<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Policyholders..................................................... 1
Performance Results......................................................... 3
Performance Perspective..................................................... 5
Portfolio Management Review................................................. 9
Portfolio of Investments
Common Stock Fund......................................................... 18
Domestic Strategic Income Fund............................................ 25
Government Fund........................................................... 31
Money Market Fund......................................................... 35
Multiple Strategy Fund.................................................... 39
Real Estate Fund.......................................................... 47
Emerging Growth Fund...................................................... 52
Global Equity Fund........................................................ 61
Statement of Assets and Liabilities
Common Stock Fund......................................................... 22
Domestic Strategic Income Fund............................................ 28
Government Fund........................................................... 32
Money Market Fund......................................................... 36
Multiple Strategy Fund.................................................... 44
Real Estate Fund.......................................................... 49
Emerging Growth Fund...................................................... 58
Global Equity Fund........................................................ 66
Statement of Operations and Changes in Net Assets
Common Stock Fund......................................................... 23
Domestic Strategic Income Fund............................................ 29
Government Fund........................................................... 33
Money Market Fund......................................................... 37
Multiple Strategy Fund.................................................... 45
Real Estate Fund.......................................................... 50
Emerging Growth Fund...................................................... 59
Global Equity Fund........................................................ 67
Financial Highlights
Common Stock Fund......................................................... 24
Domestic Strategic Income Fund............................................ 30
Government Fund........................................................... 34
Money Market Fund......................................................... 38
Multiple Strategy Fund.................................................... 46
Real Estate Fund.......................................................... 51
Emerging Growth Fund...................................................... 60
Global Equity Fund........................................................ 68
Notes to Financial Statements............................................... 69
Report of Independent Accountants........................................... 75
</TABLE>
LIT ANR 2/96
<PAGE>
LETTER TO POLICYHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
January 30, 1996
Dear Policyholder,
For most investors, it would be hard to surpass the success enjoyed during
1995. The stock and bond markets enjoyed substantial gains, driven by a
combination of continuing economic growth and low inflation. The strength of
equity and fixed-income securities in 1995 was particularly impressive because
it followed a year in which both markets declined. People who remained
invested during 1995 generally shared in the growth of the markets, while
investors who retreated after 1994's downturn may have missed out on the
double-digit returns.
The rebound in the markets last year reinforces the importance of maintain-
ing a long-term perspective for your investments. While the environment for
stocks and bonds remains positive, it is unlikely that 1996 will see a repeat
of the markets' strong 1995 performance. However, over the long-term, stocks
have outperformed virtually all other types of investments, and bonds have met
the needs of investors who seek capital preservation and regular income.
That's why we believe investors with long-term goals are best served by long-
term investment vehicles like a tax-deferred variable annuity.
ECONOMIC OVERVIEW
The U.S. economy grew throughout 1995, but the rate of growth slowed toward
year-end. The gross domestic product (the value of all goods and services pro-
duced in the United States) grew at an annual rate of more than 4 percent in
the third quarter of 1995, but slowed to an estimated 2 to 3 percent in the
fourth quarter of the year, with retail and auto sales particularly sluggish.
The slower growth rate eased concerns about inflation and allowed the Federal
Reserve Board in late December to lower short-term interest rates by a quar-
ter-percentage point. Just as the Fed's raising of short-term rates in 1994
helped slow economic growth in 1995, the reduction in rates during the latter
half of 1995 was expected to help generate moderate economic growth in 1996.
The cut in short-term rates, combined with modest growth forecasts, was
viewed by the financial markets as a positive event, pushing up both stock and
bond prices. For the year ended December 31,1995, the Standard & Poor's 500-
Stock Index achieved a total return of 37.45 percent. The yield on 10-year
Treasury notes was 5.57 percent on December 31, compared to 7.82 percent at
the beginning of the year. Bond prices and yields move in opposite directions,
so bonds rose. Many observers expect the Fed to cut rates further if Congress
and the President are able to reach an agreement on the federal budget, pro-
vided economic conditions justify further easing.
In a low inflation, low interest rate environment, corporate earnings re-
mained quite strong during the year, helping to push stocks to new highs. The
strongest sectors were technology and finance, as these stocks benefited from
the impact of the Internet, telecommunications deregulation and bank mergers.
