<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Policyholders..................................................... 1
Performance Results......................................................... 3
Portfolio Management Review................................................. 5
Portfolio of Investments
Common Stock Portfolio.................................................... 10
Domestic Strategic Income Portfolio....................................... 17
Government Portfolio...................................................... 23
Money Market Portfolio.................................................... 27
Multiple Strategy Portfolio............................................... 31
Statement of Assets and Liabilities
Common Stock Portfolio.................................................... 14
Domestic Strategic Income Portfolio....................................... 20
Government Portfolio...................................................... 24
Money Market Portfolio.................................................... 28
Multiple Strategy Portfolio............................................... 36
Statement of Operations and Changes in Net Assets
Common Stock Portfolio.................................................... 15
Domestic Strategic Income Portfolio....................................... 21
Government Portfolio...................................................... 25
Money Market Portfolio.................................................... 29
Multiple Strategy Portfolio............................................... 37
Financial Highlights
Common Stock Portfolio.................................................... 16
Domestic Strategic Income Portfolio....................................... 22
Government Portfolio...................................................... 26
Money Market Portfolio.................................................... 30
Multiple Strategy Portfolio............................................... 38
Notes to Financial Statements............................................... 39
</TABLE>
LIT SAR 8/95
<PAGE>
LETTER TO POLICYHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 3, 1995
Dear Policyholder:
The first half of 1995 has been a very positive one for most investors. Both
the fixed-income and stock markets have made considerable gains for the period
ended June 30, 1995. This year has been particularly rewarding for investors
after weathering the difficult markets of 1994.
The first six months of 1995 serve as a reminder of just how quickly markets
can move, and how difficult it can be to predict the timing of those movements.
That's why we believe investors are best served by following a long-term strat-
egy, such as investing in a tax-deferred variable annuity, when seeking long-
term financial goals.
ECONOMIC OVERVIEW
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Evidence of
this guided slowdown was reflected in gross domestic product for the second
quarter, which grew at an annual rate of 0.5 percent, substantially lower than
its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1 per-
cent. While other key economic data, including unemployment rates and housing
starts, have shown mixed signs during recent weeks, the general trend for the
first half of the year suggested a "soft landing" scenario. Subsequently, con-
cern over inflation has subsided, as its annualized rate has run at a modest
pace of 3.2 percent year-to-date.
Financial markets, perceiving the Fed's monetary initiatives had taken hold
without driving the economy into a recession, rallied through the first six
months of the year. With slowing growth, interest rates declined and the value
of fixed-income investments rose. For example, the yield on 30-year Treasury
securities fell from 7.88 percent to 6.62 percent during the first half of the
year, while prices on the "long bond" rose 18 percent.
Corporate earnings remained quite strong during the first half of the year,
helping push stocks to new highs. The Dow Jones Industrial Average and the S&P
500 Index gained nearly 19 percent during the period. The strongest performance
has been in the science & technology sector of the market--and in big "capital-
ization" stocks. As the U.S. dollar plunged against several international cur-
rencies, companies--typically large ones--which had diversified overseas were
able to capture additional earnings, while technology stocks benefited from
booming growth in computers and telecommunications throughout the world.
ECONOMIC OUTLOOK
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed course and lowered short-term interest rates on July 6. We believe the
Fed will move cautiously before easing again, waiting for further signs that
the economy has settled into a slow growth pattern. We anticipate that the
economy will grow at an annual rate between 2 and 3 percent in the second half
of the year and that inflation will run at an annualized rate between 3.3 and
3.5 percent. Based upon a generally slow growth and low inflation outlook, we
believe fixed-income markets will continue
(Continued on page two)
1
<PAGE>
to make positive gains as interest rates fall. We look for stocks to perform
well, but perhaps not as strongly as in the first half of the year, as some
companies may find it difficult to maintain their strong earnings momentum.
During recent months, debate over tax reform has dominated the agenda in
Washington. There has been varied speculation about the impact of reform, which
may have caused you to wonder how it might affect your investment goals. At
this point, no one knows for sure what will happen or when it might actually
take place. As various proposals come to the forefront, there may be short-term
market fluctuations, just as we saw during the debate over the U.S. health care
system. We will continue to keep a close watch over any new developments and
evaluate the potential impact that they may have on your investments.
On the following pages, you can read about your portfolio's performance for
the period, as well as portfolio management's outlook for your investment in
the coming months. We hope that you will find the information contained in the
question-and-answer section helpful.
Additionally, we are pleased to announced the addition of Alan T. Sachtleben
as the portfolio manager for the Multiple Strategy Portfolio effective August
1995. Mr. Sachtleben has 27 years of investment experience, and will be primar-
ily responsible for determining the percentage of the portfolio allocated to
equity and fixed-income investments.
We appreciate your continued confidence in your Life Investment Trust with
Van Kampen American Capital, and we look forward to communicating with you
again regarding the performance of your investment.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
- --------------------------- ---------------------------
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1995
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
COMMON STOCK PORTFOLIO
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 20.29%
One-year total return based on NAV/1/.................................. 21.57%
Five-year average annual total return based on NAV/1/.................. 11.08%
Life-of-Fund average annual total return based on NAV/1/............... 8.86%
Commencement Date...................................................... 04/07/86
</TABLE>
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
DOMESTIC STRATEGIC INCOME PORTFOLIO
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 13.58%
One-year total return based on NAV/1/.................................. 14.15%
Five-year average annual total return based on NAV/1/.................. 10.06%
Life-of-Fund average annual total return based on NAV/1/............... 7.70%
Commencement Date...................................................... 11/04/87
SEC YIELD
SEC Yield/2/........................................................... 7.52%
</TABLE>
/1/Assumes reinvestment of all distributions for the period.
/2/SEC Yield is a standardized calculation prescribed by the Securities and Ex-
change Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending as shown above.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investors' shares, when redeemed, may be
worth more or less than their original cost.
3
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1995
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
GOVERNMENT PORTFOLIO
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 10.16%
One-year total return based on NAV/1/.................................. 11.00%
Five-year average annual total return based on NAV/1/.................. 8.25%
Life-of-Fund average annual total return based on NAV/1/............... 7.08%
Commencement Date...................................................... 04/07/86
</TABLE>
DISTRIBUTION RATE AND YIELD
<TABLE>
<S> <C>
Distribution Rate/2/...................................................... 6.81%
SEC Yield/3/.............................................................. 6.40%
</TABLE>
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
MULTIPLE STRATEGY PORTFOLIO
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 17.55%
One-year total return based on NAV/1/.................................. 19.53%
Five-year average annual total return based on NAV/1/.................. 10.63%
Life-of-Fund average annual total return based on NAV/1/............... 9.66%
Commencement Date...................................................... 06/30/87
</TABLE>
/1/Assumes reinvestment of all distributions for the period.
/2/Distribution Rate (based on net asset value) represents the monthly
annualized distributions of the Portfolio at the end of the period and not the
earnings of the Portfolio.
/3/SEC Yield is a standardized calculation prescribed by the Securities and Ex-
change Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending as shown above.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investors' shares, when redeemed, may be
worth more or less than their original cost.
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
COMMON STOCK PORTFOLIO
The following is an interview with the management team of the American Capital
Life Investment Trust--Common Stock Portfolio. The team is led by Robert Baker,
portfolio manager, and Alan T. Sachtleben, executive vice president for equity
investments.
Q. HOW DID THE DECLINE IN INTEREST RATES HELP THE STOCK MARKET DURING THE PAST
SIX MONTHS?
A. Lower interest rates had an extremely positive influence on the stock mar-
ket. However, companies found it increasingly difficult to maintain recent
sales and earnings growth and, as earnings growth rates slow while stock prices
rise, stocks become more expensive.
Our portfolio management philosophy is to normally be fully invested and
broadly diversified. To do this, we focus on individual stock selection rather
than trying to pick sectors or time the market. As a result, our "bottom up"
approach to stock picking emphasizes relatively inexpensive stocks, and the
Portfolio's holdings are reflective of our value orientation. Some of the
stocks in the Portfolio that performed well during the reporting period in-
cluded AMR Corp. (airlines), Disney (entertainment) and Philip Morris (consumer
non-durables).
During the past six months, we increased the Portfolio's holdings of stocks
in the technology and producer manufacturing sectors. We decreased holdings in
the financial services and utilities industries. Although financial services
stocks typically do well when interest rates decline, as interest rates fell
during the first half of the year, the prices of financial services stocks rose
to the point where they could no longer be considered undervalued, so we re-
duced our holdings. The diversification of the Portfolio is illustrated by the
pie chart below.
[PIE CHART OF HOLDINGS BY INDUSTRY AS A PERCENTAGE OF NET
ASSETS AS OF JUNE 30, 1995 APPEARS HERE.]
Finance - 6%
Consumer Non-Durables - 7%
Consumer Services - 9%
Energy - 11%
Consumer Distribution - 7%
Health Care - 9%
Raw Materials/Process Industries - 10%
Producer Manufacturing - 10%
Technology - 7%
Utilities - 10%
Other - 14%
Q. HOW DID THE PORTFOLIO PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1995?
A. The Portfolio achieved a total return at net asset value of 20.29 per-
cent/1/, including reinvestment of dividends totaling $0.0075 per share and
a capital gains distribution of $0.1525 per share. By comparison, the Standard
& Poor's 500-Stock Index achieved a total return of 20.15 percent. The S&P 500
is a broad-based, unmanaged index that does not reflect any commissions or fees
that would be paid by an investor purchasing the securities it represents.
/s/ Alan T. Sachtleben /s/ B. Robert Baker, Jr.
- ------------------------ ------------------------
Alan T. Sachtleben B. Robert Baker, Jr.
Executive Vice President Portfolio Manager
Equity Investments Common Stock Portfolio
5
Please see footnotes on page three
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
DOMESTIC STRATEGIC INCOME PORTFOLIO
The following is an interview with the management team of the American Capital
Life Investment Trust--Domestic Strategic Income Portfolio. The team is led by
Walter W. Stabell, III, portfolio manager, and Robert C. Peck, Jr., executive
vice president, fixed-income investments.
Q. HOW DID YOU RESPOND TO THE DECLINE IN INTEREST RATES DURING THE REPORTING
PERIOD?
A. The gradual slowdown in economic growth during the past six months helped
make the second quarter of 1995 the weakest quarter in two years. In this
environment, we increased our holdings of investment-grade corporate bonds
(those rated as being of superior quality), and government and agency bonds,
and reduced the portfolio's holdings of high-yield bonds. We also purchased 30-
year bonds with at least 10 years of call protection and 20-year non-callable
bonds because they tend to perform well in a rallying market. As a result of
these changes, the portfolio was structured more defensively at June 30 than at
the beginning of the reporting period, and better positioned for a period of
slower economic growth. The structure of the portfolio at the end of June is
illustrated by the chart below.
