<PAGE> 1
American Capital
Life Investment
Trust
Annual Report
December 31, 1994
[Photo of Man, Woman and Child]
[Photo of Man and Woman with Boat]
[Photo of Man, Woman and Child]
The Life Investment Trust Portfolios are
available in variable annuity and variable
life products only.
[LOGO]
<PAGE> 2
POLICYHOLDERS' MESSAGE
February 13, 1995
[Photo of Don G. Powell]
Dear Policyholder,
The past year was a challenging one for investors in both equity and
fixed-income investments. The continued growth of the economy prompted concerns
about rising inflation, which resulted in the Federal Reserve Board raising
short-term interest rates six times. As the Fed continued to raise rates,
investors became increasingly worried about the impact those increases would
have on corporate earnings. The result was that most investments had a negative
total return for the year.
As we look back on 1994, it is important to remember that the
Portfolios in the American Capital Life Investment Trust have provided
policyholders with consistent, solid returns over the long term. I encourage
you to maintain a long-term perspective toward the investment component of your
life insurance product.
On the following pages, you will find more details on the stock and
bond markets' performance during 1994, along with details on the performance of
each of the five Life Investment Trust portfolios from the perspective of your
Portfolio's management team.
Please note that the performance shown is that of the underlying
investment portfolios; your individual returns may vary based on the specific
variable product in which you have invested.
The Benefits of Tax-Deferral
Many investors still are searching for new ways to lower their tax burden.
Variable annuities remain one of the few primary tools for tax-deferral
available to nearly all investors. And for variable products outside IRA or
401(k) or similar qualified accounts, there are no maximum annual contribution
limits. If you are among those investors who are concerned about paying higher
taxes, now may be a good time to consider additional investments in Life
Investment Trust. Your investment professional can help you determine whether
this would be appropriate for you.
Thank you for your continued confidence in American Capital Life
Investment Trust.
Sincerely,
/s/ DON G. POWELL
Don G. Powell
President
1
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PORTFOLIO PERSPECTIVE
[Photo of Woman and 2 Men looking at Computer Screens]
Market Review
Both the stock and bond markets declined in 1994. The stock market was affected
most by negative investor reaction to repeated increases in short-term interest
rates because of the likely impact on corporate earnings. In addition to
concerns about corporate profits because of higher borrowing costs, investors
also were concerned that if the Fed was successful in slowing the economy,
companies would not enjoy the same growth experienced in previous years. This
would put a further strain on earnings growth, which is the primary force
behind stock market performance. Industries that suffer in this type of economy
include homebuilders, automobile manufacturers and their suppliers, such as
steel companies.
After moving upward in January, the stock market began a steady decline
in February when the Federal Reserve Board first hiked interest rates. The
performance gradually improved during the second half of the year, but the gain
barely offset the earlier declines. The Standard & Poor's 500-Stock Index, a
broad-based, unmanaged indicator of stock market performance, finished the year
with a total return of just 1.36%.
Meanwhile, higher interest rates pushed up bond yields and depressed
prices because of the inverse relationship between price and yield. Each
additional hike in rates pushed bond prices down further, testing the patience
of bond investors.
The bond portfolios within the Life Investment Trust benefitted from
our continuing focus on higher quality securities. Because of this focus, the
portfolios were able to maintain more of their value in this market than they
probably would have with lower quality securities.
Common Stock Portfolio
- --------------------------------------------------------------------------------
THE FOLLOWING IS AN INTERVIEW WITH THE MANAGEMENT TEAM OF THE LIT COMMON STOCK
PORTFOLIO. THE TEAM IS LED BY PORTFOLIO MANAGER ROBERT BAKER AND ALAN
SACHTLEBEN, EXECUTIVE VICE PRESIDENT FOR EQUITY INVESTMENTS.
- --------------------------------------------------------------------------------
Q. HOW DID YOU ADJUST THE PORTFOLIO TO DEAL WITH THE IMPACT OF RISING
INTEREST RATES?
A. As the year started, the Portfolio was more heavily invested in
financial, cyclical and, to a lesser extent, smaller capitalization stocks.
These types of
2
<PAGE> 4
stocks typically underperform when interest rates rise. So, as the Fed began
raising rates, we gradually sold many of the financial, cyclical and small-cap
issues in the Portfolio. We focused instead on the stocks of companies that
were relatively inexpensive compared to their underlying value. Examples
include AMR Corp., Philip Morris and WMX Technologies.
[Pie Chart showing Portfolio Structure]
We increased the Portfolio's holdings of health care and utility
stocks. The price of stocks in both industries had been depressed, creating
what we believe are many good values. Health care companies suffered early in
the year from concerns about the potential impact of health care reform, which
now appears less likely to occur. Utility stocks came under pressure as
interest rates rose and regulators in California took steps that gradually will
deregulate parts of the industry and, thus, increase competition among electric
utilities. We believe health care and utility stocks are undervalued and,
therefore, offer good potential for appreciation.
The Portfolio's diversification is illustrated by the chart at right.
For a complete list of the Portfolio's holdings at the end of the reporting
period, see the Investment Portfolio section beginning on page 9.
Q. HOW DID THE PORTFOLIO DO LAST YEAR?
A. The total return for the Portfolio reflected the difficult
environment for stocks last year. The total return at net asset value (without
a sales charge) was -3.39%, including reinvestment of dividends totalling $.25
per share and capital gains distributions of $1.4175 per share.
Q. HOW DID STOCKS IN GENERAL PERFORM LAST YEAR?
A. The Standard & Poor's 500-Stock Index achieved a total return of
1.36%. The Index is a broad-based, unmanaged index that reflects general stock
market performance. It does not reflect any commissions or fees that would be
paid by an investor purchasing the securities it represents.
/s/ ROBERT BAKER, JR.
B. Robert Baker, Jr.
Portfolio Manager - Common Stock Portfolio
3
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DOMESTIC STRATEGIC INCOME PORTFOLIO
- --------------------------------------------------------------------------------
THE FOLLOWING IS AN INTERVIEW WITH THE MANAGEMENT TEAM OF THE LIT DOMESTIC
STRATEGIC INCOME PORTFOLIO. THE TEAM IS LED BY PORTFOLIO MANAGER WALTER
STABELL AND ROBERT PECK, EXECUTIVE VICE PRESIDENT.
- --------------------------------------------------------------------------------
Q. WHAT WAS THE IMPACT OF RISING INTEREST RATES ON THE PORTFOLIO'S
PERFORMANCE LAST YEAR?
A. The Portfolio held some bonds with longer maturities, as well as
bonds that were protected against being redeemed early. These types of issues
are among those most affected by rising rates. The Portfolio's performance
could have been significantly impacted by the increases. In response, we
shortened the duration of the portfolio. Duration is a measure of a bond's
sensitivity to changes in interest rates. The shorter the duration, the less a
bond portfolio's value will be impacted by a change in rates.
Despite the increases in interest rates, the economy continued to grow,
fueling financial strength among lower quality issuers. As a result, we
increased the percentage of the Portfolio that was invested in high-yield
issues. At the end of the year, about 38% of the Portfolio was in high-yield
issues and 55% was in investment-grade corporate and government bonds. However,
as we see signs that the economy is beginning to slow, we expect to reduce our
holdings of high-yield bonds. It is important to remember that we invest only
in better quality high-yield issues. The composition of the Portfolio is
illustrated by the chart at left.
[Pie Chart showing Portfolio Structure]
Q. HOW DID THE PORTFOLIO PERFORM IN 1994?
A. The Portfolio achieved a total return at net asset value last year of
- -4.33%, including reinvestment of dividends totalling $.8525 per share.
However, this does not tell the whole story.
Q. HOW DID CORPORATE BONDS IN GENERAL PERFORM LAST YEAR?
A. The Lehman Brothers Corporate Bond Index achieved a total return of
- -3.93%. The Index is a broad-based, unmanaged index that reflects the general
performance of corporate bonds. It does not reflect any commissions or fees
that would be paid by an investor purchasing the securities it represents.
/s/ WALTER W. STABELL, III
- -----------------------------
Walter W. Stabell, III
Portfolio Manager - Domestic
Strategic Income Portfolio
4
<PAGE> 6
GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
THE FOLLOWING IS AN INTERVIEW WITH THE MANAGEMENT TEAM OF THE LIT GOVERNMENT
PORTFOLIO. THE TEAM IS LED BY PORTFOLIO MANAGER JOHN REYNOLDSON AND ROBERT
PECK, EXECUTIVE VICE PRESIDENT.
- --------------------------------------------------------------------------------
Q. HOW DID YOU DEAL WITH THE CHANGING INTEREST-RATE ENVIRONMENT?
A. We reduced the Portfolio's duration, which reduces the impact of
changes in interest rates on its performance, and we increased our exposure to
mortgage-backed securities. The expected return on mortgage-backed securities
looked superior to that available from Treasury issues because rising interest
rates virtually eliminated prepayment of home mortgages.
The diversification of the Portfolio is illustrated by the chart at
right.
[Pie Chart showing Securities by Issuer]
Q. HOW DID THE PORTFOLIO PERFORM IN 1994?
A. The Portfolio achieved a total return at net asset value during 1994
of -4.63%, including reinvestment of dividends totalling $.555 per share. By
comparison, the Lehman Brothers Mutual Fund General U.S. Government Index
achieved a total return of -3.37%. The Index is a broad-based, unmanaged index
that reflects the general performance of government securities. It does not
reflect any commissions or fees that would be paid by an investor purchasing
the securities it represents.
/s/ JOHN R. REYNOLDSON
- ----------------------------------------
John R. Reynoldson
Portfolio Manager - Government Portfolio
5
<PAGE> 7
MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
THE FOLLOWING IS AN INTERVIEW WITH THE MANAGEMENT TEAM OF LIT MONEY MARKET
PORTFOLIO. THE TEAM IS LED BY PORTFOLIO MANAGER DAVID TROTH AND ROBERT PECK,
EXECUTIVE VICE PRESIDENT.
- -------------------------------------------------------------------------------
Q. HOW DID THE PORTFOLIO BENEFIT FROM RISING INTEREST RATES?
A. Money market funds provided some of the best returns in 1994 because of
the increase in short-term rates. The LIT Money Market Portfolio achieved a
total return at net asset value of 3.71%, including reinvestment of dividends
totalling $.0365 per share.
Q. DID YOU MAKE ANY CHANGES TO THE STRUCTURE OF THE PORTFOLIO DURING THE
PAST YEAR?
A. Your Portfolio's objective is to maintain a stable net asset value and
a conservative return through investments in very short-term securities. It is
especially appropriate for investors who want to protect the assets they have
accumulated as they near annuitization period of their contracts.
Throughout the year, our strategy has been to seek ways to safely
maximize yields. To accomplish this, we continually adjusted the Portfolio's
average maturity, although it ended up at the same point as it was on December
31, 1993: 24 days. By adjusting the maturity, we have been able to capture the
highest yields available within our quality constraints and be flexible enough
to adjust to any further changes in interest rates.
At year-end, 72% of the Portfolio was invested in U.S. Government
obligations, compared to 69% a year ago, while the percentage invested in
repurchase agreements decreased to 2% from 10% at December 31, 1993.
/s/ DAVID R. TROTH
- -------------------------
David R. Troth
Portfolio Manager - Money
Market Portfolio
6
<PAGE> 8
MULTIPLE STRATEGY PORTFOLIO
- -------------------------------------------------------------------------------
THE FOLLOWING IS AN INTERVIEW WITH THE MANAGEMENT TEAM OF LIT MULTIPLE STRATEGY
PORTFOLIO. THE TEAM IS LED BY PORTFOLIO MANAGER ROBERT BAKER AND ALAN
SACHTLEBEN, EXECUTIVE VICE PRESIDENT.
- -------------------------------------------------------------------------------
Q. HOW DID THE CHANGE IN INTEREST RATES AFFECT THE PORTFOLIO'S PERFORMANCE
IN 1994?
A. The Multiple Strategy Portfolio invests in stocks, bonds and money
market instruments, adjusting the proportion as market conditions warrant.
Since rising interest rates had a negative impact on both stocks and bonds, the
performance of your Portfolio was negatively impacted.
In an effort to limit the Portfolio's vulnerability to the impact of
rising rates, we significantly reduced the percentage invested in common
stocks, from 82% on December 31, 1993, to 50% at December 31, 1994. On the
other hand, we significantly increased the percentage invested in bonds, from
12% a year ago to 46% at year-end 1994. The additional investment in bonds
helped boost the Portfolio's income stream, and the balance between stocks and
bonds positions us to take advantage of whatever market conditions develop in
1995. The Portfolio's structure is illustrated by the chart at right.
[Pie Chart showing Portfolio Structure]
Q. HOW DID THE PORTFOLIO PERFORM LAST YEAR?
A. The Multiple Strategy Portfolio achieved a total return at net asset
value for 1994 of -3.66%, including reinvestment of dividends totalling $.45
per share, and capital gains distributions of $.92 per share. By comparison,
the Standard & Poor's 500-Stock Index achieved a total return of 1.36%. The
Index is a broad-based, unmanaged index that reflects general stock market
performance. It does not reflect any commissions or fees that would be paid by
an investor purchasing the securities it represents.
/s/ B. ROBERT BAKER, JR.
- ----------------------------
B. Robert Baker, Jr.
Portfolio Manager - Multiple
Strategy Portfolio
7
<PAGE> 9
OUTLOOK
As expected, the Fed raised interest rates once more in early 1995, which will
limit the performance of stocks and bonds in the early part of the year. Then,
investors will look to corporate earnings to see whether the rate hikes have
slowed economic growth too much. If investors believe the economy will continue
to grow at a moderate pace, stocks should enjoy modest returns.