U.S. companies with global operations also did well, aided by a declining U.S.
dollar.
Continued on page two
1
<PAGE>
ECONOMIC OUTLOOK
Looking ahead, we are cautiously optimistic. We expect the economy to grow at
a rate of 2 to 3 percent throughout 1996, with growth stronger in the second
half of the year as the full impact of the Fed's rate cuts take effect. Lower
rates will have the greatest impact on interest-sensitive industries, such as
housing. Although inflation appears to be under control, there probably will be
some upward pressure in 1996 as lower interest rates generate increased eco-
nomic activity.
The current economic conditions are ideal for stocks, especially those of
smaller companies, because they tend to be affected less by economic cycles.
The outlook for the fixed-income market is positive, too. In the near-term, we
believe domestic markets will benefit from a stable U.S. dollar and increased
business activity driven in part by a number of recently announced strategic
reorganizations of some of the nation's blue chip industry leaders.
During recent months, debate over tax reform and the federal deficit has dom-
inated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact of these issues
on the economy and on various types of investments. We are following the tax
reform debate very closely, and we will keep you updated on this issue through-
out the year.
On the following pages, you can read about your Funds' performance in 1995,
as well as the management team's outlook for the first half of 1996. We hope
you will find the information helpful. We appreciate your continued confidence
in your Life Investment Trust with Van Kampen American Capital.
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 DECEMBER 31, 1995
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
COMMON STOCK FUND
TOTAL RETURNS
<TABLE>
<S> <C>
One-year total return based on NAV/1/.................................. 36.98%
Five-year average annual total return based on NAV/1/.................. 16.16%
Life-of-Fund average annual total return based on NAV/1/............... 9.83%
Commencement date...................................................... 04/07/86
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
DOMESTIC STRATEGIC INCOME FUND
TOTAL RETURNS
<TABLE>
<S> <C>
One-year total return based on NAV/1/.................................. 21.37%
Five-year average annual total return based on NAV/1/.................. 12.99%
Life-of-Fund average annual total return based on NAV/1/............... 8.08%
Commencement date...................................................... 11/04/87
SEC YIELD
SEC Yield/3/........................................................... 7.97%
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GOVERNMENT FUND
TOTAL RETURNS
<TABLE>
<S> <C>
One-year total return based on NAV/1/.................................. 17.17%
Five-year average annual total return based on NAV/1/.................. 8.17%
Life-of-Fund average annual total return based on NAV/1/............... 7.37%
Commencement date...................................................... 04/07/86
</TABLE>
DISTRIBUTION RATE AND YIELD
<TABLE>
<S> <C>
Distribution rate/2/...................................................... 6.62%
SEC Yield/3/.............................................................. 5.99%
</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 Fund at the end of the period and not the earn-
ings of the Fund.
/3/SEC Yield is a standardized calculation prescribed by the Securities and Ex-
change Commission for determining the amount of net income a fund should theo-
retically 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. Fund shares, when redeemed, may be worth more
or less than their original cost.
3
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1995
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
MULTIPLE STRATEGY FUND
TOTAL RETURN
<TABLE>
<S> <C>
One-year total return based on NAV/1/.................................. 31.36%
Five-year average annual total return based on NAV/1/.................. 13.19%
Life-of-Fund average annual total return based on NAV/1/............... 10.49%
Commencement date...................................................... 06/30/87
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
REAL ESTATE FUND
TOTAL RETURN
<TABLE>
<S> <C>
Since inception total return based on NAV/1/........................... 8.35%
Commencement date...................................................... 07/03/95
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
EMERGING GROWTH FUND
TOTAL RETURN
<TABLE>
<S> <C>
Since inception total return based on NAV/1/........................... 17.20%
Commencement date...................................................... 07/03/95
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GLOBAL EQUITY FUND
TOTAL RETURN
<TABLE>
<S> <C>
Since inception total return based on NAV/1/........................... 3.00%
Commencement date...................................................... 07/03/95
</TABLE>
/1/Assumes reinvestment of all distributions for the period.
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. Fund shares, when redeemed, may be worth
more or less than their original cost.