[PIE CHART OF PORTFOLIO HOLDINGS AS OF JUNE 30, 1995 APPEARS HERE.]
Government Bonds - 21%
High Yield Bonds - 29%
Cash Equivalents and Stocks - 2%
Other Investment-Grade Bonds - 48%
Q. HOW DID THE PORTFOLIO PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1995?
A. The Portfolio achieved a total return at net asset value of 13.58 per-
cent/1/, including reinvestment of dividends totaling $0.0075 per share. By
comparison, the Lehman Brothers Corporate Bond Index, a broad-based, unmanaged
index that reflects the general performance of corporate bonds, achieved a to-
tal return of 13.8 percent. The Index does not reflect any commissions or fees
that would be paid by an investor purchasing the securities it represents.
/s/ Robert C. Peck, Jr. /s/ Walter W. Stabell, III
- ------------------------ --------------------------
Robert C. Peck, Jr. Walter W. Stabell, III
Executive Vice President Portfolio Manager
Fixed Income Investments Domestic Strategic
Income Portfolio
6
Please see footnotes on page three
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
GOVERNMENT PORTFOLIO
The following is an interview with the management team of the American Capital
Life Investment Trust--Government Portfolio. The team is led by John R.
Reynoldson, portfolio manager, and Robert C. Peck, Jr., executive vice
president, fixed-income investments.
Q. THE FIXED-INCOME MARKETS HAVE RALLIED SINCE THE BEGINNING OF THE YEAR. HOW
HAVE YOU RESPONDED?
A. Because the bond market has moved up strongly for the past six months, we
believe a more moderate investment stance is now warranted. As a result,
we have invested more of the portfolio in mortgage-backed securities, and we
continue to buy Treasury securities when we can find good values. The composi-
tion of the Portfolio at June 30, 1995, is illustrated by the chart below.
The bond market now appears to be relatively fully priced, with levels
already discounting at least one more drop in short-term interest rates by the
Federal Reserve Board. For the market to continue its prior aggressive rally,
economic data would have to indicate further weakness, leading the Fed to
quickly lower short-term rates. We believe, however, that economic growth will
rebound from second-quarter lows to attain moderate growth in the second half
of the year.
[PIE CHART OF PORTFOLIO HOLDINGS AS OF JUNE 30, 1995 APPEARS HERE.]
Government National Mortgage Association - 34%
U.S. Treasury - 29%
Cash & Equivalents - 2%
Federal Home Loan Mortgage Corporation - 16%
Federal National Mortgage Association - 19%
Q. HOW DID THE PORTFOLIO PERFORM DURING THE REPORTING PERIOD?
A. The Portfolio achieved a total return at net asset value of 10.16 per-
cent/1/, including reinvestment of dividends totaling $0.2975 per share.
By comparison, the Lehman Brothers Mutual Fund U.S. Government Index achieved
a total return of 11.20 percent. This broad-based, unmanaged index reflects
the general performance of government securities; however, it does not reflect
any commissions or fees that would be paid by an investor purchasing the secu-
rities it represents.
/s/ Robert C. Peck, Jr. /s/ John R. Reynoldson
- ------------------------ ----------------------
Robert C. Peck, Jr. John R. Reynoldson
Executive Vice President Portfolio Manager
Fixed Income Investments Government Portfolio
7
Please see footnotes on page four
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
MONEY MARKET PORTFOLIO
The following is an interview with the management team of the American Capital
Life Investment Trust--Money Market Portfolio. The team is led by David R.
Troth, portfolio manager, and Robert C. Peck, Jr., executive vice president,
fixed-income investments.
Q. HOW DID YOU RESPOND TO THE DECLINE IN INTEREST RATES DURING THE PAST SIX
MONTHS?
A. We gradually lengthened the average maturity of the Portfolio from 24 days
at the beginning of January 1995 to 47 days at the end of June. By adjust-
ing the maturity, we were able to capture the highest yields available within
our quality constraints and be flexible enough to adjust to any further
changes in interest rates. During the reporting period, the average seven-day
yield for the portfolio increased from 5.29 percent to 5.41 percent and the
30-day yield rose from 5.20 percent to 5.48 percent.
At the end of June, 24 percent of the Portfolio was invested in U.S.
Government obligations, compared to 72 percent at the beginning of January,
while the percentage invested in repurchase agreements increased to 43 percent
at June 30 from 2 percent on January 1, and the percentage invested in
commercial paper increased to 33 percent from 26 percent during the same
period.
Q. HOW DID THE PORTFOLIO PERFORM DURING THE REPORTING PERIOD?
A. The Portfolio achieved a total return at net asset value of 2.73 percent,
including reinvestment of dividends totaling $0.0270 per share.
/s/ Robert C. Peck, Jr. /s/ David R. Troth
- ------------------------ --------------------
Robert C. Peck, Jr. David R. Troth
Executive Vice President Portfolio Manager
Fixed Income Investments Money Market
Portfolio
An investment in the portfolio is neither insured nor guaranteed by the U.S.
Government and there can by no assurance that the fund will be able to
maintain a stable net asset value of $1.00 per share.
8
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
AMERICAN CAPITAL LIFE INVESTMENT TRUST--
MULTIPLE STRATEGY PORTFOLIO
The following is an interview with the management team of the American Capital
Life Investment Trust--Multiple Strategy Portfolio. The team is led by Alan T.
Sachtleben, executive vice president, equity investments.
Q. HOW DID THE DECLINE IN INTEREST RATES IMPACT THE PORTFOLIO DURING THE RE-
PORTING PERIOD?
A. The decline in interest rates throughout the reporting period led us to
shift more of the portfolio from bonds to stocks and cash. At the end of
June, about 63 percent of the Portfolio was invested in stocks, an allocation
that is slightly above average for the Portfolio. Bond holdings, meanwhile,
dropped to 26 percent of the Portfolio, while cash and equivalents increased to
11 percent. The diversification of the Portfolio at the end of June is illus-
trated by the chart below.
[PIE CHART OF PORTFOLIO HOLDINGS AS A PERCENTAGE OF NET ASSETS AS OF
JUNE 30, 1995 APPEARS HERE.]
Common Stock - 63%
Corporate and Government Bonds - 26%
Cash and Equivalents - 11%
Q. HOW DID THE PORTFOLIO PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1995?
A. The Portfolio achieved a total return at net asset value of 17.55 per-
cent/1/, including reinvestment of dividends totaling $0.0075 per share and
a capital gains distribution of $0.0050 per share. By comparison, the Standard
& Poor's 500-Stock Index achieved a total return of 20.15 percent. The S&P 500
is a broad-based, unmanaged index that reflects the general performance of the
stock market. It does not reflect any commissions or fees that would be in-
curred by an investor purchasing the securities it represents.
/s/ Alan T. Sachtleben
- -------------------------
Alan T. Sachtleben
Executive Vice President
Equity Investments
9
Please see footnotes on page four
<PAGE>
COMMON STOCK PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 88.5%
CONSUMER DISTRIBUTION 6.9%
*10 Best Buy, Inc....................................... $ 276,900
8 Dayton Hudson Corp.................................. 588,350
8 Dillard Department Stores, Inc...................... 235,000
9 Gap, Inc............................................ 310,387
11 Limited, Inc........................................ 244,200
9 May Department Stores Co............................ 357,975
5 Nordstrom, Inc...................................... 206,875
18 Sears Roebuck & Co.................................. 1,083,738
*9 Sports & Recreation, Inc............................ 115,500
8 Sysco Corp.......................................... 244,850
*9 Toys R Us, Inc...................................... 266,175
38 Wal-Mart Stores, Inc................................ 1,008,475
--------------
TOTAL CONSUMER DISTRIBUTION......................... 4,938,425
--------------
CONSUMER DURABLES 1.3%
9 Eastman Kodak Co.................................... 557,750
8 General Motors Corp................................. 351,562
--------------
TOTAL CONSUMER DURABLES............................. 909,312
--------------
CONSUMER NON-DURABLES 7.4%
18 Clorox Co........................................... 1,161,450
8 ConAgra, Inc........................................ 289,462
4 CPC International, Inc.............................. 216,125
*13 Fruit Of The Loom, Inc.............................. 274,625
7 Maybelline, Inc..................................... 143,500
23 PepsiCo, Inc........................................ 1,049,375
16 Philip Morris Companies, Inc........................ 1,190,000
3 Procter & Gamble Co................................. 230,000
14 RJR Nabisco Holdings Corp., Class A................. 383,400
12 Sara Lee Corp....................................... 342,000
--------------
TOTAL CONSUMER NON-DURABLES......................... 5,279,937
--------------
CONSUMER SERVICES 8.8%
10 CBS, Inc............................................ 670,000
19 Comcast Corp, Class A............................... 352,687
45 Cox Communications, Inc............................. 873,812
14 Disney (Walt), Co................................... 750,937
9 Marriott International, Inc......................... 322,875
9 McDonald's Corp..................................... 352,125
2 McGraw Hill, Inc.................................... 151,750
12 New York Times Co., Class A......................... 282,000
17 News Corp., Limited, ADR............................ 373,313
*39 Tele-Communications, Inc., Class A.................. 914,063
26 Time Warner, Inc.................................... 1,081,588
8 Wendy's International, Inc.......................... 143,000
--------------
TOTAL CONSUMER SERVICES............................. 6,268,150
--------------
ENERGY 10.7%
5 Amoco Corp.......................................... 359,775
10 Ashland, Inc........................................ 358,275
3 Atlantic Richfield Co............................... 351,200
10 Baker Hughes, Inc................................... 205,000
</TABLE>
See Notes to Financial Statements
10
<PAGE>
COMMON STOCK PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
9 Burlington Resources, Inc........................... $ 342,937
34 Coastal Corp........................................ 1,020,600
7 Consolidated Natural Gas Co......................... 264,250
9 Dresser Industrials, Inc............................ 206,925
20 Exxon Corp.......................................... 1,412,500
10 Halliburton Co...................................... 357,500
17 Pacific Enterprises................................. 404,250
34 Panhandle Eastern Corp.............................. 828,750
11 Repsol SA, ADR...................................... 347,875
8 Schlumberger, Ltd................................... 497,000
*10 Smith International, Inc............................ 167,500
12 Sonat, Inc.......................................... 366,000
7 Valero Energy Corp.................................. 147,825
--------------
TOTAL ENERGY........................................ 7,638,162
--------------
FINANCE 6.3%
3 American International Group, Inc................... 285,000
12 Chase Manhattan Corp(/1/)........................... 566,457
9 Chemical Banking Corp............................... 425,250
5 Comerica, Inc....................................... 160,625
6 Federal National Mortgage Association............... 566,250
8 First Chicago Corp.................................. 490,975
5 Franklin Resource, Inc.............................. 213,600
11 Morgan (J.P.) & Co., Inc............................ 736,313
11 NationsBank Corp.................................... 563,063
7 Providian Corp...................................... 242,875
4 St. Paul Companies, Inc............................. 211,775
--------------
TOTAL FINANCE....................................... 4,462,183
--------------
HEALTH CARE 9.3%
5 American Home Products Corp......................... 363,662
14 Baxter International, Inc........................... 509,250
5 Bristol Myers Squibb Co............................. 320,187
36 Caremark International, Inc......................... 856,000
5 Columbia/HCA Healthcare Corp........................ 233,550
*35 Community Psychiatric Centers....................... 393,750
*14 Lincare Holdings, Inc............................... 358,594
16 Mallinckrodt Group, Inc............................. 568,000
12 Merck & Co., Inc.................................... 602,700
*45 National Medical Enterprises, Inc................... 648,313
*12 Nellcor, Inc........................................ 540,000
10 Schering-Plough Corp................................ 428,013
9 Upjohn Co........................................... 321,938
5 Warner-Lambert Co................................... 466,425
--------------
TOTAL HEALTH CARE................................... 6,610,382
--------------
PRODUCER MANUFACTURING 10.0%
8 Browning-Ferris Industries, Inc..................... 289,000