Inflation likely will continue to increase at a moderate rate, which
bodes well for fixed-income investors. The "real" rate of return, investment
return minus inflation, should remain attractive, and these investments
continue to be appropriate for income-oriented investors.
/s/ ALAN T. SACHTLEBEN /s/ ROBERT C. PECK, JR.
- ------------------------ --------------------------------
Alan T. Sachtleben Robert C. Peck, Jr.
Executive Vice President Executive Vice President
Equity Investments Taxable Fixed-Income Investments
8
<PAGE> 10
COMMON STOCK PORTFOLIO INVESTMENT PORTFOLIO
December 31, 1994
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 93.1%
CONSUMER DISTRIBUTION 5.9%
7,500 American Stores Co. . . . . . . . . . . . . . . . . . . . . . . . . . $ 201,563
4,500 Circuit City Stores, Inc. . . . . . . . . . . . . . . . . . . . . . . 100,125
6,400 Dayton Hudson Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 452,800
6,000 Dillard Department Stores, Inc. . . . . . . . . . . . . . . . . . . . 160,500
*10,600 Federated Department Stores, Inc. . . . . . . . . . . . . . . . . . . 204,050
6,900 Gap, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,450
11,100 Limited, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,188
5,800 May Department Stores Co. . . . . . . . . . . . . . . . . . . . . . . 195,750
5,500 Penney (J.C.), Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 245,438
7,500 Premark International, Inc. . . . . . . . . . . . . . . . . . . . . . 335,625
12,600 Sears, Roebuck & Co. . . . . . . . . . . . . . . . . . . . . . . . . . 579,600
8,300 Sysco Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,725
*6,600 Toys R Us, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,300
31,000 Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 658,750
------------
TOTAL CONSUMER DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 3,960,864
------------
CONSUMER DURABLES 4.3%
10,000 Black & Decker Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 237,500
14,000 Brunswick Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 264,250
17,000 Callaway Golf Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 563,125
7,200 Eastman Kodak Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 343,800
4,800 Eaton Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,600
10,000 Echlin, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
9,800 Ford Motor Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,400
16,000 General Motors Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 676,000
------------
TOTAL CONSUMER DURABLES . . . . . . . . . . . . . . . . . . . . . . 2,896,675
------------
CONSUMER NON-DURABLES 7.6%
10,000 Anheuser-Busch Companies, Inc. . . . . . . . . . . . . . . . . . . . . 508,750
12,000 Archer Daniels Midland Co. . . . . . . . . . . . . . . . . . . . . . . 247,500
6,400 Clorox Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,800
*19,500 Dr Pepper/Seven-Up Companies, Inc. . . . . . . . . . . . . . . . . . . 499,688
13,700 PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,625
24,000 Pet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474,000
22,000 Philip Morris Companies, Inc. . . . . . . . . . . . . . . . . . . . . 1,265,000
6,000 Procter & Gamble Co. . . . . . . . . . . . . . . . . . . . . . . . . . 372,000
14,000 Quaker Oats Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,500
12,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303,000
8,000 U.S. Shoe Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
------------
TOTAL CONSUMER NON-DURABLES . . . . . . . . . . . . . . . . . . . . 5,123,863
------------
CONSUMER SERVICES 6.6%
5,000 Belo (A. H.) Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 282,500
12,500 Dun & Bradstreet Corp. . . . . . . . . . . . . . . . . . . . . . . . . 687,500
25,000 Marriott International, Inc. . . . . . . . . . . . . . . . . . . . . . 703,125
4,600 McDonald's Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,550
2,000 McGraw Hill, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 133,750
14,700 New York Times Co., Class A . . . . . . . . . . . . . . . . . . . . . 325,238
*10,500 Promus Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 325,500
</TABLE>
9
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COMMON STOCK PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES-CONTINUED
4,600 RR Donnelley & Sons Co. . . . . . . . . . . . . . . . . . . . . . . . $ 135,700
3,800 Time Warner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 133,475
9,000 Tribune Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,750
24,000 Walt Disney Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,107,000
------------
TOTAL CONSUMER SERVICES . . . . . . . . . . . . . . . . . . . . . . 4,461,088
------------
ENERGY 10.7%
12,000 Ashland Oil, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 414,000
3,200 Atlantic Richfield Co. . . . . . . . . . . . . . . . . . . . . . . . . 325,600
10,000 Baker Hughes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 182,500
6,200 Chevron Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,675
26,000 Coastal Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669,500
15,100 Consolidated Natural Gas Co. . . . . . . . . . . . . . . . . . . . . . 536,050
34,000 Exxon Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,065,500
13,000 Halliburton Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,625
11,000 Occidental Petroleum Corp. . . . . . . . . . . . . . . . . . . . . . . 211,750
38,600 Pacific Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . 820,250
17,000 Panhandle Eastern Corp. . . . . . . . . . . . . . . . . . . . . . . . 335,750
11,000 Repsol, SA, ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,750
5,500 Schlumberger, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 277,063
6,600 Texaco,Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,175
------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,240,188
------------
FINANCE 11.2%
13,000 Ahmanson (H.F.) & Co. . . . . . . . . . . . . . . . . . . . . . . . . 209,625
5,700 Allstate Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,663
4,800 American General Corp. . . . . . . . . . . . . . . . . . . . . . . . . 135,600
5,500 American International Group, Inc. . . . . . . . . . . . . . . . . . . 539,000
22,000 BankAmerica Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 869,000
25,000 Chase Manhattan Corp. . . . . . . . . . . . . . . . . . . . . . . . . 859,375
19,500 Chemical Banking Corp. . . . . . . . . . . . . . . . . . . . . . . . . 699,563
2,400 Chubb Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,700
5,100 Corestates Financial Corp. . . . . . . . . . . . . . . . . . . . . . . 132,600
4,000 Crestar Financial Corp. . . . . . . . . . . . . . . . . . . . . . . . 150,500
10,000 Dean Witter, Discover & Co. . . . . . . . . . . . . . . . . . . . . . 338,750
15,000 Federal National Mortgage Association . . . . . . . . . . . . . . . . 1,093,125
3,000 First Interstate Bancorp . . . . . . . . . . . . . . . . . . . . . . . 202,875
2,700 Marsh & McLennan Companies, Inc. . . . . . . . . . . . . . . . . . . . 213,975
5,100 Midlantic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,150
18,000 NationsBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 812,250
6,000 NWNL Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 174,000
10,700 Providian Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,363
8,000 St. Paul Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 358,000
------------
TOTAL FINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,574,114
------------
HEALTH CARE 9.2%
6,000 Abbott Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . 195,750
*5,200 Amgen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,800
26,000 Baxter International, Inc. . . . . . . . . . . . . . . . . . . . . . . 734,500
9,000 Bristol Myers Squibb Co. . . . . . . . . . . . . . . . . . . . . . . . 520,875
10,600 Columbia/HCA Healthcare Corp. . . . . . . . . . . . . . . . . . . . . 386,900
5,700 Eli Lilly & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,063
</TABLE>
10
<PAGE> 12
COMMON STOCK PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE-CONTINUED
11,000 Mallinckrodt Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . $ 328,625
12,700 Merck & Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 484,188
*12,000 Nellcor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396,000
5,300 Pfizer, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,425
10,000 Schering-Plough Corp. . . . . . . . . . . . . . . . . . . . . . . . . 740,000
25,000 Upjohn Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768,750
7,000 Warner Lambert Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 539,000
------------
TOTAL HEALTH CARE . . . . . . . . . . . . . . . . . . . . . . . . . 6,184,876
------------
PRODUCER MANUFACTURING 9.3%
32,500 Browning-Ferris Industries, Inc. . . . . . . . . . . . . . . . . . . . 922,188
3,700 Caterpillar, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 203,963
3,200 Emerson Electric Co. . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
11,600 General Electric Co. . . . . . . . . . . . . . . . . . . . . . . . . . 591,600
21,000 Hanson, PLC, ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,000
5,600 ITT Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,300
5,100 Minnesota Mining & Manufacturing Co. . . . . . . . . . . . . . . . . . 272,213
11,000 Philips N.V., ADR . . . . . . . . . . . . . . . . . . . . . . . . . . 323,125
22,000 Tenneco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935,000
*5,400 Varity Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,750
15,000 Westinghouse Electric Corp. . . . . . . . . . . . . . . . . . . . . . 183,750
59,800 WMX Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 1,569,750
------------
TOTAL PRODUCER MANUFACTURING . . . . . . . . . . . . . . . . . . . . 6,271,639
------------
RAW MATERIALS/PROCESSING INDUSTRIES 7.0%
1,600 Aluminum Co. of America . . . . . . . . . . . . . . . . . . . . . . . 138,600
15,300 American Barrick Resources Corp. . . . . . . . . . . . . . . . . . . . 340,425
*7,500 Bethlehem Steel Corp. . . . . . . . . . . . . . . . . . . . . . . . . 135,000
4,800 Consolidated Papers . . . . . . . . . . . . . . . . . . . . . . . . . 216,000
*12,000 Crown, Cork & Seal, Inc. . . . . . . . . . . . . . . . . . . . . . . . 453,000
7,000 DuPont (E.I.) de Nemours & Co., Inc. . . . . . . . . . . . . . . . . . 393,750
15,200 Ethyl Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,300
2,900 Hercules, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,588
3,500 International Paper Co. . . . . . . . . . . . . . . . . . . . . . . . 263,813
9,000 Lubrizol Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,875
7,000 Mead Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,375
2,500 Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,250
12,000 Newmont Mining Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 432,000
15,000 Praxair, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,500
13,000 Sherwin Williams Co. . . . . . . . . . . . . . . . . . . . . . . . . . 430,625
4,000 USX/US Steel Group . . . . . . . . . . . . . . . . . . . . . . . . . . 142,000
3,600 Weyerhauser Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000
------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES . . . . . . . . . . . . . 4,690,101
------------
TECHNOLOGY 5.8%
5,200 Apple Computer, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 202,800
7,400 Avnet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,800
8,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,000
4,400 Computer Associates International, Inc. . . . . . . . . . . . . . . . 213,400
2,000 Hewlett Packard Co. . . . . . . . . . . . . . . . . . . . . . . . . . 199,750
3,800 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,725
10,000 International Business Machines Corp. . . . . . . . . . . . . . . . . 735,000
</TABLE>
11
<PAGE> 13
COMMON STOCK PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY-CONTINUED
5,000 Loral Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 189,375
10,000 Rockwell International Corp. . . . . . . . . . . . . . . . . . . . . . 357,500
*15,700 Stratus Computer, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 596,600
*7,500 Sun Microsystems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 266,250
3,100 Texas Instruments, Inc. . . . . . . . . . . . . . . . . . . . . . . . 232,113
------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . 3,883,313
------------
TRANSPORTATION 3.5%
*25,000 AMR Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,250
*11,600 Federal Express Corp. . . . . . . . . . . . . . . . . . . . . . . . . 698,900
12,000 Illinois Central Corp. . . . . . . . . . . . . . . . . . . . . . . . . 369,000
------------
TOTAL TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . 2,399,150
------------
UTILITIES 12.0%
4,200 American Electric Power, Inc. . . . . . . . . . . . . . . . . . . . . 138,075
8,000 Ameritech Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 323,000
9,500 AT&T Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,375
30,000 Baltimore Gas & Electric Co. . . . . . . . . . . . . . . . . . . . . . 663,750
6,500 Bell Atlantic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 323,375
9,200 Bellsouth Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 497,950
7,500 Carolina Power &Light Co. . . . . . . . . . . . . . . . . . . . . . . 199,688
7,500 Centerior Energy Corp. . . . . . . . . . . . . . . . . . . . . . . . . 66,563
2,500 Cipsco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,500
2,400 Florida Progress Corp. . . . . . . . . . . . . . . . . . . . . . . . . 72,000
6,000 FPL Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,750
16,700 GTECorp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,263
2,000 Houston Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 71,250
2,800 Idaho Power Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,800
8,300 Illinova Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,525
2,200 Ipalco Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . 66,000
3,300 Nevada Power Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,238
2,500 NIPSCO Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 74,375
13,000 Nynex Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,750
11,000 Ohio Edison Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,500
8,000 Pacificorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,000
12,000 Pacific Telesis Corp. . . . . . . . . . . . . . . . . . . . . . . . . 342,000
16,000 Peco Energy Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,000
5,000 Public Service Co. of Colorado . . . . . . . . . . . . . . . . . . . . 146,875
*5,200 Public Service Co. of New Mexico . . . . . . . . . . . . . . . . . . . 67,600
3,300 Puget Sound Power & Light Co. . . . . . . . . . . . . . . . . . . . . 66,413
3,400 San Diego Gas & Electric Co. . . . . . . . . . . . . . . . . . . . . . 65,450
30,000 Southern Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
2,500 Southwestern Public Service Co. . . . . . . . . . . . . . . . . . . . 66,250
36,100 Sprint Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997,252
13,600 US West Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484,500
------------
TOTAL UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 8,127,067
------------
TOTAL COMMON STOCK (Cost $63,376,491) . . . . . . . . . . . . . . . 62,812,938
------------
</TABLE>
12
<PAGE> 14
COMMON STOCK PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Warrants Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Warrants 0.0%
*189 Chase Manhattan Corp., expiring 6/30/96 (Cost $0) . . . . . . . . . . $ 921
------------
Principal
Amount Short-Term Investments 10.4%
- -------------
$ 5,070,000 Repurchase Agreement with Salomon Brothers, Inc., dated 12/30/94,
5.75%, due 1/3/95 (Collateralized by U.S. Government obligations
in a pooled cash account) repurchase proceeds $5,073,239 . . . . . . 5,070,000
2,000,000 United States Treasury Bills, 5.37%, 3/9/95 . . . . . . . . . . . . . 1,979,380
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $7,049,940) . . . . . . . . . . . 7,049,380
------------
TOTAL INVESTMENTS (Cost $70,426,431) 103.5% . . . . . . . . . . . . . 69,863,239
Other assets and liabilities, net (3.5%) . . . . . . . . . . . . . . . (2,391,317)
------------
NET ASSETS 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,471,922
============
</TABLE>
*NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 15
COMMON STOCK PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at market value (Cost $70,426,431)............................ $69,863,239
Cash....................................................................... 5,544
Receivable for investments sold............................................ 2,468,712
Dividends and interest receivable.......................................... 174,051
Receivable for Fund shares sold............................................ 4,113
Other assets............................................................... 1,856
-----------
TOTAL ASSETS............................................................. 72,517,515
-----------
LIABILITIES
Payable for investments purchased.......................................... 4,974,888
Accrued expenses........................................................... 38,107
Due to Adviser............................................................. 24,566
