
=============================
</TABLE>
7. CONCENTRATION OF CREDIT RISK
The Money Market Fund had investments in securities issued by banks, including
foreign banks, foreign branches of domestic banks, and other financial
institutions representing 35.8% of net assets at June 30, 1996. The ability of
these entities to meet their obligations may be affected by economic conditions
related to the industry.
8. SUMMARY OF CHANGES FROM CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Shares issued upon Net increase
Capital Reinvestment of capital shares resulting from capital
shares sold dividends redeemed share transactions
------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
<S>
Six months ended June 30, 1995:
Bond Fund 914,424 $10,413,461 1,218,139 $ 13,491,950 (570,301) ($6,423,962) 1,562,262 $17,481,449
Growth and Income Fund 3,080,048 75,306,254 4,377,795 100,769,414 (425,159) (10,271,580) 7,032,684 165,804,088
Managed Fund 731,886 10,029,024 1,590,320 20,897,760 (830,577) (11,089,438) 1,491,629 19,837,346
Money Market Fund 2,497,026 24,970,258 319,661 3,196,614 (2,059,829) (20,598,295) 756,858 7,568,577
Special Opportunities Fund 1,782,194 41,428,814 1,003,269 22,445,189 (489,693) (11,154,852) 2,295,770 52,719,151
Six months ended June 30, 1996:
Bond Fund 1,308,044 15,680,572 1,278,235 15,554,772 (842,782) (9,775,137) 1,743,497 21,460,207
Growth and Income Fund 5,337,342 161,469,995 4,811,213 151,848,696 (223,641) (6,680,472) 9,930,914 306,638,219
Managed Fund 1,571,725 24,645,491 3,696,096 60,383,859 (388,744) (5,989,919) 4,879,077 79,039,431
Money Market Fund 3,134,460 31,344,604 455,235 4,552,350 (2,441,464) (24,414,645) 1,148,231 11,482,309
Special Opportunities Fund 1,632,634 44,436,431 1,695,199 48,288,651 (651,722) (17,272,564) 2,676,111 75,452,518
</TABLE>
9. DISTRIBUTION TO SHAREHOLDER
The Funds declare dividends daily on net investment income and annually on net
realized gains, if any. Dividends are distributed annually.
10. CAPITAL LOSS CARRYFORWARD
As of June 30, 1996, the Bond Fund had $8,008,867 of unused capital loss
carryforward for federal tax purposes. The loss carryforward expires in the
years 2002 to 2004.
<PAGE>
Financial highlights - unaudited
(Selected data for each capital share outstanding throughout the year)
<TABLE>
<CAPTION>
Income from investment operation Less dividends from:
----------------------------------------------- ---------------------------------------------------------
Net Net
asset realized and Total
Year value Net unrealized from Net Not realized
ended beginning investment gain (loss) investment investment gain on Total
12/31 of period income on investment operations income investments dividends
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1987 $12.448 $1.055 ($0.873) $0.182 ($1.055) ($0.434) ($1.489)
1988 11.141 1.053 (0.131) 0.922 (1.053) - (1.053)
1989 11.010 1.027 0.428 1.455 (1.027) - (1.027)
1990 11.438 0.998 (0.240) 0.758 (0.998) - (0.998)
1991 11.198 0.956 0.990 1.946 (0.956) - (0.956)
1992 12.188 0.903 0.052 0.955 (0.903) - (0.903)
1993 12.240 0.758 0.703 1.461 (0.758) (0.250) (1.008)
1994 12.693 0.741 (1.233) (0.492) (0.741) (0.519) (1.260)