3 Emerson Electric Co................................. 228,800
7 Fluor Corp.......................................... 364,000
16 General Electric Co................................. 885,087
9 Honeywell, Inc...................................... 383,812
9 ITT Corp............................................ 1,045,750
11 Philips Electronics, N.V., ADR...................... 470,250
</TABLE>
See Notes to Financial Statements
11
<PAGE>
COMMON STOCK PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
10 Rockwell International Corp......................... $ 457,500
9 Tenneco, Inc........................................ 414,000
4 United Technologies Corp............................ 281,250
*5 Varity Corp......................................... 237,600
72 WMX Technologies, Inc............................... 2,037,325
--------------
TOTAL PRODUCER MANUFACTURING........................ 7,094,374
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 10.4%
46 Asia Pacific Resources International................ 420,663
14 Barrick Gold Corp................................... 356,025
6 Consolidated Papers................................. 316,938
15 DuPont (E.I) de Nemours & Co., Inc.................. 1,003,750
5 Engelhard Corp...................................... 210,087
*60 Fort Howard Corp.................................... 844,675
*62 Freeport McMoran, Inc............................... 1,092,750
15 Grace (W.R.) & Co................................... 902,213
22 James River Corp.................................... 593,937
9 Lubrizol Corp....................................... 318,375
4 Mead Corp........................................... 237,500
3 Monsanto Co......................................... 252,350
7 Newmont Mining Corp................................. 276,375
5 Sherwin Williams Co................................. 171,000
3 Sigma-Aldrich Corp.................................. 122,813
5 Willamette Industries, Inc.......................... 294,150
--------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES........... 7,413,601
--------------
TECHNOLOGY 7.1%
7 Avnet, Inc.......................................... 328,950
*4 BMC Software, Inc................................... 285,825
*17 Compaq Computer Corp................................ 771,375
*8 Gateway 2000, Inc................................... 191,100
6 General Dynamics Corp............................... 248,500
3 Hewlett-Packard Co.................................. 208,600
9 International Business Machines Corp................ 835,200
8 Lockheed Martin Corp................................ 517,499
5 Loral Corp.......................................... 258,750
6 Northern Telecom, Ltd............................... 219,000
*17 Novell, Inc......................................... 334,950
11 Varian Associates, Inc.............................. 618,800
*7 VLSI Technology, Inc 210,875
--------------
TOTAL TECHNOLOGY.................................... 5,029,424
--------------
TRANSPORTATION 0.8%
*4 AMR Corp............................................ 313,425
8 Illinois Central Corp............................... 276,000
--------------
TOTAL TRANSPORTATION................................ 589,425
--------------
UTILITIES 9.5%
4 American Electric Power, Inc........................ 147,525
7 Ameritech Corp...................................... 294,800
18 AT&T Corp........................................... 929,687
6 Baltimore Gas & Electric Co......................... 150,000
8 Carolina Power & Light Co........................... 226,875
4 Central & South West Corp........................... 97,125
2 Florida Progress Corp............................... 75,000
</TABLE>
See Notes to Financial Statements
12
<PAGE>
COMMON STOCK PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
6 FPL Group, Inc...................................... $ 231,750
11 Frontier Corp....................................... 252,000
3 General Public Utilities Corp....................... 77,350
8 GTE Corp............................................ 273,000
8 Illinova Corp....................................... 210,612
26 MCI Communications Corp............................. 580,800
3 Nevada Power Co..................................... 68,063
2 NIPSCO Industries, Inc.............................. 74,800
16 Peco Energy Co...................................... 442,000
1 Pinnacle West Capital Corp.......................... 34,300
3 Public Service Co. of Colorado...................... 97,500
11 Public Service Co. of New Mexico.................... 156,750
3 San Diego Gas & Electric Co......................... 70,550
7 SBC Communications, Inc............................. 333,375
14 Southern Co......................................... 313,250
3 Southwestern Public Service Co...................... 73,750
33 Sprint Corp......................................... 1,109,625
7 U S West, Inc....................................... 291,375
*7 WorldCom, Inc....................................... 194,400
--------------
TOTAL UTILITIES..................................... 6,806,262
--------------
TOTAL COMMON STOCK (Cost $55,283,246)............... 63,039,637
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000)
---------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
OBLIGATIONS 3.7%
$1,000 Treasury Notes, 6.250%,
08/31/96................ 1,004,530
1,600 Treasury Notes, 6.875%,
02/28/97................ 1,625,744
--------------
TOTAL UNITED STATES 2,630,274
GOVERNMENT OBLIGATIONS
(Cost $2,595,453).......
--------------
REPURCHASE
AGREEMENT 4.8%
3,440 Lehman Government
Securities, Inc., dated
6/30/95, 6.050%, due
07/03/95,
(collateralized by U.S.
Government obligations
in a pooled cash
account) repurchase
proceeds $3,441,734
(Cost $3,440,000)....... 3,440,000
--------------
TOTAL INVESTMENTS (Cost $61,318,699) 97.0%. 69,109,911
OTHER ASSETS AND LIABILITIES, NET 3.0%..... 2,161,608
--------------
NET ASSETS 100%............................ $ 71,271,519
--------------
</TABLE>
* Non-income producing securities
(1) Includes 189 warrants, expiring 6/30/96
See Notes to Financial Statements
13
<PAGE>
COMMON STOCK PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $61,318,699).................... $69,109,911
Cash............................................................... 847
Receivable for investments sold.................................... 2,944,680
Dividends receivable............................................... 204,897
Receivable for Fund shares sold.................................... 129,228
Other assets....................................................... 1,856
-----------
Total Assets..................................................... 72,391,419
-----------
LIABILITIES
Payable for investments purchased.................................. 849,564
Payable for Fund shares redeemed................................... 202,444
Due to Adviser..................................................... 21,715
Deferred Trustees' compensation.................................... 16,500
Due to shareholder service agent................................... 1,600
Accrued expenses................................................... 28,077
-----------
Total Liabilities................................................ 1,119,900
-----------
NET ASSETS, equivalent to $14.73 per share......................... $71,271,519
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 4,839,261 shares outstanding................... $ 48,393
Capital surplus.................................................... 59,415,422
Undistributed net realized gain on securities...................... 3,263,660
Net unrealized appreciation of securities.......................... 7,791,212
Undistributed net investment income................................ 752,832
-----------
NET ASSETS......................................................... $71,271,519
-----------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
COMMON STOCK PORTFOLIO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends...................................................... $ 848,513
Interest....................................................... 134,028
-----------
Investment income............................................ 982,541
-----------
EXPENSES
Management fees................................................ 172,909
Shareholder service agent's fees and expenses.................. 9,195
Accounting services............................................ 30,389
Trustees' fees and expenses.................................... 5,247
Audit fees..................................................... 7,300
Custodian fees................................................. 7,678
Legal fees..................................................... 2,696
Reports to shareholders........................................ 4,757
Miscellaneous.................................................. 188
Expense reimbursement.......................................... (32,868)
-----------
Total expenses............................................... 207,491
-----------
NET INVESTMENT INCOME........................................ 775,050
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities................................ 3,552,959
Net unrealized appreciation of securities during the period.... 8,354,404
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES............... 11,907,363
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $12,682,413
-----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $67,471,922 $72,259,545
----------- -----------
Operations
Net investment income.................... 775,050 1,190,278
Net realized gain on securities.......... 3,552,959 6,950,717
Net unrealized appreciation
(depreciation) of securities during the
period................................... 8,354,404 (10,647,731)
----------- -----------
Increase (decrease) in net assets
resulting from operation................ 12,682,413 (2,506,736)
----------- -----------
Distributions to shareholders from
Net investment income.................... (37,385) (1,197,291)
Net realized gain on securities.......... (760,158) (6,788,651)
----------- -----------
(797,543) (7,985,942)
----------- -----------
Capital transactions
Proceeds from shares sold................ 3,435,215 11,714,030
Proceeds from shares issued for
distributions reinvested................. 797,543 7,985,942
Cost of shares redeemed.................. (12,318,031) (13,994,917)
----------- -----------
Increase (decrease) in net assets from
capital transactions.................... (8,085,273) 5,705,055
----------- -----------
INCREASE (DECREASE) IN NET ASSETS........ 3,799,597 (4,787,623)
----------- -----------
NET ASSETS, end of period................. $71,271,519 $67,471,922
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold............................... 255,130 827,085
Shares issued for distributions
reinvested................................ 58,773 648,452
Shares redeemed........................... (919,572) (989,273)
----------- -----------
Increase (decrease) in capital shares
outstanding............................. (605,669) 486,264
----------- -----------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
COMMON STOCK PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31
Ended June ---------------------------------------
30, 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $12.39 $ 14.57 $14.21 $13.44 $10.09 $11.30
------ ------- ------ ------ ------ ------
Income from investment
operations
Investment income........ .20 .33 .30 .31 .335 .46
Expenses................. (.05) (.09) (.11) (.10) (.10) (.101)
Expense reimbursement
(/1/)................... .01 .01 .02 .02 .03 .036
------ ------- ------ ------ ------ ------
Net investment income..... .16 .25 .21 .23 .265 .395
Net realized and
unrealized gains or
losses on securities..... 2.34 (.7625) 1.0325 .77 3.37 (1.17)
------ ------- ------ ------ ------ ------
Total from investment
operations............... 2.50 (.5125) 1.2425 1.00 3.635 (.775)
------ ------- ------ ------ ------ ------
Less distributions from
Net investment income.... (.0075) (.25) (.215) (.23) (.285) (.435)
Net realized gain on
securities.............. (.1525) (1.4175) (.6675) -- -- --
------ ------- ------ ------ ------ ------
Total distributions....... (.16) (1.6675) (.8825) (.23) (.285) (.435)
------ ------- ------ ------ ------ ------
Net asset value, end of
period................... $14.73 $ 12.39 $14.57 $14.21 $13.44 $10.09
------ ------- ------ ------ ------ ------
TOTAL RETURN(/2/)......... 20.29% (3.39%) 8.98% 7.48% 36.41% (6.84%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)............... $71.3 $67.5 $72.3 $65.6 $57.8 $27.2
Average net assets
(millions)............... $69.2 $69.3 $69.0 $58.0 $36.4 $28.0
Ratios to average net
assets (annualized) (/1/)
Expenses................. .60% .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement........... .70% .68% .72% .74% .90% .93%
Net investment income.... 2.26% 1.72% 1.41% 1.78% 2.33% 3.64%
Net investment income,
without expense
reimbursement........... 2.16% 1.64% 1.29% 1.64% 2.03% 3.31%
Portfolio turnover rate... 66% 153% 139% 116% 95% 122%
</TABLE>
(1) See Note 2.