Due to broker-variation margin............................................. 4,450
Payable for Fund shares redeemed........................................... 2,082
Due to shareholder service agent........................................... 1,500
-----------
TOTAL LIABILITIES........................................................ 5,045,593
-----------
NET ASSETS, equivalent to $12.39 per share................................. $67,471,922
===========
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited shares
authorized; 5,444,930 shares outstanding.................................. $ 54,449
Capital surplus............................................................ 67,494,639
Undistributed net realized gain on securities.............................. 470,859
Net unrealized depreciation of securities.................................. (563,192)
Undistributed net investment income........................................ 15,167
-----------
NET ASSETS at December 31, 1994............................................ $67,471,922
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 16
COMMON STOCK PORTFOLIO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
Statement of Operations DECEMBER 31, 1994
-----------------
<S> <C>
INVESTMENT INCOME
Dividends................................................................. $ 1,481,139
Interest.................................................................. 124,770
-----------
Investment income....................................................... 1,605,909
-----------
EXPENSES
Management fees (net of expense reimbursement of $57,464)................. 288,895
Accounting services....................................................... 52,665
Shareholder service agent's fees and expenses............................. 18,971
Audit fees................................................................ 13,860
Custodian fees............................................................ 12,789
Trustees' fees and expenses............................................... 10,873
Reports to shareholders................................................... 9,429
Legal fees................................................................ 5,412
Miscellaneous............................................................. 2,737
-----------
Total expenses.......................................................... 415,631
-----------
Net investment income................................................... 1,190,278
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on securities
Investments............................................................. 6,940,744
Futures contracts....................................................... 9,973
Net unrealized depreciation of securities during the year................. (10,647,731)
-----------
Net realized and unrealized loss on securities.......................... (3,697,014)
-----------
Decrease in net assets resulting from operations........................ $(2,506,736)
===========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
Statement of Changes in Net Assets 1994 1993
----------- -----------
<S> <C> <C>
NET ASSETS, beginning of year.................................. $72,259,545 $65,568,719
----------- -----------
OPERATIONS
Net investment income......................................... 1,190,278 974,853
Net realized gain on securities............................... 6,950,717 5,217,127
Net unrealized depreciation of securities during the year..... (10,647,731) (213,251)
----------- -----------
Increase (decrease) in net assets resulting from operations.. (2,506,736) 5,978,729
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income......................................... (1,197,291) (1,003,254)
Net realized gain on securities............................... (6,788,651) (3,109,301)
----------- -----------
(7,985,942) (4,112,555)
----------- -----------
SHARE TRANSACTIONS
Proceeds from shares sold..................................... 11,714,030 19,058,822
Proceeds from shares issued for dividends and
distributions reinvested..................................... 7,985,942 4,112,555
Cost of shares redeemed....................................... (13,994,917) (18,346,725)
----------- -----------
Increase in net assets resulting from share transactions..... 5,705,055 4,824,652
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.............................. (4,787,623) 6,690,826
----------- -----------
NET ASSETS, end of year........................................ $67,471,922 $72,259,545
=========== ===========
CHANGE IN SHARES OUTSTANDING
Shares sold.................................................... 827,085 1,310,999
Shares issued for dividends and distributions reinvested....... 648,452 292,694
Shares redeemed................................................ (989,273) (1,258,324)
----------- -----------
Increase in shares outstanding............................... 486,264 345,369
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 17
DOMESTIC STRATEGIC INCOME PORTFOLIO INVESTMENT PORTFOLIO
December 31, 1994
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Obligations 84.0%
CONSUMER DISTRIBUTION 11.5%
$ 500,000 Borden, Inc., 7.875%, 2/15/23 . . . . . . . . . . . . . . . . . . . . $ 376,700
300,000 ConAgra, Inc., 9.75%, 3/1/21 . . . . . . . . . . . . . . . . . . . . . 318,630
500,000 Food 4 Less, 13.75%, 6/15/01 . . . . . . . . . . . . . . . . . . . . . 542,500
350,000 Levitz Furniture Corp., 9.625%, 7/15/03 . . . . . . . . . . . . . . . 278,250
500,000 Smitty's Supervalue, 12.75%, 6/15/04 (private placement, purchased
on 6/22/94) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,000
500,000 Specialty Retailers, Inc., 11.00%, 8/15/03 . . . . . . . . . . . . . . 445,000
------------
TOTAL CONSUMER DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 2,451,080
------------
CONSUMER DURABLES 2.6%
500,000 Chrysler Corp., 10.95%, 8/1/17 . . . . . . . . . . . . . . . . . . . . 547,850
------------
CONSUMER NON-DURABLES 4.5%
500,000 Fieldcrest Cannon, Inc., 11.25%, 6/15/04 . . . . . . . . . . . . . . . 502,500
500,000 Westpoint Stevens, 9.375%, 12/15/05 . . . . . . . . . . . . . . . . . 452,500
------------
TOTAL CONSUMER NON-DURABLES . . . . . . . . . . . . . . . . . . . . 955,000
------------
CONSUMER SERVICES 9.7%
250,000 News America Holdings, Inc., 10.125%, 10/15/12 . . . . . . . . . . . . 258,850
500,000 Tele-Communications, Inc., 7.875%, 8/1/13 . . . . . . . . . . . . . . 422,150
500,000 Time Warner, Inc., 9.125%, 1/15/13 . . . . . . . . . . . . . . . . . . 453,400
500,000 Turner Broadcasting System, Inc., 7.40%, 2/1/04 . . . . . . . . . . . 417,900
500,000 Valassis Inserts, Inc., 9.55%, 12/1/03 . . . . . . . . . . . . . . . . 502,380
------------
TOTAL CONSUMER SERVICES . . . . . . . . . . . . . . . . . . . . . . 2,054,680
------------
ENERGY17.2%
Coastal Corp.
300,000 10.25%, 10/15/04 . . . . . . . . . . . . . . . . . . . . . . . . . . 322,740
200,000 11.75%, 6/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . 215,620
500,000 Forest Oil Corp., 11.25%, 9/1/03 . . . . . . . . . . . . . . . . . . . 445,000
500,000 HS Resources, Inc., 9.875%, 12/1/03 . . . . . . . . . . . . . . . . . 463,750
500,000 Occidental Petroleum Corp., 10.125%, 11/15/01 . . . . . . . . . . . . 535,700
500,000 PDV America, Inc., 7.875%, 8/1/03 . . . . . . . . . . . . . . . . . . 440,350
500,000 Texaco Capital, Inc., 8.625%, 6/30/10 . . . . . . . . . . . . . . . . 506,600
250,000 Union Oil Co. of California, 9.25%, 2/1/03 . . . . . . . . . . . . . . 260,625
500,000 Western Atlas, Inc., 7.875%, 6/15/04 . . . . . . . . . . . . . . . . . 474,700
------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,665,085
------------
</TABLE>
16
<PAGE> 18
DOMESTIC STRATEGIC INCOME PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 4.7%
$ 250,000 Bluebell Funding, Inc., 11.85%, 5/1/99 . . . . . . . . . . . . . . . . $ 258,125
250,000 First PV Funding Corp., Series 1986-A, 10.30%, 1/15/14 . . . . . . . . 236,250
500,000 Phoenix Re Corp., 9.75%, 8/15/03 . . . . . . . . . . . . . . . . . . . 495,000
------------
TOTAL FINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 989,375
------------
HEALTH CARE 2.2%
500,000 Healthtrust, Inc - The Hospital Co., 8.75%, 3/15/05 . . . . . . . . . 476,250
------------
RAW MATERIALS/PROCESSING INDUSTRIES 9.9%
250,000 Container Corp. of America, 9.75%, 4/1/03 . . . . . . . . . . . . . . 234,375
250,000 Geneva Steel Co., 11.125%, 3/15/01 . . . . . . . . . . . . . . . . . . 235,000
500,000 Georgia-Pacific Corp., 9.95%, 6/15/02 . . . . . . . . . . . . . . . . 531,665
150,000 IMC Fertilizer Group, Inc., 9.45%, 12/15/11 . . . . . . . . . . . . . 135,000
500,000 Noranda, Inc., 8.125%, 6/15/04 . . . . . . . . . . . . . . . . . . . . 479,200
500,000 Riverwood International Corp., 10.375%, 6/30/04 . . . . . . . . . . . 497,500
------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES . . . . . . . . . . . . . 2,112,740
------------
TECHNOLOGY 4.6%
500,000 International Business Machines Corp., 7.50%, 6/15/13 . . . . . . . . 447,850
500,000 Unisys Corp., 13.50%, 7/1/97 . . . . . . . . . . . . . . . . . . . . . 536,250
------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . 984,100
------------
TRANSPORTATION 11.5%
500,000 Delta Air Lines, Inc., 9.75%, 5/15/21 . . . . . . . . . . . . . . . . 459,550
500,000 International Shipholding Corp., 9.00%, 7/1/03 . . . . . . . . . . . . 452,500
350,000 Kansas City Southern Industries, Inc., 8.80%, 7/1/22 . . . . . . . . . 340,480
250,000 Southern Pacific Rail Corp., 9.375%, 8/15/05 . . . . . . . . . . . . . 233,750
250,000 Southern Pacific Transit Co., 10.50%, 7/1/99 . . . . . . . . . . . . . 255,000
500,000 Southwest Airlines Co., 9.40%, 7/1/01 . . . . . . . . . . . . . . . . 519,300
200,000 United Air Lines, Inc., Series 1991-A, 10.02%, 3/22/14 . . . . . . . . 188,640
------------
TOTAL TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . 2,449,220
------------
UTILITIES 5.6%
350,000 Monongahela Power Co., 8.375%, 7/1/22 . . . . . . . . . . . . . . . . 337,470
350,000 Public Service Co. of Colorado, 8.75%, 3/1/22 . . . . . . . . . . . . 342,135
Texas Utilities Electric Co.
150,000 9.00%, 4/1/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,420
350,000 9.75%, 5/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,595
------------
TOTAL UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1,191,610
------------
TOTAL CORPORATE OBLIGATIONS (Cost $19,052,156) . . . . . . . . . . . 17,876,990
------------
</TABLE>
17
<PAGE> 19
DOMESTIC STRATEGIC INCOME PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Government Obligations 8.9%
$ 1,169,977 Federal National Mortgage Association, 10.00%, 4/1/21 . . . . . . . . $ 1,227,377
350,000 Province of Newfoundland (Canada), 8.65%, 10/22/22 . . . . . . . . . . 336,455
350,000 Province of Saskatchewan (Canada), 8.00%, 2/1/13 . . . . . . . . . . . 329,070
------------
TOTAL GOVERNMENT OBLIGATIONS (Cost $1,936,526) . . . . . . . . . . . 1,892,902
------------
Number of
Shares Preferred Stock 0.7%
- -------------
*6,889 Supermarkets General Holdings Corp., $3.52 Payment-in-Kind
(Cost $166,940) . . . . . . . . . . . . . . . . . . . . . . . . . . 151,557
------------
Common Stock 0.5%
742 Arcadian Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,356
*3,500 Dr Pepper/Seven-Up Companies, Inc. . . . . . . . . . . . . . . . . . . 89,688
*2,500 FF Holdings Co. (private placement, purchased on 10/6/92) . . . . . . 5,000
------------
TOTAL COMMON STOCK (Cost $37,122) . . . . . . . . . . . . . . . . . 108,044
------------
Principal
Amount Repurchase Agreement 3.6%
- -------------
$ 755,000 Salomon Brothers, Inc., dated 12/30/94, 5.75%, due 1/3/95
(collateralized by U.S. Government obligations in a pooled cash
account) repurchase proceeds $755,482 (Cost $755,000) . . . . . . . 755,000
------------
TOTAL INVESTMENTS (Cost $21,947,744) 97.7% . . . . . . . . . . . . . . 20,784,493
Other assets and liabilities, net 2.3% . . . . . . . . . . . . . . . . 489,476
------------
NET ASSETS 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,273,969
============
</TABLE>
*NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 20
DOMESTIC STRATEGIC INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $21,947,744)............................ $ 20,784,493
Receivable for investments sold............................................ 7,293
Interest receivable........................................................ 520,944
Other assets............................................................... 1,449
---------------
TOTAL ASSETS............................................................. 21,314,179
---------------
LIABILITIES
Due to shareholder service agent........................................... 1,500
Due to Adviser............................................................. 222
Accrued expenses and other liabilities..................................... 38,488
---------------
TOTAL LIABILITIES........................................................ 40,210
---------------
NET ASSETS, equivalent to $7.35 per share.................................. $ 21,273,969
===============
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited shares
authorized; 2,894,700 shares outstanding................................. $ 28,947
Capital surplus............................................................ 24,655,160
Accumulated net realized loss on securities................................ (2,258,509)
Net unrealized depreciation of securities.................................. (1,163,251)
Undistributed net investment income........................................ 11,622
---------------
NET ASSETS at December 31, 1994............................................ $ 21,273,969
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 21
DOMESTIC STRATEGIC INCOME PORTFOLIO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
Statement of Operations DECEMBER 31, 1994
-----------------
<S> <C>
INVESTMENT INCOME
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,326,364
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,180
------------
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . 2,335,544
------------
EXPENSES
Accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . 51,604
Management fees (net of expense reimbursement of $91,634) . . . . . . . 38,840
Audit fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,100
Shareholder service agent's fees and expenses . . . . . . . . . . . . . 18,896
Trustees' fees and expenses . . . . . . . . . . . . . . . . . . . . . . 10,294
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . 8,718
Legal fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,467
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,263
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,387
------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,569
------------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . 2,178,975
------------
REALIZED AND UNREALIZED LOSS ON SECURITIES
Net realized loss on securities . . . . . . . . . . . . . . . . . . . . (857,071)
Net unrealized depreciation of securities during the year . . . . . . . (2,543,211)
------------
Net realized and unrealized loss on securities. . . . . . . . . . . . (3,400,282)
------------
Decrease in net assets resulting from operations. . . . . . . . . . . $ (1,221,307)
============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
Statement of Changes in Net Assets 1994 1993
------------- ------------
<S> <C> <C>
NET ASSETS, beginning of year. . . . . . . . . . . . . . . . . $ 27,443,291 $ 21,104,269
------------- ------------
OPERATIONS
Net investment income . . . . . . . . . . . . . . . . . . . . 2,178,975 2,080,701
Net realized gain (loss) on securities. . . . . . . . . . . . (857,071) 758,188
Net unrealized appreciation (depreciation) of securities
during the year. . . . . . . . . . . . . . . . . . . . . . . (2,543,211) 992,020
------------- ------------
Increase (decrease) in net assets resulting from operations (1,221,307) 3,830,909
------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME . . . . . (2,170,097) (2,108,100)
------------- ------------
SHARE TRANSACTIONS
Proceeds from shares sold . . . . . . . . . . . . . . . . . . 9,066,088 11,337,495
Proceeds from shares issued for dividends reinvested. . . . . 2,170,097 2,108,100
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . (14,014,103) (8,829,382)
------------- ------------
Increase (decrease) in net assets resulting from
share transactions. . . . . . . . . . . . . . . . . . . . . (2,777,918) 4,616,213
------------- ------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . (6,169,322) 6,339,022
------------- ------------
NET ASSETS, end of year. . . . . . . . . . . . . . . . . . . . $ 21,273,969 $ 27,443,291
============= ============
CHANGE IN SHARES OUTSTANDING
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,823 1,292,527
Shares issued for dividends reinvested . . . . . . . . . . . . 296,939 246,332
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . (1,700,172) (979,834)
------------- ------------
Increase (decrease) in shares outstanding. . . . . . . . . . (302,410) 559,025
============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
GOVERNMENT PORTFOLIO INVESTMENT PORTFOLIO
December 31, 1994
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
United States Agency Obligations 74.6%
Federal Home Loan Mortgage Corp.