1995 10.941 0.803 1.306 2.109 (0.803) - (0.803)
1996+ 12.247 0.382 (0.692) (0.310) (0.382) - (0.382)
Growth and Income Fund
1987 $18.031 $0.587 $2.148 $2.735 ($0.587) ($0.539) ($1.126)
1988 19.640 0.540 0.729 1.269 (0.540) (2.997) (3.537)
1989 17.372 0.793 2.859 3.652 (0.793) - (0.793)
1990 20.231 0.512 (0.539) (0.027) (0.512) (1.068) (1.580)
1991 18.624 0.617 5.142 5.759 (0.617) - (0.617)
1992 23.766 0.663 (0.336) 0.327 (0.663) (0.503) (1.166)
1993 22.927 0.610 2.285 2.895 (0.610) (0.519) (1.129)
1994 24.693 0.668 (0.428) 0.240 (0.668) (0.968) (1.636)
1995 23.297 0.701 7.680 8.380 (0.701) (1.221) (1.921)
1996+ 29.756 0.324 2.476 2.800 (0.324) (1.650) (1.974)
Managed Fund
1987 $12.248 $0.674 $0.352 $1.026 ($0.674) ($0.317) ($0.991)
1988 12.283 0.666 0.352 1.018 (0.666) (1.108) (1.774)
1989 11.527 0.798 1.186 1.984 (0.798) - (0.798)
1990 12.713 0.705 (0.334) 0.371 (0.705) (0.438) (1.143)
1991 11.941 0.710 1.906 2.616 (0.710) - (0.710)
1992 13.847 0.653 (0.158) 0.495 (0.653) (0.036) (0.689)
1993 13.653 0.584 0.908 1.492 (0.584) (0.409) (0.993)
1994 14.152 0.628 (0.814) (0.186) (0.628) (0.555) (1.183)
1995 12.783 0.623 3.132 3.755 (0.623) (0.020) (0.643)
1996+ 15.895 0.266 0.459 0.725 (0.266) (0.934) (1.200)
Money Market Fund
1987 $10.000 $0.658 - $0.658 ($0.658) - ($0.658)
1988 10.000 0.744 - 0.744 (0.744) - (0.744)
1989 10.000 0.909 - 0.909 (0.909) - (0.909)
1990 10.000 0.802 - 0.802 (0.802) - (0.802)
1991 10.000 0.571 - 0.571 (0.571) - (0.571)
1992 10.000 0.354 - 0.354 (0.354) - (0.354)
1993 10.000 0.276 - 0.276 (0.276) - (0.276)
1994 10.000 0.381 - 0.381 (0.381) - (0.381)
1995 10.000 0.570 - 0.570 (0.570) - (0.570)
1996+ 10.000 0.253 - 0.253 (0.253) - (0.253)
Special Opportunities Fund
1987 $16.617 $0.064 $1.316 $1.380 ($0.064) - ($0.064)
1988 17.933 0.060 0.327 0.387 (0.060) (2.659) (2.719)
1989 15.601 0.276 4.904 5.180 (0.276) - (0.276)
1990 20.505 0.236 (1.931) (1.695) (0.236) (1.208) (1.444)
1991 17.366 0.323 7.195 7.518 (0.323) - (0.323)
1992 24.561 0.546 1.106 1.652 (0.546) (0.955) (1.501)
1993 24.712 0.530 2.703 3.233 (0.530) (2.937) (3.467)
1994 24.478 0.565 (0.942) (0.377) (0.565) (1.372) (1.937)
1995 22.164 0.616 6.131 6.747 (0.616) (0.912) (1.528)
1996+ 27.383 0.271 1.666 1.937 (0.271) (1.882) (2.153)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Ratio of net
asset Ratio of investment Net assets
Year value expenses income Portfolio at end Average
ended end Total to average to average turnover of period Commission
12/31 of period return* net assets net assets rate (000's) rate**
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1987 $11.141 (0.47%) 0.56% 9.17% 176.75% $50,795 -
1988 11.010 9.24% 0.57% 9.41% 183.79% 59,947 -
1989 11.438 13.23% 0.53% 9.13% 121.19% 91,152 -
1990 11.198 5.45% 0.53% 9.00% 76.67% 103,845 -
1991 12.188 17.96% 0.52% 8.32% 72.80% 139,854 -
1992 12.240 7.68% 0.52% 7.45% 257.27% 168,636 -
1993 12.693 13.39% 0.50% 6.05% 324.90% 226,150 -
1994 10.941 (5.01)% 0.50% 6.40% 213.26% 195,010 -
1995 12.247 19.59% 0.49% 6.90% 139.61% 250,816 -
1996+ 11.555 0.09% 0.25% 3.26% 104.28% 256,793 N/A
Growth and Income Fund
1987 $19.640 14.75% 0.52% 2.78% 142.01% $177,354 -
1988 17.372 8.06% 0.54% 3.08% 179.88% 209,513 -