(2) Total return for a period less than one year is not annualized.
See Notes to Financial Statements
16
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 81.5%
CONSUMER DISTRIBUTION 12.3%
$ 500 Borden, Inc....................... 7.875% 02/15/23 $ 477,550
300 ConAgra, Inc...................... 9.750 03/01/21 366,750
500 Food 4 Less....................... 13.750 06/15/01 535,000
500 Nabisco, Inc...................... 7.550 06/15/15 496,900
500 Petro Stopping Centers, L.P....... 12.500 06/01/02 501,250
500 Specialty Retailers, Inc.......... 11.000 08/15/03 465,000
500 Sysco Corp........................ 6.500 06/15/05 493,635
--------------
TOTAL CONSUMER DISTRIBUTION....... 3,336,085
--------------
CONSUMER DURABLES 2.1%
500 Chrysler Corp..................... 10.950 08/01/17 564,000
--------------
CONSUMER NON-DURABLES 5.4%
500 Dr Pepper/Seven-Up Companies,
Inc............................... ** 11/01/02 449,650
500 Fieldcrest Cannon, Inc............ 11.250 06/15/04 520,000
500 Westpoint Stevens................. 9.375 12/15/05 480,000
--------------
TOTAL CONSUMER NON-DURABLES....... 1,449,650
--------------
CONSUMER SERVICES 13.4%
500 Cox Communications, Inc........... 6.875 06/15/05 494,150
500 New York Times Co................. 8.250 03/15/25 538,650
500 News American Holdings, Inc....... 10.125 10/15/12 575,750
500 Tele-Communications, Inc.......... 7.875 08/01/13 469,600
500 Time Warner, Inc.................. 9.125 01/15/13 526,800
500 Turner Broadcasting Systems, Inc.. 7.400 02/01/04 470,150
500 Valassis Communications, Inc...... 9.550 12/01/03 553,450
--------------
TOTAL CONSUMER SERVICES........... 3,628,550
--------------
ENERGY 13.0%
300 Coastal Corp...................... 10.250 10/15/04 360,180
200 Coastal Corp...................... 11.750 06/15/06 217,500
500 HS Resources, Inc................. 9.875 12/01/03 485,000
500 Occidental Petroleum Corp......... 10.125 11/15/01 584,850
500 PDV America, Inc.................. 7.875 08/01/03 487,850
500 Plains Resources, Inc............. 12.000 10/01/99 521,250
500 Texaco Capital, Inc............... 8.625 06/30/10 583,350
250 Union Oil Co. of California....... 9.250 02/01/03 284,175
--------------
TOTAL ENERGY...................... 3,524,155
--------------
FINANCE 2.9%
247 Bluebell Funding, Inc............. 11.850 05/01/99 261,820
500 Phoenix Re Corp................... 9.750 08/15/03 523,750
--------------
TOTAL FINANCE..................... 785,570
--------------
HEALTH CARE 2.8%
500 Quorum Health Group............... 11.875 12/15/02 546,875
200 Tenet Healthcare.................. 10.125 03/01/05 211,500
--------------
TOTAL HEALTH CARE................. 758,375
--------------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING
INDUSTRIES 11.8%
$ 500 Boise Cascade Corp.......... 9.450% 11/01/09 $ 575,500
250 Container Corp. of America.. 9.750 04/01/03 248,750
500 Georgia-Pacific Corp........ 9.950 06/15/02 581,450
150 IMC Fertilizer Group, Inc... 9.450 12/15/11 151,500
500 Noranda, Inc................ 8.125 06/15/04 536,200
500 Riverwood International
Corp........................ 10.375 06/30/04 547,500
500 UCAR Global Enterprise,
Inc......................... 12.000 01/15/05 538,750
--------------
TOTAL RAW
MATERIALS/PROCESSING
INDUSTRIES.................. 3,179,650
--------------
TECHNOLOGY 3.9%
500 International Business
Machines Corp............... 7.500 06/15/13 511,400
500 Unisys Corp................. 13.500 07/01/97 553,125
--------------
TOTAL TECHNOLOGY........... 1,064,525
--------------
TRANSPORTATION 11.1%
500 Delta Air Lines, Inc........ 9.750 05/15/21 562,600
500 International Shipholding
Corp........................ 9.000 07/01/03 485,000
350 Kansas City Southern
Industries, Inc............. 8.800 07/01/22 387,485
250 Southern Pacific Rail Corp.. 9.375 08/15/05 256,250
500 Southwest Airlines Co....... 9.400 07/01/01 564,100
500 Union Pacific Co............ 8.350 05/01/25 526,150
200 United Air Lines, Inc.,
Series 1991-A............... 10.020 03/22/14 224,320
--------------
TOTAL TRANSPORTATION....... 3,005,905
--------------
UTILITIES 2.8%
350 Monongahela Power Co........ 8.375 07/01/22 370,895
350 Public Service Co. of
Colorado.................... 8.750 03/01/22 383,237
--------------
TOTAL UTILITIES............ 754,132
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $21,388,401)......... 22,050,597
--------------
GOVERNMENT OBLIGATIONS 22.1%
*2,000 Federal National Mortgage
Association, Forward........ 7.500 settling 07/95 2,005,620
1,072 Federal National Mortgage
Association, Pools.......... 10.000 04/01/21 1,163,239
350 Province of Newfoundland
(Canada).................... 8.650 10/22/22 386,750
350 Province of Saskatchewan
(Canada).................... 8.000 02/01/13 380,870
+2,000 United States Treasury
Notes....................... 6.750 06/30/99 2,054,060
--------------
TOTAL GOVERNMENT
OBLIGATIONS (Cost
$5,843,841)................ 5,990,539
--------------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON AND PREFERRED STOCK 0.9%
2,226 Arcadian Corp................................... $ 40,068
*2,500 F F Holdings Co. (private placement, purchased
on 10/6/92)..................................... 5,000
*500 Smitty's Supermarket, Class B................... 5,000
*6,889 Supermarkets General Holdings Corp., $3.52,
Payment in Kind, preferred stock................ 182,558
--------------
TOTAL COMMON AND PREFERRED STOCK (Cost
$189,924)....................................... 232,626
--------------
<CAPTION>
Principal
Amount
(000)
- ------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT 1.1%
$ 295 Lehman Government Securities,
Inc., dated 6/30/95
(collateralized by U.S.
Government obligations in a
pooled cash account) repurchase
proceeds $295,152 (Cost
$295,000)...................... 6.180% 07/03/95 295,000
--------------
TOTAL INVESTMENTS (Cost $27,717,166) 105.6%............... 28,568,762
OTHER ASSETS AND LIABILITIES, NET (5.6%).................. (1,518,279)
--------------
NET ASSETS 100%........................................... $ 27,050,483
--------------
</TABLE>
*Non-income producing securities
**Zero coupon bond
+Security placed as collateral for a forward purchase commitment (Note 1B).
See Notes to Financial Statements
19
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investment, at market value (Cost $27,717,166).................... $28,568,762
Cash.............................................................. 2,049
Receivable for investments sold................................... 534,462
Interest receivable............................................... 510,123
Receivable for Fund shares sold................................... 1,568
Other assets...................................................... 1,132
-----------
Total Assets..................................................... 29,618,096
-----------
LIABILITIES
Payable for investments purchased................................. 2,519,583
Deferred Trustees' compensation................................... 12,796
Payable for Fund shares redeemed.................................. 4,801
Due to shareholder service agent.................................. 1,561
Accrued expenses and other liabilities............................ 28,872
-----------
Total Liabilities................................................ 2,567,613
-----------
NET ASSETS, equivalent to $8.34 per share......................... $27,050,483
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 3,241,975 shares outstanding.................. $ 32,420
Capital surplus................................................... 27,167,842
Accumulated net realized loss on securities....................... (2,072,245)
Net unrealized appreciation of securities......................... 851,596
Undistributed net investment income............................... 1,070,870
-----------
NET ASSETS........................................................ $27,050,483
-----------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest...................................................... $1,157,866
Dividends..................................................... 3,265
----------
Investment income........................................... 1,161,131
----------
EXPENSES
Management fees............................................... 64,257
Shareholder service agent's fees and expenses................. 9,202
Accounting services........................................... 27,920
Trustees' fees and expenses................................... 4,881
Audit fees.................................................... 10,550
Custodian fees................................................ 2,377
Legal fees.................................................... 2,981
Reports to shareholders....................................... 4,995
Miscellaneous................................................. 993
Expense reimbursement......................................... (51,048)
----------
Total expenses.............................................. 77,108
----------
NET INVESTMENT INCOME....................................... 1,084,023
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities............................... 186,264
Net unrealized appreciation of securities during the period... 2,014,847
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.............. 2,201,111
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,285,134
----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $21,273,969 $27,443,291
----------- -----------
Operations
Net investment income.................... 1,084,023 2,178,975
Net realized gain (loss) on securities... 186,264 (857,071)
Net unrealized appreciation (deprecia-
tion) of securities during the period... 2,014,847 (2,543,211)
----------- -----------
Increase (decrease) in net assets re-
sulting from operations.............. 3,285,134 (1,221,307)
----------- -----------
Distributions to shareholders from net
investment income........................ (24,775) (2,170,097)
----------- -----------
Capital transactions
Proceeds from shares sold................ 5,765,225 9,066,088
Proceeds from shares issued for distribu-
tions reinvested........................ 24,776 2,170,097
Cost of shares redeemed.................. (3,273,846) (14,014,103)
----------- -----------
Increase (decrease) in net assets from
capital transactions................. 2,516,155 (2,777,918)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS....... 5,776,514 (6,169,322)
----------- -----------
NET ASSETS, end of period................. $27,050,483 $21,273,969
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold............................... 767,791 1,100,823
Shares issued for distributions reinvest-
ed....................................... 3,172 296,939
Shares redeemed........................... (423,688) (1,700,172)
----------- -----------
Increase (decrease) in capital shares
outstanding............................ 347,275 (302,410)
----------- -----------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
DOMESTIC STRATEGIC INCOME PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, --------------------------------------------
1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period.... $7.35 $8.58 $8.00 $7.74 $6.98 $8.64
------- ------- ------- ------- ------- -------
Income from investment
operations
Investment income...... .35 .91 .77 .74 .725 1.085
Expenses............... (.03) (.10) (.09) (.07) (.07) (.08)
Expense
reimbursement(/1/).... .01 .04 .04 .02 .03 .03
------- ------- ------- ------- ------- -------
Net investment income... .33 .85 .72 .69 .685 1.035
Net realized and
unrealized gains or
losses on securities... .6675 (1.2275) .5825 .2725 .7525 (1.64)
------- ------- ------- ------- ------- -------
Total from investment
operations............. .9975 (.3775) 1.3025 .9625 1.4375 (.605)
------- ------- ------- ------- ------- -------
Distributions from net
investment income...... (.0075) (.8525) (.7225) (.7025) (.6775) (1.055)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $8.34 $7.35 $8.58 $8.00 $7.74 $6.98
------- ------- ------- ------- ------- -------
TOTAL RETURN(/2/)....... 13.58% (4.33%) 16.32% 12.50% 21.23% (7.23%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $27.1 $21.3 $27.4 $21.1 $17.4 $6.3
Average net assets
(millions)............. $25.7 $26.1 $26.7 $18.8 $10.6 $6.8
Ratios to average net
assets
(annualized)(/1/)
Expenses............... .60% .60% .60% .60% .60% .60%
Expenses, without
expense reimbursement. 1.00% .95% .95% .95% .95% .95%
Net investment income.. 8.44% 8.35% 7.80% 8.89% 9.72% 11.99%
Net investment income,
without expense
reimbursement......... 8.04% 8.00% 7.40% 8.54% 9.37% 11.64%
Portfolio turnover rate. 61% 94% 130% 117% 90% 123%
</TABLE>
(1) See Note 2.