$ **2,938,036 7.00% Pools, 5/1/24 to 7/1/24 . . . . . . . . . . . . . . . . . . . $ 2,671,791
5,980,199 7.50% Pools, 5/1/24 to 10/1/24 . . . . . . . . . . . . . . . . . . . 5,587,778
2,017,347 8.00% Pools, 9/1/24 to 10/1/24 . . . . . . . . . . . . . . . . . . . 1,934,757
2,481,538 8.50% Pools, 3/1/17 to 1/1/23 . . . . . . . . . . . . . . . . . . . 2,441,213
Federal National Mortgage Association
1,003,644 7.00% Pools, 12/1/23 to 6/1/24 . . . . . . . . . . . . . . . . . . . 910,496
3,994,680 7.50% Pools, 5/1/24 to 11/1/24 . . . . . . . . . . . . . . . . . . . 3,730,033
8,062,912 8.00% Pools, 4/1/24 to 11/1/24 . . . . . . . . . . . . . . . . . . . 7,722,737
800,049 9.50% Pools, 4/01/20 . . . . . . . . . . . . . . . . . . . . . . . . 822,051
1,837,030 11.00% Pools, 11/01/20 . . . . . . . . . . . . . . . . . . . . . . . 1,983,993
Government National Mortgage Association
2,174,690 7.00% Pools, 11/15/23 to 6/15/24 . . . . . . . . . . . . . . . . . . 1,950,436
5,887,011 7.50% Pools, 4/15/22 to 6/15/24 . . . . . . . . . . . . . . . . . . 5,462,028
**7,882,681 8.00% Pools, 5/15/17 to 11/15/24 . . . . . . . . . . . . . . . . . . 7,535,370
810,543 8.50% Pools, 4/15/17 to 7/15/17 . . . . . . . . . . . . . . . . . . 796,107
**4,671,870 9.00% Pools, 5/15/16 to 8/15/17 . . . . . . . . . . . . . . . . . . 4,712,749
558,332 11.00% Pools, 9/15/10 to 10/15/18 . . . . . . . . . . . . . . . . . 604,567
------------
TOTAL UNITED STATES AGENCY OBLIGATIONS
(Cost $50,539,880) . . . . . . . . . . . . . . . . . . . . . . . . 48,866,106
------------
United States Treasury Obligations 16.0%
United States Treasury Notes
500,000 5.50%, 2/15/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 499,845
4,000,000 7.25%, 11/15/96 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,966,880
2,000,000 7.75%, 11/30/99 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,991,560
2,000,000 8.50%, 5/15/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,014,060
2,000,000 11.25%, 5/15/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,034,380
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS
(Cost $11,142,109) . . . . . . . . . . . . . . . . . . . . . . . . 10,506,725
------------
Forward Purchase Commitments 6.0%
*2,000,000 Federal Home Loan Mortgage Association, 8.50%, settling 1/95 . . . . . 1,967,500
*2,000,000 Federal National Mortgage Association, 8.50%, settling 1/95 . . . . . 1,963,120
------------
TOTAL FORWARD PURCHASE COMMITMENTS (Cost $3,954,062) . . . . . . . . 3,930,620
------------
Repurchase Agreement 8.8%
5,780,000 Salomon Brothers, Inc., dated 12/30/94, 5.75%, due 1/3/95
(collateralized by U.S. Government obligations in a pooled cash
account) repurchase proceeds $5,783,693 (Cost $5,780,000) . . . . . 5,780,000
------------
TOTAL INVESTMENTS (Cost $71,416,051) 105.4% . . . . . . . . . . . . . 69,083,451
Other assets and liabilities, net (5.4%) . . . . . . . . . . . . . . . (3,570,190)
------------
NET ASSETS 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,513,261
============
</TABLE>
*NON-INCOME PRODUCING SECURITIES.
**SECURITIES WITH A MARKET VALUE OF APPROXIMATELY $9.9 MILLION WERE PLACED AS
COLLATERAL FOR FUTURES CONTRACTS AND FORWARD PURCHASE COMMITMENTS (NOTE 1B).
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 23
GOVERNMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at market value (Cost $71,416,051)............................ $ 69,083,451
Cash....................................................................... 2,855
Interest receivable........................................................ 441,732
Unrealized appreciation of forward commitments............................. 26,569
Receivable for Fund shares sold............................................ 3,757
Other assets............................................................... 8,043
-------------------
TOTAL ASSETS............................................................. 69,566,407
-------------------
LIABILITIES
Payable for investments purchased.......................................... 3,954,062
Payable for Fund shares purchased.......................................... 25,244
Due to Adviser............................................................. 23,861
Due to shareholder service agent........................................... 1,500
Accrued expenses and other liabilities..................................... 48,479
-------------------
TOTAL LIABILITIES........................................................ 4,053,146
-------------------
NET ASSETS, equivalent to $8.28 per share.................................. $ 65,513,261
===================
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share, unlimited shares
authorized; 7,914,930 shares outstanding................................. $ 79,149
Capital surplus............................................................ 82,533,700
Accumulated net realized loss on securities................................ (14,787,043)
Net unrealized appreciation (depreciation) of securities
Investments.............................................................. (2,332,600)
Forward commitments...................................................... 26,569
Futures contracts........................................................ (2,377)
Accumulated net investment loss............................................ (4,137)
-------------------
NET ASSETS at December 31, 1994............................................ $ 65,513,261
===================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 24
GOVERNMENT PORTFOLIO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
Statement of Operations DECEMBER 31, 1994
-----------------
<S> <C>
INVESTMENT INCOME
Interest.................................................................. $ 5,139,715
-------------
EXPENSES
Management fees (net of expense reimbursement of $68,843)................. 282,831
Accounting services....................................................... 58,043
Audit fees................................................................ 22,160
Shareholder service agent's fees and expenses............................. 18,647
Custodian fees............................................................ 17,172
Trustees' fees and expenses............................................... 10,935
Reports to shareholders................................................... 5,234
Legal fees................................................................ 3,928
Miscellaneous............................................................. 3,059
-------------
Total expenses.......................................................... 422,009
-------------
Net investment income................................................... 4,717,706
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities
Investments and forward commitments..................................... (5,400,416)
Futures contracts....................................................... (683,356)
Net unrealized appreciation (depreciation) of securities during the year
Investments............................................................. (2,417,837)
Forward commitments..................................................... 30,977
Futures contracts....................................................... 169,114
-------------
Net realized and unrealized loss on securities.......................... (8,301,518)
-------------
Decrease in net assets resulting from operations........................ $ (3,583,812)
=============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
Statement of Changes in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
NET ASSETS, beginning of year................................. $ 80,630,053 $ 74,842,296
------------- -------------
OPERATIONS
Net investment income........................................ 4,717,706 5,069,075
Net realized gain (loss) on securities....................... (6,083,772) 4,901,827
Net unrealized depreciation of securities during the year.... (2,217,746) (4,092,262)
------------- -------------
Increase (decrease) in net assets resulting from operations. (3,583,812) 5,878,640
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME.......... (4,508,286) (4,842,309)
------------- -------------
SHARE TRANSACTIONS
Proceeds from shares sold.................................... 3,484,195 10,003,675
Proceeds from shares issued for dividends reinvested ........ 4,508,286 4,842,309
Cost of shares redeemed...................................... (15,017,175) (10,094,558)
------------- -------------
Increase (decrease) in net assets resulting from
share transactions........................................ (7,024,694) 4,751,426
------------- -------------
INCREASE (DECREASE) IN NET ASSETS............................. (15,116,792) 5,787,757
------------- -------------
NET ASSETS, end of year....................................... $ 65,513,261 $ 80,630,053
============= =============
CHANGE IN SHARES OUTSTANDING
Shares sold................................................... 405,270 1,071,835
Shares issued for dividends reinvested........................ 524,430 519,719
Shares redeemed............................................... (1,719,219) (1,083,789)
------------- -------------
Increase (decrease) in shares outstanding................... (789,519) 507,765
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 25
MONEY MARKET PORTFOLIO INVESTMENT PORTFOLIO
December 31, 1994
<TABLE>
<CAPTION>
Principal Market
Amount Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper 26.2%
$ 1,500,000 Chevron Oil Finance Co., 5.93%, 1/6/95 . . . . . . . . . . . . . . . . . . . . . $ 1,498,525
1,500,000 General Electric Capital Corp., 5.89%, 2/16/95 . . . . . . . . . . . . . . . . . 1,488,642
1,500,000 MetLife Funding, Inc., 6.03%, 1/18/95 . . . . . . . . . . . . . . . . . . . . . . 1,495,500
1,500,000 Prudential Funding Corp., 5.47%, 1/3/95 . . . . . . . . . . . . . . . . . . . . . 1,499,323
1,500,000 Toronto Dominion Holdings, 5.93%, 1/6/95 . . . . . . . . . . . . . . . . . . . . 1,498,525
------------
TOTAL COMMERCIAL PAPER (Cost $7,480,515) . . . . . . . . . . . . . . . . . . . . 7,480,515
------------
United States Agency and Government Obligations 72.4%
3,000,000 Federal Home Loan Banks, 5.93%, 1/6/95 . . . . . . . . . . . . . . . . . . . . . 2,997,050
2,000,000 Federal Home Loan Banks, 5.93%, 1/5/95 . . . . . . . . . . . . . . . . . . . . . 1,998,361
774,000 Federal Home Loan Mortgage Corp., 5.37%, 1/6/95 . . . . . . . . . . . . . . . . . 773,316
1,000,000 Federal Home Loan Mortgage Corp., 5.83%, 2/21/95 . . . . . . . . . . . . . . . . 991,694
5,000,000 Home Loan Mortgage Corp., 5.70%, 2/2/95 . . . . . . . . . . . . . . . . . . . . . 4,973,792
2,000,000 Federal National Mortgage Association, 5.32%, 1/20/95 . . . . . . . . . . . . . . 1,994,167
3,000,000 Federal National Mortgage Association, 5.78%, 2/17/95 . . . . . . . . . . . . . . 2,977,200
2,000,000 Federal National Mortgage Association, 5.80%, 2/21/95 . . . . . . . . . . . . . . 1,983,476
2,000,000 Federal National Mortgage Association, 5.81%, 1/4/95 . . . . . . . . . . . . . . 1,998,713
------------
TOTAL UNITED STATES AGENCY AND GOVERNMENT OBLIGATIONS
(Cost $20,687,769) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,687,769
------------
Repurchase Agreement 1.5%
420,000 Salomon Brothers, Inc., dated 12/30/94, 5.75%,
due 1/3/95 (collateralized by U.S. Government
obligations in a pooled cash account) repurchase
proceeds $420,268 (Cost $420,000) . . . . . . . . . . . . . . . . . . . . . . . 420,000
------------
TOTAL INVESTMENTS (Cost $28,588,284) 100.1% . . . . . . . . . . . . . . . . . . . 28,588,284
Other assets and liabilities, net (0.1%) . . . . . . . . . . . . . . . . . . . . (40,609)
------------
NET ASSETS 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,547,675
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE> 26
MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost ........................................... $28,588,284
Cash...................................................................... 3,480
Other assets.............................................................. 1,187
-----------
TOTAL ASSETS............................................................ 28,592,951
-----------
LIABILITIES
Accrued expenses.......................................................... 34,093
Due to Adviser............................................................ 6,091
Payable for Fund shares redeemed.......................................... 3,592
Due to shareholder service agent.......................................... 1,500
-----------
TOTAL LIABILITIES....................................................... 45,276
-----------
NET ASSETS, equivalent to $1.00 per share................................. $28,547,675
===========
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited shares
authorized; 28,547,478 shares outstanding............................... $ 285,475
Capital surplus........................................................... 28,262,003
Undistributed net investment income....................................... 197
-----------
NET ASSETS at December 31, 1994........................................... $28,547,675
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 27
MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
Statement of Operations DECEMBER 31, 1994
-----------------
<S> <C>
INVESTMENT INCOME
Interest.................................................................... $1,292,872
----------
EXPENSES
Management fees (net of expense reimbursement of $80,915)................... 71,750
Accounting services......................................................... 51,778
Shareholder service agent's fees and expenses............................... 18,684
Audit fees.................................................................. 13,180
Trustees' fees and expenses................................................. 10,269
Report to shareholders...................................................... 6,327
Custodian fees.............................................................. 6,108
Legal fees.................................................................. 3,342
Miscellaneous............................................................... 1,760