4
<PAGE>
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
Each of the following charts shows the total return performance of a differ-
ent Life Investment Trust Fund compared to a benchmark index. It is important
to track your investment portfolio's performance at regular intervals. The in-
dexes do not reflect any commissions or fees that would be paid by an investor
purchasing the securities they represent. Similarly, their performances do not
reflect any sales charges or other costs which would be applicable to an ac-
tively managed portfolio, such as that of the Fund. For details on market con-
ditions and each Fund's performance during the reporting period, see pages
nine through seventeen of this report.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Common Stock Fund vs.
Standard & Poor's 500-Stock Index (April 1986 through December 1995)
VKAC LIT S&P's
Common Stock Fund 500-Stock Index
- --------------------------------------------------------
Apr 1986 $10,000 $10,000
Dec 1986 9,330 10,401
Dec 1987 8,292 10,940
Dec 1988 9,427 12,744
Dec 1989 12,654 16,770
Dec 1990 11,789 16,248
Dec 1991 16,081 21,177
Dec 1992 17,283 22,788
Dec 1993 18,835 25,075
Dec 1994 18,198 25,415
Dec 1995 24,927 34,932
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
5
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Domestic Strategic
Income Fund vs. Lehman Brothers Corporate Bond Index (November 1987
through December 1995)
VKAC LIT Lehman Brothers
Domestic Strategic Corporate Bond
Income Fund Index
- --------------------------------------------------------
Nov 1987 $10,000 $10,000
Dec 1987 10,150 10,189
Dec 1988 11,669 11,129
Dec 1989 11,034 12,700
Dec 1990 10,237 13,596
Dec 1991 12,409 16,114
Dec 1992 13,960 17,515
Dec 1993 16,239 19,646
Dec 1994 15,535 18,876
Dec 1995 18,854 23,076
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Government Fund vs.
Lehman Brothers Mutual Fund U.S. Government Index (April 1986 through
December 1995)
Lehman Brothers
VKAC LIT Mutual Fund U.S.
Government Fund Government Index
- --------------------------------------------------------
Apr 1986 $10,000 $10,000
Dec 1986 10,422 10,784
Dec 1987 10,202 11,020
Dec 1988 10,903 11,796
Dec 1989 12,463 13,475
Dec 1990 13,499 14,651
Dec 1991 15,691 16,897
Dec 1992 16,590 18,119
Dec 1993 17,894 20,050
Dec 1994 17,066 19,374
Dec 1995 19,995 22,926
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
6
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Multiple Strategy
Fund vs. Standard & Poor's 500-Stock Index (June 1987 through December
1995)
VKAC LIT S&P's
Multiple Strategy Fund 500-Stock Index
- --------------------------------------------------------
June 1987 $10,000 $10,000
Dec 1987 9,735 8,257
Dec 1988 10,476 9,619
Dec 1989 12,343 12,658
Dec 1990 12,576 12,264
Dec 1991 15,978 15,984
Dec 1992 17,142 17,200
Dec 1993 18,463 18,926
Dec 1994 17,788 19,183
Dec 1995 23,365 26,366
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Real Estate Fund vs.
Standard & Poor's 500-Stock Index and the NAREIT Equity REIT Index (July
1995 through December 1995)
VKAC LIT S&P's NAREIT Equity
Real Estate Fund 500-Stock Index REIT Index
- --------------------------------------------------------------------------
7/3/95 $10,000 $10,000 $10,000
Jul 1995 10,200 10,318 10,172
Aug 1995 10,290 10,314 10,294
Sep 1995 10,490 10,792 10,470
Oct 1995 10,190 10,739 10,246
Nov 1995 10,310 11,179 10,339
Dec 1995 10,835 11,440 10,904
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
*The Standard & Poor's 500-Stock Index represents general stock market
performance and was initially selected as a benchmark for the Fund's
performance; additionally the NAREIT Equity REIT Index was selected to
represent a more narrow-based comparison for the Fund.
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
7
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Emerging Growth Fund
vs. Russell 2000 Stock Index (July 1995 through December 1995)
VKAC LIT Russell 2000
Emerging Growth Fund Stock Index
- -----------------------------------------------------------
7/3/95 $10,000 $10,000
Jul 1995 10,860 10,576
Aug 1995 11,000 10,795
Sep 1995 11,270 10,988
Oct 1995 11,110 10,496
Nov 1995 11,460 10,937
Dec 1995 11,720 11,226
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Life Investment Trust--Global Equity Fund
vs. Morgan Stanley Capital International World Index + Dividends (July
1995 through December 1995)
VKAC LIT MSCI World Index
Global Equity Fund & Dividends
- ------------------------------------------------------------
7/3/95 $10,000 $10,000
Jul 1995 10,230 10,502
Aug 1995 10,140 10,270
Sep 1995 10,280 10,571
Oct 1995 9,950 10,407
Nov 1995 10,160 10,770
Dec 1995 10,310 11,087
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and is shown at net asset value.