(2) Total return for a period of less than one year is not annualized.
See Notes to Financial Statements
22
<PAGE>
GOVERNMENT PORTFOLIO PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES AGENCY
OBLIGATIONS 65.8%
Federal Home Loan
**$2,885 Mortgage Corp., Pools... 7.000% 06/01/24 to 07/01/24 $ 2,834,999
Federal Home Loan
**5,859 Mortgage Corp., Pools... 7.500 05/01/24 to 10/01/24 5,879,623
Federal Home Loan
**1,996 Mortgage Corp., Pools... 8.000 09/11/24 to 10/01/24 2,033,709
Federal National
Mortgage Association,
2,580 ARM..................... 6.254 03/25/09 2,580,659
Federal National
Mortgage Association,
1,983 Pools................... 7.000 12/01/23 to 06/01/24 1,948,481
Federal National
Mortgage Association,
**1,921 Pools................... 7.500 05/01/24 to 10/01/24 1,926,072
Federal National
Mortgage Association,
3,966 Pools................... 8.000 04/01/24 to 10/01/24 4,039,145
Federal National
Mortgage Association,
1,686 Pools................... 11.000 11/01/20 1,868,550
Government National
Mortgage Association,
7,102 Pools................... 7.000 08/15/23 to 10/15/24 6,987,015
Government National
Mortgage Association,
**5,727 Pools................... 7.500 04/15/23 to 06/15/24 5,753,478
Government National
Mortgage Association,
**7,572 Pools................... 8.000 05/15/17 to 11/15/24 7,752,263
Government National
Mortgage Association,
774 Pools................... 8.500 04/15/17 to 07/15/17 803,476
Government National
Mortgage Association,
445 Pools................... 11.000 09/15/10 to 08/15/20 489,215
--------------
TOTAL UNITED STATES
AGENCY OBLIGATIONS
(Cost $43,753,386)...... 44,896,685
--------------
UNITED STATES TREASURY
OBLIGATIONS 31.5%
1,500 Treasury Notes.......... 6.250 05/31/00 1,515,705
4,000 Treasury Notes.......... 6.500 08/15/97 4,050,000
**4,000 Treasury Notes.......... 7.250 11/15/96 4,074,360
2,000 Treasury Notes.......... 7.500 12/31/96 2,047,180
500 Treasury Notes.......... 7.875 07/31/96 510,780
5,000 Treasury Notes.......... 7.875 01/15/98 5,232,800
**4,000 Treasury Notes.......... 8.875 02/15/96 4,073,120
--------------
TOTAL UNITED STATES
TREASURY OBLIGATIONS
(Cost $21,335,937)...... 21,503,945
--------------
FORWARD PURCHASE
COMMITMENTS 10.3%
*1,000 Federal Home Loan
Mortgage Association.... 7.000 settling 07/95 982,500
*2,000 Federal National
Mortgage Association.... 7.500 settling 09/95 1,999,140
*4,000 Government National
Mortgage Association.... 7.500 settling 07/95 4,018,760
--------------
TOTAL FORWARD PURCHASE
COMMITMENTS
(Cost $6,862,031)....... 7,000,400
--------------
REPURCHASE
AGREEMENT 2.0%
1,340 Lehman Government
Securities, Inc., date
6/30/95 (collateralized
by U.S. Government
obligations in a pool
cash account) repurchase
proceeds $1,340,690
(Cost $1,340,000)....... 6.180 07/03/95 1,340,000
--------------
TOTAL INVESTMENTS (Cost $73,291,354) 109.6%.................... 74,741,030
OTHER ASSETS AND LIABILITIES, NET (9.6%)....................... (6,531,922)
--------------
NET ASSETS 100%................................................ $ 68,209,108
--------------
</TABLE>
* Non-income producing securities.
**Securities with a market value of approximately $21.7 million were placed as
collateral for futures contracts and forward purchase commitments (Note 1B).
ARM--adjustable rate mortgage backed security
See Notes to Financial Statements
23
<PAGE>
GOVERNMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investment, at market value (Cost $73,291,354)................... $ 74,741,030
Cash............................................................. 2,002
Receivable for investments sold.................................. 6,238,495
Interest receivable.............................................. 747,155
Unrealized appreciation on forward commitments................... 113,760
Receivable for Fund shares sold.................................. 5,308
Other assets..................................................... 1,571
------------
Total Assets.................................................... 81,849,321
------------
LIABILITIES
Payable for investments purchased................................ 13,529,294
Unrealized depreciation on forward commitments................... 40,700
Deferred Trustees' compensation.................................. 17,353
Due to Adviser................................................... 14,639
Due to broker-variation margin................................... 5,776
Due to shareholder service agent................................. 1,600
Accrued expenses and other liabilities........................... 30,851
------------
Total Liabilities............................................... 13,640,213
------------
NET ASSETS, equivalent to $8.81 per share........................ $ 68,209,108
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share;
unlimited shares authorized; 7,738,562 shares outstanding....... $ 77,386
Capital surplus.................................................. 81,072,017
Accumulated net realized loss on securities...................... (14,473,605)
Net unrealized appreciation (depreciation) of securities
Investments..................................................... 1,449,676
Forward commitments............................................. 73,060
Future contracts................................................ (7,240)
Undistributed net investment income.............................. 17,814
------------
NET ASSETS....................................................... $ 68,209,108
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
GOVERNMENT PORTFOLIO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest..................................................... $ 2,540,909
------------
EXPENSES
Management fees.............................................. 166,020
Shareholder service agent's fees and expenses................ 9,315
Accounting services.......................................... 33,287
Trustees' fees and expenses.................................. 5,309
Audit fees................................................... 11,650
Custodian fees............................................... 12,441
Legal fees................................................... 2,627
Reports to shareholders...................................... 2,617
Miscellaneous................................................ 179
Expense reimbursement........................................ (44,221)
------------
Total expenses............................................. 199,224
------------
NET INVESTMENT INCOME...................................... 2,341,685
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain (loss) on securities
Investments and forward commitments......................... 724,004
Future contracts............................................ (410,566)
Net unrealized appreciation (depreciation) of securities
during the period
Investments................................................. 3,782,276
Futures contracts........................................... (4,863)
Forward commitments......................................... 46,491
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES............. 4,137,342
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 6,479,027
------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $65,513,261 $80,630,053
----------- -----------
Operations
Net investment income.................... 2,341,685 4,717,706
Net realized gain (loss) on securities... 313,438 (6,083,772)
Net unrealized appreciation (deprecia-
tion) of securities during the period... 3,823,904 (2,217,746)
----------- -----------
Increase (decrease) in net assets re-
sulting from operations.............. 6,479,027 (3,583,812)
----------- -----------
Distributions to shareholders from net
investment income........................ (2,319,734) (4,508,286)
----------- -----------
Capital transactions
Proceeds from shares sold................ 1,758,886 3,484,195
Proceeds from shares issued for distribu-
tions reinvested........................ 2,319,734 4,508,286
Cost of shares redeemed.................. (5,542,066) (15,017,175)
----------- -----------
Decrease in net assets from capital
transactions........................... (1,463,446) (7,024,694)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS......... 2,695,847 (15,116,792)
----------- -----------
NET ASSETS, end of period................. $68,209,108 $65,513,261
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold............................... 204,427 405,270
Shares issued for distributions reinvest-
ed....................................... 269,018 524,430
Shares redeemed........................... (649,813) (1,719,219)
----------- -----------
Decrease in capital shares outstanding.. (176,368) (789,519)
----------- -----------
</TABLE>
See Notes to Financial Statements
25
<PAGE>
GOVERNMENT PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, -------------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period.... $8.28 $9.26 $9.13 $9.29 $8.70 $8.80
------- ------ ------ ------- ----- -----
Income from investment
operations
Investment income...... .33 .61 .62 .72 .79 .835
Expenses............... (.04) (.06) (.06) (.064) (.06) (.06)
Expense
reimbursement(/1/).... .01 .01 .01 .009 .01 .01
------- ------ ------ ------- ----- -----
Net investment income... .30 .56 .57 .665 .74 .785
Net realized and
unrealized gains or
losses on securities... .5275 (.985) .135 (.1575) .60 (.105)
------- ------ ------ ------- ----- -----
Total from investment
operations............. .8275 (.425) .705 .5075 1.34 .68
------- ------ ------ ------- ----- -----
Distributions from net
investment income...... (.2975) (.555) (.575) (.6675) (.75) (.78)
------- ------ ------ ------- ----- -----
Net asset value, end of
period................. $8.81 $8.28 $9.26 $9.13 $9.29 $8.70
------- ------ ------ ------- ----- -----
TOTAL RETURN(/2/)....... 10.16% (4.63%) 7.86% 5.73% 16.23% 8.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $68.2 $65.5 $80.6 $74.8 $77.0 $73.2
Average net assets
(millions)............. $66.4 $70.3 $78.6 $74.6 $72.9 $72.7
Ratios to average net
assets
(annualized)(/1/)
Expenses............... .60% .60% .60% .60% .60% .60%
Expenses, without
expense reimbursement. .73% .70% .70% .70% .70% .69%
Net investment income.. 7.05% 6.71% 6.45% 7.29% 8.37% 9.19%
Net investment income,
without expense
reimbursement......... 6.92% 6.61% 6.35% 7.19% 8.27% 9.10%
Portfolio turnover rate. 100% 192% 91% 36% 57% 164%
</TABLE>
(1) See Note 2.