----------
Total expenses............................................................ 183,198
----------
Net investment income..................................................... 1,109,674
----------
Increase in net assets resulting from operations.......................... $1,109,674
==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
Statement of Changes in Net Assets 1994 1993
----------- -----------
<S> <C> <C>
NET ASSETS, beginning of year............................... $29,966,001 $32,898,961
----------- -----------
OPERATIONS
Net investment income...................................... 1,109,674 760,117
----------- -----------
Increase in net assets resulting from operations.......... 1,109,674 760,117
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME........ (1,109,772) (760,253)
----------- -----------
SHARE TRANSACTIONS
Proceeds from shares sold.................................. 22,474,029 24,761,075
Proceeds from shares issued for dividends reinvested....... 1,107,713 760,253
Cost of shares redeemed.................................... (24,999,970) (28,454,152)
----------- -----------
Decrease in net assets resulting from share transactions.. (1,418,228) (2,932,824)
----------- -----------
DECREASE IN NET ASSETS...................................... (1,418,326) (2,932,960)
----------- -----------
NET ASSETS, end of year..................................... $28,547,675 $29,966,001
=========== ===========
CHANGE IN SHARES OUTSTANDING
Shares sold................................................. 22,474,029 24,761,075
Shares issued for dividends reinvested...................... 1,107,713 760,253
Shares redeemed............................................. (24,999,970) (28,454,152)
----------- -----------
Decrease in shares outstanding............................ (1,418,228) (2,932,824)
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 28
MULTIPLE STRATEGY PORTFOLIO INVESTMENT PORTFOLIO
December 31, 1994
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 50.1%
CONSUMER DISTRIBUTION 3.1%
3,200 American Stores Co. . . . . . . . . . . . . . . . . . . . . . . . $ 86,000
1,900 Circuit City Stores, Inc. . . . . . . . . . . . . . . . . . . . . 42,275
2,600 Dayton Hudson Corp. . . . . . . . . . . . . . . . . . . . . . . . 183,950
3,400 Dillard Department Stores, Inc. . . . . . . . . . . . . . . . . . 90,950
*4,500 Federated Department Stores, Inc. . . . . . . . . . . . . . . . . 86,625
3,000 Gap, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,500
4,900 Limited, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 88,813
2,500 May Department Stores Co. . . . . . . . . . . . . . . . . . . . . 84,375
2,500 Penney (J.C.), Inc. . . . . . . . . . . . . . . . . . . . . . . . 111,563
3,200 Premark International, Inc. . . . . . . . . . . . . . . . . . . . 143,200
5,100 Sears, Roebuck & Co. . . . . . . . . . . . . . . . . . . . . . . 234,600
4,500 Sysco Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,875
*2,800 Toys R Us, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 85,400
13,500 Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . . . . . . . . 286,875
--------------
TOTAL CONSUMER DISTRIBUTION . . . . . . . . . . . . . . . . . . 1,732,001
--------------
CONSUMER DURABLES 2.0%
2,100 Armstrong World Industries, Inc. . . . . . . . . . . . . . . . . 80,850
4,800 Black & Decker Corp. . . . . . . . . . . . . . . . . . . . . . . 114,000
6,700 Brunswick Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 126,462
3,100 Eastman Kodak Co. . . . . . . . . . . . . . . . . . . . . . . . . 148,025
1,800 Eaton Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,100
2,800 Echlin, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 84,000
4,200 Ford Motor Co. . . . . . . . . . . . . . . . . . . . . . . . . . 117,600
7,500 General Motors Corp. . . . . . . . . . . . . . . . . . . . . . . 316,875
2,500 Leggett & Platt, Inc. . . . . . . . . . . . . . . . . . . . . . . 87,500
--------------
TOTAL CONSUMER DURABLES . . . . . . . . . . . . . . . . . . . . 1,164,412
--------------
CONSUMER NON-DURABLES 4.2%
5,500 Anheuser-Busch Companies, Inc. . . . . . . . . . . . . . . . . . 279,812
7,500 Archer Daniels Midland Co. . . . . . . . . . . . . . . . . . . . 154,687
2,600 Clorox Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,075
*8,000 Dr Pepper/Seven-Up Companies, Inc. . . . . . . . . . . . . . . . 205,000
7,600 PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 275,500
10,000 Pet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,500
9,700 Philip Morris Companies, Inc. . . . . . . . . . . . . . . . . . . 557,750
2,600 Proctor & Gamble Co. . . . . . . . . . . . . . . . . . . . . . . 161,200
5,600 Quaker Oats Co. . . . . . . . . . . . . . . . . . . . . . . . . . 172,200
6,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 151,500
3,000 U.S. Shoe Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 56,250
--------------
TOTAL CONSUMER NON-DURABLES . . . . . . . . . . . . . . . . . . 2,364,474
--------------
CONSUMER SERVICES 3.4%
2,000 Belo (A.H.) Corp. . . . . . . . . . . . . . . . . . . . . . . . . 113,000
5,500 Dun & Bradstreet Corp. . . . . . . . . . . . . . . . . . . . . . 302,500
9,000 Marriott International, Inc. . . . . . . . . . . . . . . . . . . 253,125
1,900 McDonald's Corp. . . . . . . . . . . . . . . . . . . . . . . . . 55,575
800 McGraw Hill, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 53,500
7,200 New York Times Co., Class A . . . . . . . . . . . . . . . . . . . 159,300
*4,600 Promus Companies, Inc. . . . . . . . . . . . . . . . . . . . . . 142,600
1,900 RR Donnelley & Sons Co. . . . . . . . . . . . . . . . . . . . . . 56,050
</TABLE>
27
<PAGE> 29
MULTIPLE STRATEGY PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES-continued
1,600 Time Warner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . $ 56,200
4,000 Tribune Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,000
11,000 Walt Disney Co. . . . . . . . . . . . . . . . . . . . . . . . . . 507,375
--------------
TOTAL CONSUMER SERVICES . . . . . . . . . . . . . . . . . . . . 1,918,225
--------------
ENERGY 5.9%
5,800 Ashland Oil, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 200,100
1,200 Atlantic Richfield Co. . . . . . . . . . . . . . . . . . . . . . 122,100
6,300 Baker Hughes, Inc. . . . . . . . . . . . . . . . . . . . . . . . 114,975
3,300 Chevron Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 147,262
10,700 Coastal Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 275,525
7,500 Consolidated Natural Gas Co. . . . . . . . . . . . . . . . . . . 266,250
16,500 Exxon Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002,375
5,800 Halliburton Co. . . . . . . . . . . . . . . . . . . . . . . . . . 192,125
5,000 Occidental Petroleum Corp. . . . . . . . . . . . . . . . . . . . 96,250
14,000 Pacific Enterprises . . . . . . . . . . . . . . . . . . . . . . . 297,500
7,600 Panhandle Eastern Corp. . . . . . . . . . . . . . . . . . . . . . 150,100
5,000 Repsol SA, ADR . . . . . . . . . . . . . . . . . . . . . . . . . 136,250
3,300 Schlumberger, Ltd. . . . . . . . . . . . . . . . . . . . . . . . 166,238
3,100 Texaco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 185,613
--------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . 3,352,663
--------------
FINANCE 6.1%
6,000 Ahmanson (H.F.) & Co. . . . . . . . . . . . . . . . . . . . . . . 96,750
2,400 Allstate Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 56,700
2,000 American General Corp. . . . . . . . . . . . . . . . . . . . . . 56,500
2,200 American International Group, Inc. . . . . . . . . . . . . . . . 215,600
10,000 BankAmerica Corp. . . . . . . . . . . . . . . . . . . . . . . . . 395,000
10,200 Chase Manhattan Corp. . . . . . . . . . . . . . . . . . . . . . . 350,625
8,400 Chemical Banking Corp. . . . . . . . . . . . . . . . . . . . . . 301,350
1,200 Chubb Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,850
2,200 Corestates Financial Corp. . . . . . . . . . . . . . . . . . . . 57,200
2,600 Crestar Financial Corp. . . . . . . . . . . . . . . . . . . . . . 97,825
4,800 Dean Witter Discover & Co. . . . . . . . . . . . . . . . . . . . 162,600
6,600 Federal National Mortgage Association . . . . . . . . . . . . . . 480,975
1,600 First Interstate Bancorp . . . . . . . . . . . . . . . . . . . . 108,200
1,500 Marsh & McLennan Companies, Inc. . . . . . . . . . . . . . . . . 118,875
2,200 Midlantic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 58,300
7,900 NationsBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . 356,488
3,500 NWNL Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . 101,500
4,800 Providian Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 148,200
3,000 St. Paul Companies, Inc. . . . . . . . . . . . . . . . . . . . . 134,250
1,600 Transamerica Corp. . . . . . . . . . . . . . . . . . . . . . . . 79,600
--------------
TOTAL FINANCE . . . . . . . . . . . . . . . . . . . . . . . . . 3,469,388
--------------
HEALTH CARE 4.9%
2,900 Abbott Laboratories . . . . . . . . . . . . . . . . . . . . . . . 94,612
*2,300 Amgen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,700
11,000 Baxter International, Inc. . . . . . . . . . . . . . . . . . . . 310,750
4,000 Bristol Myers Squibb Co. . . . . . . . . . . . . . . . . . . . . 231,500
4,400 Columbia/HCA Healthcare Corp. . . . . . . . . . . . . . . . . . . 160,600
2,700 Eli Lilly & Co. . . . . . . . . . . . . . . . . . . . . . . . . . 177,188
5,500 Mallinckrodt Group, Inc. . . . . . . . . . . . . . . . . . . . . 164,313
</TABLE>
28
<PAGE> 30
MULTIPLE STRATEGY PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE-continued
5,600 Merck & Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . $ 213,500
*6,000 Nellcor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 198,000
2,300 Pfizer, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 177,675
4,200 Schering-Plough Corp. . . . . . . . . . . . . . . . . . . . . . . 310,800
10,500 Upjohn Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,875
3,400 Warner Lambert Co. . . . . . . . . . . . . . . . . . . . . . . . 261,800
--------------
TOTAL HEALTH CARE . . . . . . . . . . . . . . . . . . . . . . . 2,759,313
--------------
PRODUCER MANUFACTURING 5.3%
3,500 Allied-Signal, Inc. . . . . . . . . . . . . . . . . . . . . . . . 119,000
14,500 Browning-Ferris Industries, Inc. . . . . . . . . . . . . . . . . 411,437
1,600 Caterpillar, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 88,200
1,400 Emerson Electric Co. . . . . . . . . . . . . . . . . . . . . . . 87,500
2,600 Fluor Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,125
6,500 General Electric Co. . . . . . . . . . . . . . . . . . . . . . . 331,500
10,000 Hanson, PLC, ADR . . . . . . . . . . . . . . . . . . . . . . . . 180,000
2,400 ITT Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,700
2,100 Minnesota Mining & Manufacturing Co. . . . . . . . . . . . . . . 112,088
4,800 Philips N.V., ADR . . . . . . . . . . . . . . . . . . . . . . . . 141,000
9,500 Tenneco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 403,750
*2,600 Varity Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 94,250
6,000 Westinghouse Electric Corp. . . . . . . . . . . . . . . . . . . . 73,500
24,000 WMX Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . 630,000
--------------
TOTAL PRODUCER MANUFACTURING . . . . . . . . . . . . . . . . . 2,997,050
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.0%
700 Aluminum Co. of America . . . . . . . . . . . . . . . . . . . . . 60,637
6,500 American Barrick Resources Corp. . . . . . . . . . . . . . . . . 144,625
*3,000 Bethlehem Steel Corp. . . . . . . . . . . . . . . . . . . . . . . 54,000
2,000 Consolidated Papers . . . . . . . . . . . . . . . . . . . . . . . 90,000
*5,000 Crown, Cork & Seal, Inc. . . . . . . . . . . . . . . . . . . . . 188,750
4,800 DuPont (E.I.) de Nemours & Co., Inc. . . . . . . . . . . . . . . 270,000
7,900 Ethyl Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,038
1,000 Hercules, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 115,375
1,700 International Paper Co. . . . . . . . . . . . . . . . . . . . . . 128,137
4,600 Lubrizol Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 155,825
3,400 Mead Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,325
1,600 Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 112,800
5,000 Newmont Mining Corp. . . . . . . . . . . . . . . . . . . . . . . 180,000
7,000 Praxair, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 143,500
5,700 Sherwin Williams Co. . . . . . . . . . . . . . . . . . . . . . . 188,813
2,100 USX/US Steel Group . . . . . . . . . . . . . . . . . . . . . . . 74,550
1,500 Weyerhauser Co. . . . . . . . . . . . . . . . . . . . . . . . . . 56,250
1,800 Williamette Industries, Inc. . . . . . . . . . . . . . . . . . . 85,500
--------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES . . . . . . . . . . . 2,290,125
--------------
TECHNOLOGY 3.2%
2,400 Apple Computer, Inc. . . . . . . . . . . . . . . . . . . . . . . 93,600
3,000 Avnet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,000
5,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,750
3,000 Computer Associates International, Inc. . . . . . . . . . . . . . 145,500
1,000 Hewlett-Packard Co. . . . . . . . . . . . . . . . . . . . . . . . 99,875
1,600 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,200
</TABLE>
29
<PAGE> 31
MULTIPLE STRATEGY PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Number of Market
Shares Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY-continued
4,600 International Business Machines Corp. . . . . . . . . . . . . . . $ 338,100
2,800 Loral Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,050
4,500 Rockwell International Corp. . . . . . . . . . . . . . . . . . . 160,875
*4,800 Stratus Computer, Inc. . . . . . . . . . . . . . . . . . . . . . 182,400
*3,600 Sun Microsystems, Inc. . . . . . . . . . . . . . . . . . . . . . 127,800
1,400 Texas Instruments, Inc. . . . . . . . . . . . . . . . . . . . . . 104,825
--------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . 1,805,975
--------------
TRANSPORTATION 1.7%
*9,500 AMR Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505,875