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
8
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
COMMON STOCK FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Common Stock Fund. The team is led by
B. Robert Baker, Jr., portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments.
Q THE STOCK MARKET ENJOYED STRONG RETURNS DURING 1995. WHAT FACTORS HAD THE
MOST IMPACT ON THE FUND'S PERFORMANCE DURING THE PAST YEAR?
A The stock market as a whole benefited from continued--although slower--eco-
nomic growth that generated strong corporate profits without experiencing
increased inflation. The portfolio benefited from our value-oriented approach
to stock selection, which allowed us to identify stocks that were inexpensive
but that had good potential for appreciation. It was our emphasis on stock
picking, rather than a focus on particular industries or sectors, that provided
most of the Fund's return for the year. The portfolio had large holdings in
stocks such as WMX, Time Warner and Philip Morris that contributed signifi-
cantly to the Fund's performance.
While we did not focus on particular industries, we increased the percentage
of the portfolio's assets which were invested in finance, utility and energy
stocks. In the energy sector, stocks were somewhat inexpensive in light of the
traditional seasonal increase in demand for heating oil and gas. We already
have seen an increase in energy prices that has resulted in higher stock
prices. The portfolio's diversification at the end of the year is illustrated
by the chart below.
[Pie Chart Holdings by Sector as a Percentage of Net Assets as of
December 31, 1995 appears here]
Raw Materials/Processing Industries 12%
Other 8%
Technology 5%
Producer Manufacturing 9%
Health Care 9%
Energy 15%
Utilities 12%
Consumer Services 5%
Finance 12%
Consumer Non-Durables 8%
Consumer Distribution 5%
Q CAN YOU GIVE A FEW EXAMPLES OF OTHER STOCKS THE PORTFOLIO OWNED DURING THE
REPORTING PERIOD THAT DID PARTICULARLY WELL?
A We owned stock in all three of the major long-distance telephone companies,
AT&T, MCI and Sprint. The prices of these stocks had been depressed because
of pending telecommunications deregulation. As the likely changes became more
evident, these stocks increased in price. In addition, AT&T announced a major
restructuring that caused further increases in the price of its stock.
Q HOW DID THE FUND PERFORM DURING THE YEAR ENDED DECEMBER 31, 1995?
A The Fund achieved a total return at net asset value of 36.98 percent/1/,
including reinvestment of dividends totaling $0.3175 per share and a capi-
tal gains distribution of $1.9225 per share. By comparison, the Standard &
Poor's 500-Stock Index, a broad-based, unmanaged index that reflects general
stock market performance, achieved a total return of 37.45 percent for the pe-
riod. The Lipper Growth Fund Index, which represents the average performance of
the largest growth funds, achieved a total return of 31.48 percent. Neither in-
dex reflects any commissions or fees that would be paid by an investor purchas-
ing the securities it represents. (For more detailed performance information,
please see page three of this report.)
Q WHAT IS THE OUTLOOK FOR STOCKS?
A The outlook is excellent, which is not to say that a correction could not
occur in the near term. However, some very positive forces are present:
moderate economic growth, low inflation and acceptable levels of interest
rates. These should limit any decline to a modest one.
Looking further into the future, these three conditions--aided by the Federal
Reserve Board's decision in December to lower short-term interest rates--we
feel should lead to increasing corporate profits which, in turn, should lead to
higher stock prices.
/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 Fund
9
Please see footnotes on page three.
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
DOMESTIC STRATEGIC INCOME FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Domestic Strategic Income Fund. The
team is led by Walter W. Stabell, III, portfolio manager, and Robert C. Peck,
Jr., executive vice president for fixed-income investments.
Q INTEREST RATES DECLINED THROUGHOUT MOST OF THE YEAR. HOW DID THIS IMPACT
THE PERFORMANCE OF FIXED-INCOME SECURITIES?