(2) Total return for a period less than one year is not annualized.
See Notes to Financial Statements
26
<PAGE>
MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER 32.6%
$1,200 Associates Corp. of North America.... 6.223% 07/12/95 $ 1,197,560
1,200 Chevron Oil Finance Co............... 5.965 07/14/95 1,197,223
1,100 General Electric Capital Corp........ 6.186 07/24/95 1,095,578
1,200 General Electric Co.................. 6.231 09/05/95 1,186,444
1,100 Pitney Bowes, Inc.................... 5.960 07/07/95 1,098,727
1,200 Prudential Funding Corp.............. 6.228 07/27/95 1,194,537
1,000 Toronto Dominion Holdings............ 5.991 07/10/95 998,353
-----------
TOTAL COMMERCIAL PAPER (Cost
$7,968,422).......................... 7,968,422
-----------
UNITED STATES AGENCY
OBLIGATIONS 23.9%
2,000 Federal Home Loan Mortgage Corp...... 5.549 12/01/95 1,953,800
2,000 Federal National Mortgage
Association.......................... 5.787 12/18/95 1,946,610
2,000 Federal National Mortgage
Association.......................... 5.701 12/21/95 1,946,447
-----------
TOTAL UNITED STATES AGENCY
OBLIGATIONS
(Cost $5,846,857).................... 5,846,857
-----------
REPURCHASE AGREEMENTS 43.5%(/1/)
5,315 Lehman Government Securities, Inc.,
dated 6/30/95, repurchase
proceeds $5,317,737.................. 6.180 07/03/95 5,315,000
5,315 SBC Capital Markets, Inc., dated
6/30/95, repurchase
proceeds $5,317,713.................. 6.125 07/03/95 5,315,000
-----------
TOTAL REPURCHASE AGREEMENTS (Cost $10,630,000)........ 10,630,000
-----------
TOTAL INVESTMENTS (Cost $24,445,279) 100.0%..................... 24,445,279
OTHER ASSETS AND LIABILITIES, NET 0.0%.......................... (10,042)
-----------
NET ASSETS 100%................................................. $24,435,237
-----------
</TABLE>
(1) Collateralized by U.S. Government obligations in a pooled cash account
See Notes to Financial Statements
27
<PAGE>
MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost.................................... $24,445,279
Cash.............................................................. 2,663
Receivable for Fund shares sold................................... 28,166
Other assets...................................................... 1,120
-----------
Total Assets..................................................... 24,477,228
-----------
LIABILITIES
Deferred Trustees' compensation................................... 16,209
Due to shareholder service agent.................................. 1,587
Payable for Fund shares redeemed.................................. 236
Accrued expenses.................................................. 23,959
-----------
Total Liabilities................................................ 41,991
-----------
NET ASSETS, equivalent to $1.00 per share......................... $24,435,237
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 24,435,403 shares outstanding................. $ 244,354
Capital surplus................................................... 24,191,049
Accumulated net investment loss................................... (166)
-----------
NET ASSETS........................................................ $24,435,237
-----------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest....................................................... $746,404
--------
EXPENSES
Management fees................................................ 62,283
Shareholder service agent's fees and expenses.................. 9,364
Accounting services............................................ 28,607
Trustees' fees and expenses.................................... 5,244
Audit fees..................................................... 7,100
Custodian fees................................................. 3,191
Legal fees..................................................... 2,889
Reports to shareholders........................................ 3,166
Miscellaneous.................................................. 229
Expense reimbursement.......................................... (47,333)
--------
Total expenses................................................ 74,740
--------
NET INVESTMENT INCOME......................................... 671,664
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $671,664
--------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $28,547,675 $29,966,001
----------- -----------
Operations
Net investment income.................... 671,664 1,109,674
----------- -----------
Distributions to shareholders from net
investment income........................ (672,027) (1,109,772)
----------- -----------
Capital transactions
Proceeds from shares sold................ 6,596,311 22,474,029
Proceeds from shares issued for
distributions reinvested................ 672,027 1,107,713
Cost of shares redeemed.................. (11,380,413) (24,999,970)
----------- -----------
Decrease in net assets from capital
transactions........................... (4,112,075) (1,418,228)
----------- -----------
DECREASE IN NET ASSETS.................. (4,112,438) (1,418,326)
----------- -----------
NET ASSETS, end of period................. $24,435,237 $28,547,675
----------- -----------
CAPITAL SHARE TRANSACTIONS................
Shares sold............................... 6,596,311 22,474,029
Shares issued for distributions
reinvested............................... 672,027 1,107,713
Shares redeemed........................... (11,380,413) (24,999,970)
----------- -----------
DECREASE IN CAPITAL SHARES OUTSTANDING.. (4,112,075) (1,418,228)
----------- -----------
</TABLE>
See Notes to Financial Statements
29
<PAGE>
MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial outstanding throughout each of the
periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, -------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ------ ------ ------ ------ -----
Income from investment
operations
Investment income.......... .03 .0425 .0322 .0391 .0607 .082
Expenses................... (.005) (.0087) (.0095) (.009) (.0087) (.009)
Expense reimbursement(/1/). .002 .0027 .0035 .003 .0026 .003
----- ------ ------ ------ ------ -----
Net investment income....... .027 .0365 .0262 .0331 .0546 .076
----- ------ ------ ------ ------ -----
Distributions from net
investment income.......... (.027) (.0365) (.0262) (.0331) (.0546) (.076)
----- ------ ------ ------ ------ -----
Net asset value, end of
period..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ------ ------ ------ ------ -----
TOTAL RETURN(/2/)........... 2.73% 3.71% 2.66% 3.36% 5.46% 7.83%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................. $24.4 $28.5 $30.0 $32.9 $38.0 $34.3
Average net assets
(millions)................. $24.9 $30.5 $28.9 $36.2 $36.3 $32.8
Ratios to average net assets
(annualized)(/1/)
Expenses................... .60% .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement............. .98% .87% .95% .89% .87% .89%
Net investment income...... 5.39% 3.63% 2.63% 3.32% 5.44% 7.59%
Net investment income,
without expense
reimbursement............. 5.01% 3.37% 2.28% 3.03% 5.17% 7.30%
</TABLE>
(1) See Note 2.
(2) Total return for a period less than a year is not annualized.
See Notes to Financial Statements
30
<PAGE>
MULTIPLE STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 62.9%
CONSUMER DISTRIBUTION 4.9%
*6 Best Buy, Inc....................................... $ 162,412
5 Dayton Hudson Corp.................................. 358,750
5 Dillard Dept. Stores, Inc........................... 141,000
5 Gap, Inc............................................ 181,350
6 Limited, Inc........................................ 140,800
5 May Dept Stores Co.................................. 216,450
3 Nordstrom, Inc...................................... 124,125
11 Sears, Roebuck & Co................................. 670,600
*5 Sports & Recreation, Inc............................ 66,938
6 Sysco Corp.......................................... 185,850
*5 Toys R Us, Inc...................................... 155,025
23 Wal-Mart Stores, Inc................................ 609,900
--------------
TOTAL CONSUMER DISTRIBUTION......................... 3,013,200
--------------
CONSUMER DURABLES 0.9%
5 Eastman Kodak Co.................................... 333,437
4 General Motors Corp................................. 206,250
--------------
TOTAL CONSUMER DURABLES............................. 539,687
--------------
CONSUMER NON-DURABLES 5.3%
12 Clorox Co........................................... 789,525
7 ConAgra, Inc........................................ 230,175
2 CPC International, Inc.............................. 129,675
*8 Fruit Of The Loom, Inc.............................. 164,775
4 Maybelline, Inc..................................... 71,750
13 PepsiCo, Inc........................................ 584,000
9 Philip Morris Companies, Inc........................ 684,250
2 Procter & Gamble Co................................. 122,188
8 RJR Nabisco Holdings Corp., Class A................. 216,000
9 Sara Lee Corp....................................... 245,100
--------------
TOTAL CONSUMER NON-DURABLES......................... 3,237,438
--------------
CONSUMER SERVICES 5.9%
6 CBS, Inc............................................ 428,800
11 Comcast Corp, Class A............................... 206,044
26 Cox Communications, Inc............................. 507,625
8 Disney (Walt) Co.................................... 439,437
6 Marriott International, Inc......................... 208,075
3 McDonald's Corp..................................... 129,112
1 McGraw Hill, Inc.................................... 98,637
7 New York Times Co., Class A......................... 164,500
10 News Corp., Limited, ADR............................ 230,775
*23 Tele-Communications, Inc., Class A.................. 527,344
15 Time Warner, Inc.................................... 596,313
5 Wendy's International, Inc.......................... 96,525
--------------
TOTAL CONSUMER SERVICES............................. 3,633,187
--------------
</TABLE>
See Notes to Financial Statements
31
<PAGE>
MULTIPLE STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY 7.4%
3 Amoco Corp.......................................... $ 199,875
6 Ashland, Inc........................................ 203,725
2 Atlantic Richfield Co............................... 197,550
6 Baker Hughes, Inc................................... 116,850
5 Burlington Resources, Inc........................... 199,125
20 Coastal Corp........................................ 592,312
4 Consolidated Natural Gas Co......................... 154,775
5 Dresser Industrials, Inc............................ 122,375
12 Exxon Corp.......................................... 826,312
6 Halliburton Co...................................... 196,625
13 Pacific Enterprises................................. 306,250
20 Panhandle Eastern Corp.............................. 477,750
7 Repsol, SA, ADR..................................... 227,700
5 Schlumberger, Ltd................................... 285,775
*6 Smith International, Inc............................ 105,525
8 Sonat, Inc.......................................... 240,950
4 Valero Energy Corp.................................. 87,075
--------------
TOTAL ENERGY........................................ 4,540,549
--------------
FINANCE 4.6%
2 American International Group, Inc................... 182,400
8 Chase Manhattan Corp................................ 357,200
5 Chemical Banking Corp............................... 245,700
3 Comerica, Inc....................................... 112,437
3 Federal National Mortgage Association............... 311,438
5 First Chicago Corp.................................. 299,375
5 Franklin Resources, Inc............................. 222,500
6 Morgan (J.P.) & Co., Inc............................ 441,788
4 NationsBank Corp.................................... 198,413
4 Providian Corp...................................... 155,875
3 St. Paul Companies, Inc............................. 128,050
2 TransAmerica Corp................................... 133,975
--------------