*5,100 Federal Express Corp. . . . . . . . . . . . . . . . . . . . . . . 307,275
5,000 Illinois Central Corp. . . . . . . . . . . . . . . . . . . . . . 153,750
--------------
TOTAL TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . 966,900
--------------
UTILITIES 6.3%
2,300 American Electric Power, Inc. . . . . . . . . . . . . . . . . . . 75,612
4,000 Ameritech Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 161,500
3,600 AT&T Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,900
4,000 Baltimore Gas & Electric Co. . . . . . . . . . . . . . . . . . . 88,500
2,800 Bell Atlantic Corp. . . . . . . . . . . . . . . . . . . . . . . . 139,300
4,000 Bellsouth Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 216,500
3,300 Carolina Power & Light Co. . . . . . . . . . . . . . . . . . . . 87,862
3,200 Centerior Energy Corp. . . . . . . . . . . . . . . . . . . . . . 28,400
1,100 Cipsco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 29,700
2,000 Florida Progress Corp. . . . . . . . . . . . . . . . . . . . . . 60,000
3,000 FPL Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 105,375
7,100 GTE Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,662
1,000 Houston Industries, Inc. . . . . . . . . . . . . . . . . . . . . 35,625
1,200 Idaho Power Co. . . . . . . . . . . . . . . . . . . . . . . . . . 28,200
2,700 Illinova Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 58,725
1,000 Ipalco Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . 30,000
1,400 Nevada Power Co. . . . . . . . . . . . . . . . . . . . . . . . . 28,525
6,700 NIPSCO Industries, Inc. . . . . . . . . . . . . . . . . . . . . . 199,325
5,700 NYNEX Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,475
6,000 Ohio Edison Co. . . . . . . . . . . . . . . . . . . . . . . . . . 111,000
4,000 Pacificorp . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,500
5,200 Pacific Telesis Group . . . . . . . . . . . . . . . . . . . . . . 148,200
7,000 Peco Energy Co. . . . . . . . . . . . . . . . . . . . . . . . . . 171,500
3,600 Public Service Co. of Colorado . . . . . . . . . . . . . . . . . 105,750
*3,800 Public Service Co. of New Mexico . . . . . . . . . . . . . . . . 49,400
1,400 Puget Sound Power & Light Co. . . . . . . . . . . . . . . . . . . 28,175
1,500 San Diego Gas & Electric Co. . . . . . . . . . . . . . . . . . . 28,875
10,000 Southern Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
1,100 Southwestern Public Service Co. . . . . . . . . . . . . . . . . . 29,150
15,400 Sprint Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 425,425
6,100 US West, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 217,313
--------------
TOTAL UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . 3,566,474
--------------
TOTAL COMMON STOCK (Cost $28,760,703) . . . . . . . . . . . . . 28,387,000
--------------
</TABLE>
30
<PAGE> 32
MULTIPLE STRATEGY PORTFOLIO INVESTMENT PORTFOLIO, CONTINUED
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------
<S> <C>
Corporate Obligations 17.8%
CONSUMER DISTRIBUTION 3.5%
$1,000,000 Dayton Hudson Corp., 9.25%, 3/1/06 . . . . . . . . . . . . . . . $ 1,022,900
1,000,000 Wal-Mart Stores, Inc., 8.07%, 12/21/12 . . . . . . . . . . . . . 945,800
-------------
TOTAL CONSUMER DISTRIBUTION . . . . . . . . . . . . . . . . . . 1,968,700
-------------
ENERGY 3.7%
1,000,000 Atlantic Richfield Co., 9.125%, 3/1/11 . . . . . . . . . . . . . 1,046,100
1,000,000 Burlington Resources, Inc., 9.125%, 10/1/21 . . . . . . . . . . . 1,043,400
-------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . 2,089,500
-------------
FINANCE 1.9%
1,000,000 American General Corp., 9.625%, 2/1/18 . . . . . . . . . . . . . 1,063,300
-------------
PRODUCER MANUFACTURING 1.7%
1,000,000 Waste Management, Inc., 8.75%, 5/1/18 . . . . . . . . . . . . . . 995,840
-------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.7%
1,000,000 DuPont (E.I.) de Nemours & Co., Inc., 8.25%, 1/15/22 . . . . . . 961,400
-------------
UTILITIES 5.3%
1,000,000 Hydro-Quebec, Series HS, 9.40%, 2/1/21 . . . . . . . . . . . . . 1,039,900
1,000,000 Pacific Gas & Electric Co., Series 92D, 8.25%, 11/1/22 . . . . . 937,000
1,000,000 Tennessee Valley Authority, Series G, 8.625%, 11/15/29 . . . . . 1,007,000
-------------
TOTAL UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . 2,983,900
-------------
TOTAL CORPORATE OBLIGATIONS (Cost $10,579,930) . . . . . . . . 10,062,640
-------------
Government Obligations 28.0%
1,000,000 Province of Nova Scotia (Canada), 7.25%, 7/27/13 . . . . . . . . 855,400
10,700,000 United States Treasury Bonds, 7.125%, 2/15/23 . . . . . . . . . . 9,733,683
5,500,000 United States Treasury Notes, 7.25%, 5/15/04 . . . . . . . . . . 5,277,415
-------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $16,862,894) . . . . . . . . . . . . . . . . . . . . . . 15,866,498
-------------
Repurchase Agreement 5.7%
3,235,000 Salomon Brothers, Inc., dated 12/30/94, 5.75%, due 1/3/95
(collateralized by U.S. Government obligations in a
pooled cash account) repurchase proceeds $3,237,067
(Cost $3,235,000) . . . . . . . . . . . . . . . . . . . . . . . 3,235,000
-------------
TOTALINVESTMENTS (Cost $59,438,527) 101.6% . . . . . . . . . . . 57,551,138
Other assets and liabilities, net (1.6%) . . . . . . . . . . . . . (915,205)
-------------
NET ASSETS 100% . . . . . . . . . . . . . . . . . . . . . . . . $ 56,635,933
=============
</TABLE>
*Non-income producing security.
See Notes to Financial Statements.
31
<PAGE> 33
MULTIPLE STRATEGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $59,438,527)............................ $57,551,138
Cash....................................................................... 1,901
Receivable for investments sold............................................ 1,300,466
Interest and dividends receivable.......................................... 674,851
Other assets............................................................... 567
-----------
TOTAL ASSETS............................................................. 59,528,923
-----------
LIABILITIES
Payable for investments purchased.......................................... 2,824,094
Accrued expenses........................................................... 44,481
Due to Adviser............................................................. 19,770
Payable for Fund shares redeemed........................................... 3,145
Due to shareholder service agent........................................... 1,500
-----------
TOTAL LIABILITIES........................................................ 2,892,990
-----------
NET ASSETS, equivalent to $9.99 per share.................................. $56,635,933
===========
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited shares
authorized; 5,668,898 shares outstanding................................. $ 56,689
Capital surplus............................................................ 58,634,934
Accumulated net realized loss on securities................................ (182,768)
Net unrealized depreciation of securities.................................. (1,887,389)
Undistributed net investment income........................................ 14,467
-----------
NET ASSETS at December 31, 1994............................................ $56,635,933
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 34
MULTIPLE STRATEGY PORTFOLIO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
Statement of Operations DECEMBER 31, 1994
-----------------
<S> <C>
INVESTMENT INCOME
Interest.................................................................. $ 1,741,898
Dividends................................................................. 907,689
------------
Investment income........................................................ 2,649,587
------------
EXPENSES
Management fees (net of expense reimbursement of $75,169)................. 232,725
Accounting services....................................................... 55,826
Audit fees................................................................ 22,390
Shareholder service agent's fees and expenses............................. 18,719
Custodian fees............................................................ 13,854
Trustees' fees and expenses............................................... 10,650
Reports to shareholders................................................... 9,596
Legal fees................................................................ 3,598
Miscellaneous............................................................. 2,115
------------
Total expenses........................................................... 369,473
------------
Net investment income.................................................... 2,280,114
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on securities........................................... 4,566,704
Net unrealized depreciation of securities during the year................. (9,205,867)
------------
Net realized and unrealized loss on securities........................... (4,639,163)
------------
Decrease in net assets resulting from operations......................... $ (2,359,049)
============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
Statement of Changes in Net Assets 1994 1993
----------- -----------
<S> <C> <C>
NET ASSETS, beginning of year.................................. $64,857,688 $59,644,829
----------- -----------
OPERATIONS
Net investment income......................................... 2,280,114 1,492,873
Net realized gain on securities............................... 4,566,704 3,217,848
Net unrealized depreciation of securities during the year..... (9,205,867) (25,137)
----------- -----------
Increase (decrease) in net assets resulting from operations .. (2,359,049) 4,685,584
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income.................................... (2,288,536) (1,480,545)
From net realized gain on securities.......................... (4,566,704) (3,217,848)
In excess of book-basis net realized gain (Note 1F)........... (106,886) (432,966)
----------- -----------
(6,962,126) (5,131,359)
----------- -----------
SHARE TRANSACTIONS
Proceeds from shares sold..................................... 3,800,820 9,259,035
Proceeds from shares issued for dividends and
distributions reinvested..................................... 6,962,125 5,131,359
Cost of shares redeemed....................................... (9,663,525) (8,731,760)
----------- -----------
Increase in net assets resulting from share transactions....... 1,099,420 5,658,634
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.............................. (8,221,755) 5,212,859
----------- -----------
NET ASSETS, end of year........................................ $56,635,933 $64,857,688
=========== ===========
CHANGE IN SHARES OUTSTANDING
Shares sold.................................................... 327,001 752,083
Shares issued for dividends and distributions reinvested....... 700,508 442,986
Shares redeemed................................................ (857,318) (699,366)
----------- -----------
Increase in shares outstanding................................. 170,191 495,703
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
Note 1-Significant Accounting Policies
American Capital Life Investment Trust (the "Fund"), comprised of five
investment portfolios: Common Stock Portfolio ("Common Stock"), Domestic
Strategic Income Portfolio ("Domestic Strategic"), Government Portfolio
("Government"), Money Market Portfolio ("Money Market") and Multiple Strategy
Portfolio ("Multiple Strategy"), is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment company.
Each portfolio is accounted for as a separate entity. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
A. Investment Valuations
Securities listed or traded on a national securities exchange are
valued at the last sale price. Unlisted securities and listed
securities for which the last sale price is not available are valued
at the most recent bid price.
U.S. Agency and Government obligations and related forward commitments
are valued at the last reported bid price. Listed options are valued
at the last reported sale price on the exchange on which such option
is traded, or, if no sale is reported, at the mean between the last
reported bid and asked prices. Options and forward commitments for
which market quotations are not readily available are valued at fair
value under a method approved by the Board of Trustees.
Private placements are valued at fair value as determined in good
faith by, or under the direction of, the Board of Trustees. Private
placements generally may be resold only in a privately negotiated
transaction until they are registered.
Short-term investments with a maturity of 60 days or less when
purchased are valued at amortized cost, which approximates market
value. Short-term investments with a maturity of more than 60 days
when purchased are valued based on market quotations until the
remaining days to maturity becomes less than 61 days. From such time,
until maturity, the investments are valued at amortized cost. For
Money Market, all investments are valued at amortized cost.
Domestic Strategic's investments include lower rated and unrated debt
securities which may be more susceptible to adverse economic
conditions than other investment grade holdings. These securities are
often subordinated to the prior claims of other senior lenders and
uncertainties exist as to an issuer's ability to meet principal and
interest payments. Debt securities rated below investment grade and
comparable unrated securities represented approximately 39% of
Domestic Strategic's investment portfolio at December 31, 1994.
B. Futures Contracts and Forward Commitments
General - Transactions in futures contracts and forward commitments
also are utilized in strategies to manage the market risk of the
Fund's investments. The purchase of a futures contract or forward
commitment increases the impact of changes in the market price of
investments on net asset value. Forward commitments have a risk of
loss due to nonperformance of counterparties. There is a risk that the
market movement of such instruments may not be in the direction
forecasted. Note 3 - Investment Activity contains additional
information.