1989 20.231 19.86% 0.50% 4.06% 208.98% 295,399 -
1990 18.624 1.68% 0.48% 2.79% 59.47% 356,329 -
1991 23.766 30.83% 0.44% 2.86% 33.59% 581,297 -
1992 22.927 1.24% 0.41% 2.97% 74.50% 765,457 -
1993 24.693 13.31% 0.38% 2.58% 60.76% 1,034,105 -
1994 23.297 0.65% 0.37% 2.85% 76.34% 1,161,324 -
1995 29.756 39.06% 0.35% 2.64% 51.76% 1,833,450 -
1996+ 30.582 10.75% 0.17% 1.08% 27.39% 2,187,856 $0.047
Managed Fund
1987 $12.283 7.35% 0.53% 5.23% 121.98% $121,167 -
1988 11.527 8.17% 0.55% 5.71% 166.57% 140,135 -
1989 12.713 16.00% 0.52% 6.47% 158.73% 182,576 -
1990 11.941 3.41% 0.52% 5.96% 93.38% 204,310 -
1991 13.847 22.59% 0.50% 5.53% 22.70% 276,899 -
1992 13.653 3.69% 0.49% 4.86% 226.66% 343,439 -
1993 14.152 11.91% 0.45% 4.24% 235.59% 445,040 -
1994 12.783 (2.42%) 0.44% 4.45% 160.79% 442,140 -
1995 15.895 30.11% 0.43% 4.37% 112.52% 589,165 -
1996+ 15.420 6.80% 0.20% 1.73% 66.37% 646,798 $0.045
Money Market Fund
1987 $10.000 8.02% 0.56% 6.50% - $ 55,093 -
1988 10.000 5.45% 0.55% 7.21% - 59,160 -
1989 10.000 7.20% 0.54% 9.09% - 88,551 -
1990 10.000 7.61% 0.53% 7.94% - 102,399 -
1991 10.000 7.48% 0.53% 5.79% - 149,555 -
1992 10.000 4.70% 0.53% 3.48% - 92,472 -
1993 10.000 4.46% 0.50% 2.76% - 81,042 -
1994 10.000 3.20% 0.52% 3.82% - 77,177 -
1995 10.000 4.22% 0.52% 5.67% - 75,319 -
1996+ 10.000 6.40% 0.27% 2.54% - 86,802 N/A
Special Opportunities Fund
1987 $17.933 8.77% 0.56% 0.31% 110.80% $ 58,866 -
1988 15.601 3.73% 0.59% 0.39% 73.91% 63,982 -
1989 20.505 31.92% 0.55% 1.50% 92.56% 75,245 -
1990 17.366 (7.28%) 0.55% 1.33% 37.50% 83,762 -
1991 24.561 43.14% 0.53% 1.49% 111.60% 132,753 -
1992 24.712 6.24% 0.53% 2.35% 128.49% 189,867 -
1993 24.478 18.31% 0.49% 2.29% 74.11% 273,998 -
1994 22.164 (1.55%) 0.48% 2.49% 74.63% 318,417 -
1995 27.383 32.05% 0.45% 2.39% 90.12% 505,755 -
1996+ 27.167 8.28% 0.21% 1.00% 44.53% 574,463 $0.044
====================================================================================================================================
</TABLE>
** Total return percentages in this table are calculated on the basis
prescribed by the Securities and Exchange Commission. These percentages are
based on the underlying mutual fund shares in which Separate Account C, D,
G, and K may invest. The total return percentages in the table are NOT
calculated on the same basis as the performance percentages noted in the
letter at the front of this booklet (those percentages are based upon the
change in unit value).
*** The average commission rate is required to be disclosed for the fiscal years
beginning on or after September 1, 1995. The rate is the average commission
paid per share for security trades on which a commission is charged. This
amount may vary from period to period and from fund to fund depending on the
mix of trades executed in various markets where trading practices and
commission rate structures may differ.
+ Six months ended June 30, 1996. Returns, ratios, and portfolio turnovers
have NOT been calculated on an annualized basis.
<PAGE>
Lincoln National Life Insurance Co. --------
1300 South Clinton Street | |
Fort Wayne, IN 46802 | |
--------
[LOGO OF LINCOLN NATIONAL LIFE INSURANCE CO.]
Fort Wayne, Indiana 46801