TOTAL FINANCE....................................... 2,789,151
--------------
HEALTH CARE 6.6%
3 American Home Products Corp......................... 201,175
7 Baxter International, Inc........................... 265,537
3 Bristol Myers Squibb Co............................. 190,750
24 Caremark International, Inc......................... 474,000
3 Columbia/HCA Healthcare Corp........................ 147,050
*21 Community Psychiatric Centers....................... 235,125
*9 Lincare Holdings, Inc............................... 244,375
9 Mallinckrodt Group, Inc............................. 333,700
7 Merck & Co., Inc.................................... 357,700
*26 National Medical Enterprises, Inc................... 369,438
8 Nellcor, Inc........................................ 364,500
*8 Schering-Plough Corp................................ 361,825
5 Upjohn Co........................................... 193,163
3 Warner-Lambert Co................................... 293,675
--------------
TOTAL HEALTH CARE................................... 4,032,013
--------------
PRODUCER MANUFACTURING 7.7%
4 Allied-Signal, Inc.................................. 182,450
5 Browning-Ferris Industries, Inc..................... 198,687
</TABLE>
See Notes to Financial Statements
32
<PAGE>
MULTIPLE STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
1 Cooper Industrials, Inc............................. $ 47,400
2 Emerson Electric Co................................. 150,150
8 Fluor Corp.......................................... 400,400
10 General Electric Co................................. 558,112
5 Honeywell, Inc...................................... 224,250
5 ITT Corp............................................ 622,750
6 Philip N.V., ADR.................................... 269,325
6 Rockwell International Corp......................... 274,500
5 Tenneco, Inc........................................ 239,200
2 United Technologies Corp............................ 164,063
*4 Varity Corp......................................... 158,400
42 WMX Technologies, Inc............................... 1,186,075
--------------
TOTAL PRODUCER MANUFACTURING........................ 4,675,762
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 7.2%
23 Asia Pacific Resources International................ 208,050
8 Barrick Gold Corp................................... 207,050
3 Consolidated Papers................................. 184,400
9 DuPont (E.I.) de Nemours & Co., Inc................. 639,375
3 Engelhard Corp...................................... 141,487
*36 Fort Howard Corp.................................... 509,912
*36 Freeport McMoran, Inc............................... 625,687
8 Grace (W.R.) & Co................................... 497,137
6 Lubrizol Corp....................................... 226,400
2 Mead Corp........................................... 136,562
2 Monsanto Co......................................... 153,213
4 Newmont Mining Corp................................. 163,313
13 James River Corp.................................... 353,600
3 Sherwin Williams Co................................. 96,188
1 Sigma-Aldrich Corp.................................. 68,775
3 Willamette Industries, Inc.......................... 166,500
--------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES........... 4,377,649
--------------
TECHNOLOGY 5.1%
4 Avnet, Inc.......................................... 183,825
*3 BMC Software, Inc................................... 200,850
*10 Compaq Computer Corp................................ 453,750
*5 Gateway 2000, Inc................................... 113,750
3 General Dynamics Corp............................... 142,000
3 Hewlett-Packard Co.................................. 193,700
5 International Business Machines Corp................ 489,600
5 Lockheed Martin Corp................................ 314,741
4 Loral Corp.......................................... 196,650
4 Northern Telecom, Ltd............................... 127,750
*10 Novell, Inc......................................... 199,375
7 Varian Associates, Inc.............................. 370,175
*4 VLSI Technology, Inc................................ 123,513
--------------
TOTAL TECHNOLOGY.................................... 3,109,679
--------------
TRANSPORTATION 0.6%
*2 AMR Corp............................................ 179,100
5 Illinois Central Corp............................... 169,050
--------------
TOTAL TRANSPORTATION................................ 348,150
--------------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
MULTIPLE STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES 6.7%
3 American Electric Power, Inc........................ $ 94,837
4 Ameritech Corp...................................... 167,200
11 AT&T Corp........................................... 573,750
3 Baltimore Gas & Electric Co......................... 70,000
6 Carolina Power & Light Co........................... 166,375
1 Central & South West Corp........................... 21,000
2 Florida Progress Corp............................... 75,000
5 FPL Group, Inc...................................... 185,400
6 Frontier Corp....................................... 151,200
1 General Public Utilities Corp....................... 35,700
5 GTE Corp............................................ 163,800
4 Illinova Corp....................................... 109,112
15 MCI Communications Corp............................. 330,000
2 Nevada Power Co..................................... 35,063
1 NIPSCO Industries, Inc.............................. 40,800
10 Peco Energy Co...................................... 276,250
1 Pinnacle West Capital Corp.......................... 9,800
1 Public Service Co. of Colorado...................... 39,000
*8 Public Service Co. of New Mexico.................... 111,150
2 San Diego Gas & Electric Co......................... 37,350
5 SBC Communications, Inc............................. 214,313
9 Southern Co......................................... 208,088
1 Southwestern Public Service Co...................... 38,350
20 Sprint Corp......................................... 682,588
4 US West, Inc........................................ 174,825
*4 WorldCom, Inc....................................... 102,600
--------------
TOTAL UTILITIES..................................... 4,113,551
--------------
TOTAL COMMON STOCK (Cost $34,740,171)............... 38,410,016
--------------
</TABLE>
See Notes to Financial Statements
34
<PAGE>
MULTIPLE STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 16.4%
CONSUMER DISTRIBUTION 3.6%
$1,000 Dayton Hudson Corp............... 9.250% 03/01/06 $ 1,123,520
1,000 Wal-Mart Stores, Inc............. 8.070 12/21/12 1,076,300
--------------
TOTAL CONSUMER DISTRIBUTION...... 2,199,820
--------------
ENERGY 3.9%
1,000 Atlantic Richfield Co............ 9.125 03/01/11 1,179,900
1,000 Burlington Resources, Inc........ 9.125 10/01/21 1,183,750
--------------
TOTAL ENERGY..................... 2,363,650
--------------
FINANCE 1.8%
1,000 American General Corp............ 9.625 02/01/18 1,106,500
--------------
RAW MATERIALS/PROCESSING
INDUSTRIES 1.7%
DuPont (E.I.) de Nemours & Co.,
1,000 Inc.............................. 8.250 01/15/22 1,049,400
--------------
UTILITIES 5.4%
1,000 Hydro-Quebec, Series HS.......... 9.400 02/01/21 1,184,900
Pacific Gas & Electric Co., 1st
1,000 Mtg., Series 92D................. 8.250 11/01/22 1,039,930
Tennessee Valley Authority,
1,000 Series G......................... 8.625 11/15/29 1,075,160
--------------
TOTAL UTILITIES.................. 3,299,990
--------------
TOTAL CORPORATE OBLIGATIONS (Cost
$9,444,020)...................... 10,019,360
--------------
GOVERNMENT OBLIGATIONS 9.7%
1,000 Province of Nova Scotia (Canada). 7.250 07/27/13 970,600
4,700 United States Treasury Bonds..... 7.125 02/15/23 4,957,748
--------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $5,499,315)................ 5,928,348
--------------
REPURCHASE AGREEMENTS 13.6%
8,265 Lehman Government Securities,
dated 6/30/95 (Collateralized by
U.S. Government obligations in a
pooled cash account) repurchase
proceeds $8,269,167 (Cost
$8,265,000)...................... 6.050 07/03/95 8,265,000
--------------
TOTAL INVESTMENTS (Cost $57,948,506) 102.6%................. 62,622,724
OTHER ASSETS AND LIABILITIES, NET (2.6)%.................... (1,572,609)
--------------
NET ASSETS 100%............................................. $ 61,050,115
--------------
</TABLE>
*Non-income producing security
See Notes to Financial Statements
35
<PAGE>
MULTIPLE STRATEGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $57,948,506).................... $62,622,724
Cash............................................................... 1,702
Receivable for investments sold.................................... 2,072,387
Interest and dividends receivable.................................. 452,580
Other assets....................................................... 567
-----------
Total Assets..................................................... 65,149,960
-----------
LIABILITIES
Payable for investments purchased.................................. 3,949,523
Payable for Fund shares redeemed................................... 86,917
Deferred Trustees' compensation.................................... 14,331
Due to Adviser..................................................... 14,023
Due to shareholder service agent................................... 1,750
Accrued expenses................................................... 33,301
-----------
Total Liabilities................................................ 4,099,845
-----------
NET ASSETS, equivalent to $11.73 per share......................... $61,050,115
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 5,206,212 shares outstanding................... $ 52,062
Capital surplus.................................................... 53,658,822
Undistributed net realized gain on securities...................... 1,428,635
Net unrealized appreciation of securities.......................... 4,674,218
Undistributed net investment income................................ 1,236,378
-----------
NET ASSETS......................................................... $61,050,115
-----------
</TABLE>
See Notes to Financial Statements
36
<PAGE>
MULTIPLE STRATEGY PORTFOLIO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
- --------------------------------
<S> <C>
INVESTMENT INCOME
Interest............................................................ $1,041,211
Dividends........................................................... 397,890
----------
Investment income................................................. 1,439,101
----------
EXPENSES
Management fees..................................................... 147,104
Shareholder service agent's fees and expenses....................... 9,467
Accounting services................................................. 32,215
Trustees' fees and expenses......................................... 4,540
Audit fees.......................................................... 11,750
Custodian fees...................................................... 10,547
Legal fees.......................................................... 3,076
Reports to shareholders............................................. 4,801
Miscellaneous....................................................... 939
Expense reimbursement............................................... (47,915)
----------
Total expenses.................................................... 176,524
----------
NET INVESTMENT INCOME............................................. 1,262,577
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities..................................... 1,638,514
Net unrealized appreciation of securities during the period......... 6,561,607
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.................... 8,200,121
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $9,462,698
----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $56,635,933 $64,857,688
----------- -----------
Operations................................