A At the beginning of the year, economic growth looked robust and inflation
appeared as if it might acclerate. Just the opposite occurred. Growth began
to falter and inflation began to moderate. Federal Reserve Board policymakers,
who in February had raised short-term interest rates for the seventh time since
early 1994, reversed direction and cut rates, once in July 1995 and once in De-
cember. This created a better environment for bonds, with slowing economic
growth, falling inflation and fiscal restraint.
Long-term bond rates, which had topped 7.9 percent in January, fell to 5.9
percent at year-end. Thirty-year Treasury bonds generated total returns in
excess of 34 percent for the year. In response to the declining-rate trend, we
decreased the percentage of the portfolio invested in high-yield bonds and
increased the percentage invested in government securities and investment-grade
corporate bonds. The portfolio's diversification at year-end is illustrated by
the chart below.
[Pie Chart Portfolio Holdings as of December 31, 1995 appears here]
Investment-Grade Corporate Bonds 51%
Government Agencies 15%
High-Yield Bonds 33%
Stocks 1%
Q HOW DID THE FUND PERFORM DURING 1995?
A The Fund achieved a total return at net asset value of 21.37 percent/1/,
including reinvestment of dividends totaling $0.7025 per share. By compari-
son, the Lehman Brothers Corporate Bond Index, a broad-based, unmanaged index
that reflects the general performance of corporate bonds, achieved a total re-
turn of 22.25 percent. The Index does not reflect any commissions or fees that
would be paid by an investor purchasing the securities it represents. (For more
detailed performance information, please see page three of this report.)
Q WHAT'S THE OUTLOOK FOR THE FIXED-INCOME MARKET?
A Given continued slow economic growth, favorable inflation numbers, pros-
pects for fiscal restraint, continued foreign investor buying and a dollar
that's stable-to-slightly higher, we are favorable towards bonds. Our outlook
is for further easing by the Fed as economic growth continues to slow and in-
flation remains moderate.
/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 Income Fund
10
Please see footnotes on page three.
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GOVERNMENT FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Government Fund. The team is led by
John R. Reynoldson, portfolio manager, and Robert C. Peck, Jr., executive vice
president for fixed-income investments.
Q BOND PRICES RALLIED THROUGHOUT MOST OF 1995. WHY?
A Investors reacted positively to a strengthening dollar, continued low in-
flation rates and slowing economic growth rates. In addition, an expecta-
tion of positive budget developments that were to be coming out of Washington
helped to push interest rates lower.
Q WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO IN LIGHT OF THESE CONDITIONS?
A We reduced the portfolio's mortgage-backed securities exposure, and kept
the duration (an indication of the impact a change in rates would have on
the portfolio) at an average- to above-average level (4.50 to 5 years). The
portfolio's diversification at the end of December is illustrated by the chart
below.
[Pie Chart Portfolio Holdings as of December 31, 1995 appears here]
Repurchase Agreement 7%
FHLMC 9%
FNMA 19%
U.S. Treasury Securities 33%
SLMA 7%
GNMA 25%
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund achieved a total return at net asset value of 17.17 percent/1/,
including reinvestment of dividends totaling $0.60 per share. By compari-
son, the Lehman Brothers Mutual Fund U.S. Government Index achieved a total
return of 18.34 percent. This broad-based, unmanaged index reflects the gen-
eral performance of government securities; however, it does not reflect any
commissions or fees that would be paid by an investor purchasing the securi-
ties it represents. (For more detailed performance information, please see
page three of this report.)
Q WHAT'S THE OUTLOOK FOR THE NEXT SIX MONTHS?
A While 1996 total returns likely will not match those of 1995, our outlook
for the fixed-income markets remains positive. Inflation-adjusted interest
rates remain high by historical standards, the Fed remains biased toward fur-
ther interest rate reductions, and domestic and global economic expansions re-
main anemic. The overall trend toward government fiscal conservation also
should help buoy the markets.
/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 Fund
11
Please see footnotes on page three.
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
MONEY MARKET FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Money Market Fund. 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 DECLINING INTEREST-RATE ENVIRONMENT?