Futures Contracts - Upon entering into futures contracts, the Fund
maintains, in a segregated account with its custodian, securities with
a value equal to its obligation under the futures contracts. A portion
of these funds is held as collateral in an account in the name of the
broker, the Fund's agent in acquiring the futures position. During the
period the futures contract is open, changes in the value of the
contract ("variation margin") are recognized by marking the contract
to market on a daily basis. As unrealized gains or losses are
incurred, variation margin payments are received from or made to the
broker. Upon the closing or cash settlement of a contract, gains or
losses are realized. The cost of securities acquired through delivery
under a contract is adjusted by the unrealized gain or loss on the
contract.
34
<PAGE> 36
Forward Commitments - The Fund trades certain securities under the
terms of forward commitments whereby the settlement for payment and
delivery occurs at a specified future date. Forward commitments are
privately negotiated transactions between the Fund and dealers. Upon
executing a forward commitment and during the period of obligation,
the Fund maintains collateral of cash or securities in a segregated
account with its custodian in an amount sufficient to relieve the
obligation. If the intent of the Fund is to accept delivery of a
security traded under a forward purchase commitment, the commitment is
recorded as a long-term purchase. For forward purchase commitments and
forward sale commitments which security settlement is not intended by
the Fund, changes in the value of the commitment are recognized by
marking the commitment to market on a daily basis. During the period
of obligation, the Fund may either resell or repurchase the forward
commitment and enter into a new forward commitment, the effect of
which is to extend the settlement date. In addition, the Fund may
occasionally close such forward commitments prior to delivery. Gains
and losses on investments are realized upon the ultimate closing or
cash settlement of forward commitments.
C. Repurchase Agreements
A repurchase agreement is a short-term investment in which the Fund
acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund
may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other
investment companies advised or subadvised by Van Kampen American
Capital Asset Management, Inc. (the "Adviser"), the daily aggregate
of which is invested in repurchase agreements. Repurchase agreements
are collateralized by the underlying debt security. The Fund will make
payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not
less than the repurchase proceeds due the Fund.
D. Federal Income Taxes
No provision for federal income taxes is required because the Fund has
elected to be qualified as a "regulated investment company" under the
Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investmen t income and
taxable net realized capital gains on investments to its shareholders.
It is anticipated that no distributions of net realized capital gains
will be made until tax basis capital loss carryforwards, if any,
expire or are offset by net realized capital gains.
E. Investment Transactions and Related Investment Income
Investment transactions are accounted for on the trade date. Realized
gains and losses on investments are determined on the basis of
identified cost. Dividend income is recorded on the ex-dividend date.
Interest income is accrued daily. Issuers of Payment-in-Kind
securities may make dividend or interest payments by issuing
additional stocks or bonds in lieu of cash payments.
F. Dividends and Distributions
Government and Money Market declare dividends from net investment
income on each business day. Domestic Strategic, Common Stock and
Multiple Strategy declare dividends and distributions annually.
Government declares distributions from short-term capital gains, if
any, monthly. Dividends and distributions are recorded on the record
date.
The Fund distributes tax basis earnings in accordance with the minimum
distribution requirements of the Internal Revenue Code, which may
differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
35
<PAGE> 37
G. Debt Discount and Premium
The Fund accounts for discounts and premiums on long-term debt
securities on the same basis for financial reporting as for federal
income tax reporting. Accordingly, original issue discounts on debt
securities purchased are amortized over the life of the security.
Premiums on debt securities are not amortized. Market discounts are
recognized at the time of sale as realized gains for book purposes and
ordinary income for tax purposes.
Note 2-Management Fees and Other Transactions with Affiliates
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual rate of
.50% of the first $500 million, .45% of the next $500 million and .40% of the
amount in excess of $1 billion. The resulting fee is prorated to each portfolio
based on its average daily net assets. The Adviser has volunteered to
reimburse each portfolio for all ordinary business expenses, exclusive of taxes
and interest, in excess of .60% of the average daily net assets. For the year
ended December 31, 1994, such voluntary expense reimbursements were as follows:
<TABLE>
<S> <C>
Common Stock . . . . . . . . . . . . . . . . . . $ 57,464
Domestic Strategic . . . . . . . . . . . . . . . 91,332
Government . . . . . . . . . . . . . . . . . . . 68,843
Money Market . . . . . . . . . . . . . . . . . . 80,915
Multiple Strategy . . . . . . . . . . . . . . . 75,169
</TABLE>
Under the terms of the advisory agreement, if the total ordinary business
expenses, exclusive of taxes, distribution fees and interest, exceed .95% of
average daily net assets, the Manager will reimburse the Trust for the amount
of the excess. The contractual expense reimbursement shall be made monthly. For
the year ended December 31, 1994, the only portfolio to have such contractual
expense reimbursement was Domestic Strategic for $302.
Other transactions with affiliates during the year were as follows:
<TABLE>
<CAPTION>
Common Domestic Money Multiple
Stock Strategic Government Market Strategy
------ --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C>
Accounting services . . . . . . . . . . . . . $ 6,751 $ 6,214 $ 6,760 $ 6,270 $ 6,655
Shareholder service agent's fees . . . . . . 18,000 18,000 18,000 18,000 18,000
Legal fees . . . . . . . . . . . . . . . . . 3,546 3,452 3,928 3,342 3,598
</TABLE>
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are
allocated among all investment companies advised or subadvised by the Adviser.
These charges include the employee costs attributable to the accounting
officers of the Fund. A portion of the accounting services expense was paid to
the Adviser in reimbursement of personnel, facilities and equipment costs
attributable to the provision of accounting services. The services provided by
the Adviser are at cost.
Van Kampen American Capital Shareholder Services, Inc., an affiliate of the
Adviser, serves as the Fund's shareholder service agent. These services are
provided at cost plus a profit.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a Trustee of the Fund.
During the year, the Fund paid brokerage commissions of $67,636 to companies
which are deemed affiliates of the Adviser's parent because it owns more than
5% of the companies' outstanding voting securities.
Certain officers and trustees of the Fund are officers and directors of the
Adviser and the shareholder service agent.
36
<PAGE> 38
Note 3-Investment Activity
During the year, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were:
<TABLE>
<CAPTION>
Common Domestic Multiple
Stock Strategic Government Strategy
------ --------- ---------- --------
<S> <C> <C> <C> <C>
Purchases . . . . . . . . . . . . . . . . . . $102,382,209 $24,736,859 $123,847,021 $93,174,398
Sales . . . . . . . . . . . . . . . . . . . . 105,496,582 27,253,679 131,187,916 95,402,939
</TABLE>
Money Market held only short-term investments.
The following table presents the identified cost of investments at December 31,
1994 for federal income tax purposes with the associated net unrealized
depreciation and the net realized capital loss carryforward at December 31,
1994 with expiration dates.
<TABLE>
<CAPTION>
Common Domestic Money Multiple
Stock Strategic Government Market Strategy
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Identified cost . . . . . . . . . $70,714,824 $21,950,714 $71,419,645 $28,588,284 $59,569,212
=========== =========== =========== =========== ===========
Gross unrealized
appreciation . . . . . . . . . $ 2,250,111 $ 139,045 $ 114,177 $ - $ 914,312
Gross unrealized
depreciation . . . . . . . . . 3,101,696 1,305,266 2,450,371 - 2,932,386
----------- ----------- ----------- ----------- -----------
Net unrealized
depreciation . . . . . . . . . $ (851,585) $(1,166,221) $(2,336,194) $ - $(2,018,074)
=========== =========== =========== =========== ===========
Net realized capital
loss carryforward . . . . . . . $ - $ 2,125,532 $14,456,054 $ - $ -
=========== =========== =========== =========== ===========
Expiration dates . . . . . . . . - 1998-2002 1996-2002 - -
</TABLE>
The net capital loss carryforwards at December 31, 1994 may be utilized to
offset any future capital gains until expiration. Additionally, $130,007,
$329,772, $2,041, and $75,888 of financial statement capital losses for
Domestic Strategic, Government, Money Market and Multiple Strategy,
respectively, are deferred for tax purposes to the 1995 fiscal year.
37
<PAGE> 39
At December 31, 1994, Government held the following forward purchase
commitments for which delivery is not intended.
<TABLE>
<CAPTION>
Market
Value at
Principal December 31, Unrealized
Amount Security 1994 Appreciation
- -------- -------- ------------ ------------
<S> <C> <C> <C>
Government National Mortgage Association
$ 4,000,000 8.50%, settling 2/95 . . . . . . . . . . . . . . $3,916,720 $17,189
2,000,000 8.50%, settling 1/95 . . . . . . . . . . . . . . 1,964,380 9,380
---------- -------
$5,881,100 $26,569
========== =======
</TABLE>
At December 31, 1994, Government held the following U.S. Treasury Bond futures
contracts expiring in March 1995.
<TABLE>
<CAPTION>
Market
Value at Unrealized
Number of December 31, Appreciation
Contracts 1994 (Depreciation)
--------- ------------ --------------
<S> <C> <C>
10 (long) . . . . . . . . . . . . . . . . . . . . $ 999,375 $(3,501)
10 (short) . . . . . . . . . . . . . . . . . . . . (999,375) 1,124
--------- -------
$ 0 $(2,377)
========= ========
</TABLE>
Note 4-Trustee Compensation
Trustees who are not affiliated with the Adviser are compensated by the Fund at
the annual rate of $3,850 plus a fee of $100 per day for the Board and
Committee meetings attended. The Chairman receives additional fees from the
Fund at an annual rate of $1,440. The Trustees may participate in a voluntary
Deferred Compensation Plan (the "Plan"). The Plan is not funded, and
obligations under the Plan will be paid solely out of the Fund's general
accounts. Funds for the payment of obligations under the Plan will not be
reserved or set aside by any form of trust or escrow. Each director covered
under the Plan elects to be credited with an earnings component on amounts
deferred equal to the income earned by the Fund on its short-term investments
or equal to the total return of the Fund.