Net investment income.................... 1,262,577 2,280,114
Net realized gain on securities.......... 1,638,514 4,566,704
Net unrealized appreciation
(depreciation) of securities during the
period.................................. 6,561,607 (9,205,867)
----------- -----------
Increase (decrease) in net assets
resulting from operations.............. 9,462,698 (2,359,049)
----------- -----------
Distributions to shareholders from
Net investment income.................... (40,666) (2,288,536)
Net realized gain on securities.......... (27,111) (4,566,704)
Excess of book-basis net realized gain
(Note 1F)............................... -- (106,886)
----------- -----------
(67,777) (6,962,126)
----------- -----------
Capital transactions
Proceeds from shares sold................ 1,097,046 3,800,820
Proceeds from shares issued for
distributions reinvested................ 67,776 6,962,125
Cost of shares redeemed.................. (6,145,561) (9,663,525)
----------- -----------
Increase (decrease) in net assets from
capital transactions................... (4,980,739) 1,099,420
----------- -----------
INCREASE (DECREASE) IN NET ASSETS........ 4,414,182 (8,221,755)
----------- -----------
NET ASSETS, end of period................. $61,050,115 $56,635,933
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold............................... 100,399 327,001
Shares issued for distributions
reinvested............................... 6,247 700,508
Shares redeemed........................... (569,332) (857,318)
----------- -----------
Increase (decrease) in capital shares
outstanding............................ (462,686) 170,191
----------- -----------
</TABLE>
See Notes to Financial Statements
37
<PAGE>
MULTIPLE STRATEGY PORTFOLIO FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended June Year Ended December 31
30, ---------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................. $ 9.99 $11.80 $11.92 $12.08 $10.43 $10.77
------ ------ ------- ------ ------ ------
Income from investment
operations
Investment income......... .28 .52 .37 .44 .54 .58
Expenses.................. (.05) (.09) (.09) (.09) (.09) (.09)
Expense
reimbursement(/1/)....... .01 .02 .01 .02 .02 .03
------ ------ ------- ------ ------ ------
Net investment income...... .24 .45 .29 .37 .47 .52
Net realized and unrealized
gains or losses on
securities................ 1.5125 (.89) .6025 .493 2.27 (.325)
------ ------ ------- ------ ------ ------
Total from investment
operations................ 1.7525 (.44) .8925 .863 2.74 .195
------ ------ ------- ------ ------ ------
Less distributions from
Net investment income..... (.0075) (.45) (.2925) (.3689) (.4825) (.535)
Net realized gain on
securities............... (.005) (.90) (.63) (.6541) (.6075) --
Excess of book-basis net
realized gains on
securities............... -- (.02) (.09) -- -- --
------ ------ ------- ------ ------ ------
Total distributions........ (.0125) (1.37) (1.0125) (1.023) (1.09) (.535)
------ ------ ------- ------ ------ ------
Net asset value, end of
period.................... $11.73 $ 9.99 $11.80 $11.92 $12.08 $10.43
------ ------ ------- ------ ------ ------
TOTAL RETURN(/2/).......... 17.55% (3.66%) 7.71% 7.28% 27.05% 1.89%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................ $61.1 $56.6 $64.9 $59.6 $52.2 $40.3
Average net assets
(millions)................ $58.8 $61.6 $63.9 $54.8 $44.4 $40.4
Ratios to average net
assets (annualized)(/1/)
Expenses.................. .60% .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement............ .76% .72% .74% .77% .80% .80%
Net investment income..... 4.29% 3.70% 2.34% 3.05% 4.12% 4.70%
Net investment income,
without expense
reimbursement............ 4.13% 3.58% 2.20% 2.88% 3.92% 4.50%
Portfolio turnover rate.... 53% 163% 150% 126% 88% 46%
</TABLE>
(1) See Note 2.
(2) Total return for a period less than a year is not annualized.
See Notes to Financial Statements
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Life Investment Trust (the "Fund"), comprised of five invest-
ment portfolios: Common Stock Portfolio ("Common Stock"), Domestic Strategic
Income Portfolio ("Domestic Strategic"), Government Portfolio ("Government"),
Money Market Portfolio ("Money Market") and Multiple Strategy Portfolio ("Mul-
tiple Strategy"), is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company. Each portfo-
lio is accounted for as a separate entity. The following is a summary of sig-
nificant 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 se-
curities 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 regis-
tered.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments 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 securi-
ties 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 abil-
ity to meet principal and interest payments. Debt securities rated below in-
vestment grade and comparable unrated securities represented approximately 29%
of Domestic Strategic's investment portfolio at the end of the period.
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 on net asset value of changes in the
market price of investments. 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 Ac-
tivity 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 acquir-
ing 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 bro-
ker. Upon the closing or cash settlement of a contract, gains or losses are re-
alized. The cost of securities acquired through delivery under a contract is
adjusted by the unrealized gain or loss on the contract.
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 transac-
tions between the Fund and dealers. Upon executing a forward commitment and
during the period of obligation, the Fund maintains collateral of cash or secu-
rities 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 and sale commitments, which secu-
rity settlement is not intended by the Fund, changes in the value of the com-
mitment 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.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
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 re-
quired 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 be-
cause 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 investment 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 ba-
sis capital loss carryforwards expire or are offset by net realized capital
gains.
The following table presents the identified cost of investments at the end of
the period for federal income tax purposes with the associated net unrealized
appreciation 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......... $61,318,167 $27,720,136 $73,291,354 $24,445,279 $58,023,855
----------- ----------- ----------- ----------- -----------
Gross unrealized
appreciation............ $ 8,252,829 $ 1,121,593 $ 1,745,674 -- $ 4,995,377
Gross unrealized
depreciation............ 524,085 272,967 295,998 -- 396,508
----------- ----------- ----------- ----------- -----------
Net unrealized
appreciation............ $ 7,728,744 $ 848,626 $ 1,449,676 -- $ 4,598,869
----------- ----------- ----------- ----------- -----------
Net realized capital
loss carryforward...... -- $ 2,125,532 $14,491,367 $ 18 $ --
----------- ----------- ----------- ----------- -----------
Expiration dates........ -- 1998-2002 1996-2002 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,
$294,459, $2,041, and $75,888 of financial statement capital losses for Domes-
tic Strategic, Government, Money Market and Multiple Strategy, respectively,
are deferred for tax purposes to the 1995 fiscal year.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on invest-
ments 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 dis-
tribution requirements of the Internal Revenue Code, which may differ from gen-
erally accepted accounting principles. Such dividends or distributions may
exceed financial statement earnings.
G. DEBT DISCOUNT AND PREMIUM-The Fund accounts for discounts and premiums on
the same basis as used 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
40
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
portfolio for all ordinary business expenses, exclusive of taxes and interest,
in excess of .60% of the average daily net assets. For the period, such volun-
tary expense reimbursements were as follows:
<TABLE>
<S> <C>
Common Stock...................................................... $32,868
Domestic Strategic................................................ 44,980
Government........................................................ 44,221
Money Market...................................................... 43,599
Multiple Strategy................................................. 47,915
</TABLE>
Under the terms of the advisory agreement, if the total ordinary business ex-
penses, exclusive of taxes, distribution fees and interest, exceed .95% of av-
erage daily net assets, the Adviser will reimburse the portfolios for the
amount of the excess. The contractual expense reimbursement shall be made
monthly. For the period, the only portfolios to have such contractual expense
reimbursements were Domestic Strategic and Money Market for $6,068 and $3,734,
respectively.
Other transactions with affiliates during the period were as follows:
<TABLE>
<CAPTION>
Common Domestic Money Multiple
Stock Strategic Government Market Strategy
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounting services.......... $4,637 $4,234 $4,611 $4,218 $4,542
Shareholder service agent's
fees......................... 9,000 9,000 9,000 9,000 9,000
Legal fees................... 2,514 2,981 2,627 2,708 2,880
</TABLE>
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised by the Adviser. These charges include
the employee costs attributable to the accounting officers of the Fund. A por-
tion of the accounting services expense was paid to the Adviser in reimburse-
ment of personnel, facilities and equipment costs attributable to the provision
of accounting services. The services provided by the Adviser are at cost.
ACCESS Investor 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.
Certain officers and trustees of the Fund are officers and directors of the
Adviser and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were:
<TABLE>
<CAPTION>
Common Domestic Multiple
Stock Strategic Government Strategy
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases................. $43,501,968 $22,005,818 $64,226,904 $27,552,308
Sales..................... 52,520,231 15,962,661 68,619,824 35,710,842
</TABLE>
Money Market held only short-term investments.
At the end of the period, Government held the following forward purchase com-
mitments for which delivery is not intended:
<TABLE>
<CAPTION>
Principal Unrealized
Amount Appreciation
(000) Security Market Value (Depreciation)
--------------------------------------------------------------------------
<C> <S> <C> <C>
Federal National Mortgage
Association
$4,000 8.00%, settling 07/95........ $ 4,073,760 $113,760
Government National Mortgage
Association
4,000 7.00%, settling 07/95........ 3,935,000 (27,500)
2,000 7.00%, settling 09/95........ 1,963,360 (4,140)
2,000 8.00%, settling 09/95........ 2,040,940 (9,060)
----------- --------
$12,013,060 $ 73,060
----------- --------
</TABLE>
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
At the end of the period, Government held the following U.S. Treasury futures
contracts expiring in September 1995.
<TABLE>
<CAPTION>
Number Unrealized
of Appreciation
Contracts Description Market Value (Depreciation)
---------------------------------------------------------------------------
<C> <S> <C> <C>
6 U.S. Treasury Bonds, long...... $ 681,188 $(13,012)
18 U.S. Treasury Notes, short..... (1,981,688) 5,772
----------- ---------
$(1,300,500) $ (7,240)
----------- ---------
</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 Commit-
tee 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 at the end of the period were:
<TABLE>
<CAPTION>
Common Domestic Money Multiple
Stock Strategic Government Market Strategy
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trustee fees.................. $4,732 $4,261 $4,689 $4,609 $3,920
</TABLE>
NOTE 5--SUBSEQUENT EVENT
Effective July 3, 1995, the Fund added three more portfolios to the Fund. The
new portfolios were Emerging Growth Portfolio, Global Equity Portfolio, and
Real Estate Portfolio.
NOTE 6--FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Fund to a
Delaware Business Trust and the election of fourteen trustees.
42
<PAGE>
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
DENNIS J. MCDONNELL
RONALD A. NYBERG
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.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071
(C) Van Kampen American Capital Distributors, Inc., 1995 All rights reserved.
/SM/ denotes a service mark of Van Kampen American Capital Distributors, Inc.
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.
43
<PAGE>
AMERICAN CAPITAL LIFE INVESTMENT TRUST
THIS PAGE INTENTIONALLY LEFT BLANK
44