Trustees' fees for the year and the liability for deferred compensation at
December 31, 1994 were:
<TABLE>
<CAPTION>
Common Domestic Money Multiple
Stock Strategic Government Market Strategy
------ --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C>
Trustee fees . . . . . . . . . . . . $ 9,674 $ 9,150 $ 9,339 $ 8,725 $ 9,123
Deferred compensation liability . . . 15,598 11,730 16,443 15,223 13,182
</TABLE>
38
<PAGE> 40
COMMON STOCK PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year . . . . . . . $ 14.57 $14.21 $13.44 $10.09 $11.30
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . . . .33 .30 .31 .335 .46
Expenses . . . . . . . . . . . . . . . . . . . . (.09) (.11) (.10) (.10) (.101)
Expense reimbursement(1) . . . . . . . . . . . . .01 .02 .02 .03 .036
------- ------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . .25 .21 .23 .265 .395
Net realized and unrealized gains or
losses on securities . . . . . . . . . . . . . . (.7625) 1.0325 .77 3.37 (1.17)
------- ------ ------ ------ ------
Total from investment operations . . . . . . . . (.5125) 1.2425 1.00 3.635 (.775)
------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income . . . . . . (.25) (.215) (.23) (.285) (.435)
Distributions from net realized gain
on securities . . . . . . . . . . . . . . . . . (1.4175) (.6675) - - -
------- ------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . (1.6675) (.8825) (.23) (.285) (.435)
------- ------ ------ ------ ------
Net asset value, end of year . . . . . . . . . . $ 12.39 $14.57 $14.21 $13.44 $10.09
======= ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . (3.39%) 8.98% 7.48% 36.41% (6.84%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) . . . . . . . $ 67.5 $ 72.3 $ 65.6 $ 57.8 $ 27.2
Average net assets (millions) . . . . . . . . . . $ 69.3 $ 69.0 $ 58.0 $ 36.4 $ 28.0
Ratios to average net assets(1)
Expenses . . . . . . . . . . . . . . . . . . . . .60% .60% .60% .60% .60%
Expenses, without expense reimbursement . . . . .68% .72% .74% .90% .93%
Net investment income . . . . . . . . . . . . . 1.72% 1.41% 1.78% 2.33% 3.64%
Net investment income, without
expense reimbursementy . . . . . . . . . . . . 1.64% 1.29% 1.64% 2.03% 3.31%
Portfolio turnover rate . . . . . . . . . . . . . 153% 139% 116% 95% 122%
</TABLE>
(1) SEE NOTE 2.7
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 41
DOMESTIC STRATEGIC INCOME PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year . . . . . . . $ 8.58 $ 8.00 $ 7.74 $ 6.98 $8.64
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . . . .91 .77 .74 .725 1.085
Expenses . . . . . . . . . . . . . . . . . . . . (.10) (.09) (.07) (.07) (.08)
Expense reimbursement(1) . . . . . . . . . . . . .04 .04 .02 .03 .03
------- ------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . .85 .72 .69 .685 1.035
Net realized and unrealized gains or losses
on securities . . . . . . . . . . . . . . . . . (1.2275) .5825 .2725 .7525 (1.64)
------- ------ ------ ------ ------
Total from investment operations . . . . . . . . (.3775) 1.3025 .9625 1.4375 (.605)
------- ------ ------ ------ ------
DIVIDENDS FROM NET INVESTMENT INCOME . . . . . . (.8525) (.7225) (.7025) (.6775) (1.055)
------- ------ ------ ------ ------
Net asset value, end of year . . . . . . . . . . $ 7.35 $ 8.58 $ 8.00 $ 7.74 $ 6.98
======= ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . (4.33%) 16.32% 12.50% 21.23% (7.23%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) . . . . . . . $ 21.3 $ 27.4 $ 21.1 $ 17.4 $ 6.3
Average net assets (millions) . . . . . . . . . . $ 26.1 $ 26.7 $ 18.8 $ 10.6 $ 6.8
Ratios to average net assets(1)
Expenses . . . . . . . . . . . . . . . . . . . . .60% .60% .60% .60% .60%
Expenses, without expense reimbursement . . . . .95% .95% .95% .95% .95%
Net investment income . . . . . . . . . . . . . 8.35% 7.80% 8.89% 9.72% 11.99%
Net investment income, without
expense reimbursement . . . . . . . . . . . . . 8.00% 7.40% 8.54% 9.37% 11.64%
Portfolio turnover rate . . . . . . . . . . . . . 94% 130% 117% 90% 123%
</TABLE>
(1) SEE NOTE 2
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE> 42
GOVERNMENT PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year . . . . . . . $ 9.26 $ 9.13 $ 9.29 $ 8.70 $ 8.80
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . . . .61 .62 .72 .79 .835
Expenses . . . . . . . . . . . . . . . . . . . . (.06) (.06) (.064) (.06) (.06)
Expense reimbursement(1) . . . . . . . . . . . . .01 .01 .009 .01 .01
------- ------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . .56 .57 .665 .74 .785
Net realized and unrealized gains or
losses on securities . . . . . . . . . . . . . . (.985) .135 (.1575) .60 (.105)
------- ------ ------ ------ ------
Total from investment operations . . . . . . . . (.425) .705 .5075 1.34 .68
------- ------ ------ ------ ------
DIVIDENDS FROM NET INVESTMENT INCOME . . . . . . (.555) (.575) (.6675) (.75) (.78)
------- ------ ------ ------ ------
Net asset value, end of year . . . . . . . . . . $ 8.28 $ 9.26 $ 9.13 $ 9.29 $ 8.70
======= ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . (4.63%) 7.86% 5.73% 16.23% 8.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) . . . . . . . $ 65.5 $ 80.6 $ 74.8 $ 77.0 $ 73.2
Average net assets (millions) . . . . . . . . . . $ 70.3 $ 78.6 $ 74.6 $ 72.9 $ 72.7
Ratios to average net assets(1)
Expenses . . . . . . . . . . . . . . . . . . . . .60% .60% .60% .60% .60%
Expenses, without expense reimbursement . . . . .70% .70% .70% .70% .69%
Net investment income . . . . . . . . . . . . . 6.71% 6.45% 7.29% 8.37% 9.19%
Net investment income, without
expense reimbursement . . . . . . . . . . . . . 6.61% 6.35% 7.19% 8.27% 9.10%
Portfolio turnover rate . . . . . . . . . . . . . 192% 91% 36% 57% 164%
</TABLE>
(1) SEE NOTE 2.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 43
MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . . . .0425 .0322 .0391 .0607 .082
Expenses . . . . . . . . . . . . . . . . . . . . (.0087) (.0095) (.009) (.0087) (.009)
Expense reimbursement(1) . . . . . . . . . . . .0027 .0035 .003 .0026 .003
------- ------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . .0365 .0262 .0331 .0546 .076
------- ------ ------ ------ ------
DIVIDENDS FROM NET INVESTMENT INCOME . . . . . . (.0365) (.0262) (.0331) (.0546) (.076)
------- ------ ------ ------ ------
Net asset value, end of year . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . 3.71% 2.66% 3.36% 5.46% 7.83%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) . . . . . . . $ 28.5 $ 30.0 $ 32.9 $ 38.0 $ 34.3
Average net assets (millions) . . . . . . . . . . $ 30.5 $ 28.9 $ 36.2 $ 36.3 $ 32.8
Ratios to average net assets(1)
Expenses . . . . . . . . . . . . . . . . . . . . .60% .60% .60% .60% .60%
Expenses, without expense reimbursement . . . . .87% .95% .89% .87% .89%
Net investment income . . . . . . . . . . . . . 3.63% 2.63% 3.32% 5.44% 7.59%
Net investment income, without expense
reimbursement . . . . . . . . . . . . . . . . . 3.37% 2.28% 3.03% 5.17% 7.30%
</TABLE>
(1) SEE NOTE 2.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 44
MULTIPLE STRATEGY PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period . . . . . . $ 11.80 $11.92 $12.08 $10.43 $10.77
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . . . .52 .37 .44 .54 .58
Expenses . . . . . . . . . . . . . . . . . . . . (.09) (.09) (.09) (.09) (.09)
Expense reimbursement(1) . . . . . . . . . . . . .02 .01 .02 .02 .03
------- ------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . .45 .29 .37 .47 .52
Net realized and unrealized gains
or losses on securities . . . . . . . . . . . . (.89) .6025 .493 2.27 (.325)
------- ------ ------ ------ ------
Total from investment operations . . . . . . . . (.44) .8925 .863 2.74 .195
------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income . . . . . . (.45) (.2925) (.3689) (.4825) (.535)
Distributions from net realized
gain on securities . . . . . . . . . . . . . . . (.90) (.63) (.6541) (.6075) -
Distributions in excess of book-basis net
realized gains on securities . . . . . . . . . . (.02) (.09) - - -
------- ------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . (1.37) (1.0125) (1.023) (1.09) (.535)
------- ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . $ 9.99 $11.80 $11.92 $12.08 $10.43
======= ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . (3.66%) 7.71% 7.28% 27.05% 1.89%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) . . . . . . $ 56.6 $ 64.9 $ 59.6 $ 52.2 $ 40.3
Average net assets (millions) . . . . . . . . . . $ 61.6 $ 63.9 $ 54.8 $ 44.4 $ 40.4
Ratios to average net assets(1)
Expenses . . . . . . . . . . . . . . . . . . . . .60% .60% .60% .60% .60%
Expenses, without expense reimbursement . . . . .72% .74% .77% .80% .80%
Net investment income . . . . . . . . . . . . . 3.70% 2.34% 3.05% 4.12% 4.70%
Net investment income, without expense
reimbursement . . . . . . . . . . . . . . . . . 3.58% 2.20% 2.88% 3.92% 4.50%
Portfolio turnover rate . . . . . . . . . . . . . 163% 150% 126% 88% 46%
</TABLE>
(1) SEE NOTE 2.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of American Capital Life Investment Trust
In our opinion, the accompanying statements of assets and liabilities,
including the investment portfolios, and the related statements of operation
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of the Common Stock Portfolio,
Domestic Strategic Income Portfolio, Government Portfolio, Money Market
Portfolio, and Multiple Strategy Portfolio (constituting American Capital Life
Investment Trust, hereafter referred to as the "Trust") at December 31, 1994,
and the results of each of their operations, the changes in each of their net
assets and the selected per share data and ratios for each of the fiscal
periods presented, in conformity with generally accepted accounting principles.
These financial statements and selected per share data and ratios (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Houston, Texas
February 13, 1995
44
<PAGE> 46
FUND PERFORMANCE DATA
Management Discussion
For details on market conditions and the performance of each portfolio during
the fiscal year ended December 31, 1994, see pages 2-8 of this report. The
following charts show the performance since inception of the underlying
investment portfolios; YOUR INDIVIDUAL RETURNS MAY VARY BASED ON THE SPECIFIC
VARIABLE PRODUCT IN WHICH YOU HAVE INVESTED.
[Graph showing Change in Value of $10,000 Investment in American Capital
LIT Common Stock Portfolio]
*Past performance is not indicative of future performance. The Standard &
Poor's 500-Stock Index is a broad-based, unmanaged index that reflects general
stock market performance. It does not reflect any commissions or fees that
would be paid by an investor purchasing the securities it represents.
AVERAGE ANNUAL TOTAL RETURNS (AS OF 12/31/94)
1 Year: -3.39% 5 Years: 7.54% From Inception (4/7/86): 7.10%
[Graph showing Change in Value of $10,000 Investment in American Capital
LIT Domestic Strategic Income Portfolio]
**Past performance is not indicative of future performance. The Lehman Brothers
Corporate Bond Index is a broad-based, unmanaged index that reflects the
general performance of corporate bonds. It does not reflect any commissions or
fees that would be pai d by an investor purchasing the securities it
represents.
AVERAGE ANNUAL TOTAL RETURNS (AS OF 12/31/94)
1 Year: -4.33% 5 Years: 7.08% From Inception (11/4/87): 6.35%
45
<PAGE> 47
[Graph showing Change in Value of $10,000 Investment in American Capital
LIT Government Portfolio]
*Past performance is not indicative of future performance. The Lehman Brothers
Mutual Fund U.S. Government Index is a broad-based unmanaged index that
reflects the general performance of government securities. It does not reflect
any commissions or fees that would be paid by an investor purchasing the
securities it represents.
AVERAGE ANNUAL TOTAL RETURNS (AS OF 12/31/94)
1 Year: -4.63% 5 Years: 6.49% From Inception (4/7/86): 6.31%
[Graph showing Change in Value of $10,000 Investment in American Capital
LIT Multiple Strategy Portfolio]
**Past performance is not indicative of future performance. The Standard &
Poor's 500-Stock Index is a broad-based unmanaged index that reflects general
stock market performance. It does not reflect any commissions or fees which
would be paid by an investor purchasing the securities it represents.
AVERAGE ANNUAL TOTAL RETURNS (AS OF 12/31/94)
1 Year: -3.66% 5 Years: 7.58% From Inception (6/30/87): 7.98%
46
<PAGE> 48
AMERICAN CAPITAL LIFE INVESTMENT TRUST
Board of Trustees
J. Miles Branagan
Richard E. Caruso
Roger Hilsman
Don G. Powell
David Rees
Lawrence J. Sheehan
Fernando Sisto*
William S. Woodside
*CHAIRMAN OF THE BOARD
- ------------------------------------------------------
Officers
Don G. Powell
PRESIDENT
Curtis W. Morell
VICE PRESIDENT
AND TREASURER
B. Robert Baker, Jr.
Ellis S. Bigelow
Cindee Burkitt
Ralph P. Goldsticker
Robert C. Peck, Jr.
John R. Reynoldson
Alan T. Sachtleben
Walter W. Stabell, III
David R. Troth
Paul R. Wolkenberg
VICE PRESIDENTS
Tanya M. Loden
VICE PRESIDENT
AND CONTROLLER
Nori L. Gabert
VICE PRESIDENT AND
SECRETARY
J. David Wise
VICE PRESIDENT AND
ASSISTANT SECRETARY
Perry F. Farrell
M. Robert Sullivan
ASSISTANT TREASURERS
Huey P. Falgout, Jr.
ASSISTANT SECRETARY
- ------------------------------------------------------
Investment Adviser
Van Kampen American Capital Asset Management, Inc.
2800 Post Oak Blvd., Houston, Texas 77056
- ------------------------------------------------------
Distributor
Van Kampen American Capital Distributors, Inc.
2800 Post Oak Blvd., Houston, Texas 77056
- ------------------------------------------------------
Shareholder Service Agent
Van Kampen American Capital Shareholder Services, Inc.
P.O. Box 418256, Kansas City, Missouri 64141-9256
- ------------------------------------------------------
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110
- ------------------------------------------------------
Counsel
O'Melveny & Myers
400 South Hope Street, Los Angeles, California 90071
- ------------------------------------------------------
Independent Accountants
Price Waterhouse LLP
1201 Louisiana, Houston, Texas 77002
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund and their policyholders. It is not authorized for distribution to
prospective investors unless it has been preceded or is accompanied by an
effective prospectus of the Fund and appropriate product prospectus which
contains additional information on how to purchase shares, the sales charge,
and other pertinent data.
- --------------------------------------------------------------------------------
Not part of the Prospectus 47
<PAGE> 49
AMERICAN CAPITAL FAMILY OF FUNDS
Emerging Growth Fund
American Capital Emerging Growth Fund, Inc.
Midcap Fund
American Capital Enterprise Fund, Inc.
Core Growth Funds
American Capital Pace Fund, Inc.
American Capital Global Equity Fund
Real Estate Fund
American Capital Real Estate Securities Fund, Inc.
Growth-Income Funds
American Capital Comstock Fund, Inc.
American Capital Growth and Income Fund, Inc.
American Capital Equity Income Fund, Inc.
American Capital Global Managed Assets Fund, Inc.
American Capital Harbor Fund, Inc.
Income-Growth Fund
American Capital Utilities Income Fund, Inc.
Corporate Bond Funds
American Capital High Yield Investments, Inc.
American Capital Corporate Bond Fund, Inc.
Government Securities Funds
American Capital Global Government Securities Fund
American Capital U.S. Government Trust for Income
American Capital Government Securities, Inc.
American Capital Federal Mortgage Trust
Tax-Free Funds
American Capital Tax-Exempt Trust
High Yield Municipal Portfolio
American Capital Texas Municipal Securities, Inc.
American Capital Municipal Bond Fund, Inc.
American Capital Tax-Exempt Trust
Insured Municipal Portfolio
Money Market Fund
American Capital Reserve Fund, Inc.
*Life Investment Trust
Common Stock Portfolio
Domestic Strategic Income Portfolio
Government Portfolio
Money Market Portfolio
Multiple Strategy Portfolio
THE GOVETT FUNDS, INC.
NATIONALLY DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(FORMERLY AMERICAN CAPITAL MARKETING, INC.)
Govett Latin America Fund
Govett Pacific Strategy Fund
Govett Emerging Markets Fund
Govett Smaller Companies Fund
Govett International Equity Fund
Govett Global Government Income Fund
* Available in variable annuity and variable life insurance products only.
For more complete information about any American Capital or Govett Fund,
including charges and expenses, obtain a prospectus from your investment
professional or write Van Kampen American Capital Distributors, Inc., P.O. Box
1411, Houston, TX 77251-1411. Read the prospectus carefully before you invest
or send money.
American Capital
Life Investment Trust
C/O ACCESS
P.O. Box 418256
Kansas City, MO 64141
Not part of the Prospectus 48