A During the second half of the year we increased substantially the percent-
age of the portfolio's assets invested in government securities, from 24
percent to almost 50 percent. However, that is still only two-thirds of the
year-end 1994 level, when 72 perent of the portfolio's assets were in govern-
ment securities. To offset this increase, the percentage of assets invested in
commercial paper declined from 33 percent on June 30 to about 19 percent on De-
cember 31.
Q HOW DID THE PORTFOLIO PERFORM DURING 1995?
A The portfolio achieved a total return at net asset value of 5.46 percent.
/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 Fund
An investment in the portfolio is neither insured nor guaranteed by the U.S.
Government and there can no assurance that the fund will be able to maintain a
stable net asset value of $1.00 per share.
12
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
MULTIPLE STRATEGY FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Multiple Strategy Fund. The team is
led by B. Robert Baker, Jr. and Thomas Copper, portfolio co-managers, and Alan
T. Sachtleben, executive vice president for equity investments.
Q THE STOCK AND BOND MARKETS ENJOYED STRONG RETURNS DURING 1995. WHAT FAC-
TORS HAD THE MOST IMPACT ON THE PORTFOLIO'S PERFORMANCE DURING THE PAST
YEAR?
A Both equity and fixed-income investments benefited from continued--al-
though slower--economic growth that generated strong corporate profits
without experiencing increased inflation. The equity portion of the Portfolio
benefited from our value-oriented approach to stock selection, which allowed
us to identify stocks that were inexpensive but that had good potential for
appreciation. It was our emphasis on stock picking, rather than a focus on
particular industries or sectors, that provided most of the equity portion's
return for the year.
Q DID YOU MAKE ANY CHANGES TO THE PORTFOLIO'S ALLOCATION DURING THE PAST
YEAR?
A We continued to maintain our equity weighting at about 60 percent of the
portfolio's net assets, with 30 percent in fixed-income securities and 10
percent in cash. Also, we maintained the average maturity of our bonds between
short- and long-term maturities given the flatness of the yield curve.
While we did not focus the equity assets on particular industries, the
largest percentage was invested in finance, utility and energy stocks. In the
energy sector, stocks were somewhat inexpensive in light of the traditional
seasonal increase in demand for heating oil and gas. We already have seen an
increase in energy prices that has resulted in higher stock prices. The
portfolio's diversification at the end of the year is illustrated by the chart
below.
[Pie Chart Portfolio Holdings as a Percentage of Net Assets as of
December 31, 1995 appears here]
Cash and Equivalents 10%
Corporate and Government Bonds 30%
Common Stocks 60%
Q HOW DID THE FUND PERFORM IN 1995?
A The Fund achieved a total return at net asset value of 31.36 percent, in-
cluding reinvestment of dividends totaling $0.4775 per share. By compari-
son, the Standard & Poor's 500-Stock Index achieved a total return of 37.45
percent. The S&P 500 is a broad-based, unmanaged index that reflects general
stock market performance. It does not reflect any commissions or fees that
would be paid by an investor purchasing the securities it represents. (For
more detailed performance information, please see page four of this report.)
Q WHAT'S THE OUTLOOK FOR THE NEXT SIX MONTHS?
A The outlook for equity investments remains positive, with economic growth
and inflation rates remaining fairly low. Short-term interest rates may be
lowered again in 1996, which should help both the equity and fixed-income mar-
kets.
/s/ Alan T. Sachtleben /s/ B. Robert Baker, Jr. /s/ Thomas Copper
Alan T. Sachtleben B. Robert Baker, Jr. Thomas Copper
Executive Vice President Portfolio Co-Manager Portfolio Co-Manager
Equity Investments Multiple Strategy Fund Multiple Strategy Fund
13
Please see footnotes on page four.
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
REAL ESTATE FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Real Estate Fund. The team is led by
Mary Jayne Maly, portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments.
Q REAL ESTATE SECURITIES DID NOT SHARE IN THE RALLY ENJOYED BY THE GENERAL
STOCK AND BOND MARKETS BETWEEN JULY, WHEN THE FUND BEGAN OPERATIONS, AND
THE END OF THE YEAR. WHY NOT?
A As interest rates declined throughout the year, the trend generated re-
newed enthusiasm among traditional stock investors but not among those who
typically invest in real estate investment trusts. Investors remained con-
cerned about the slowdown in economic growth, which could limit the demand for
new office space, apartments and other types of real estate. So, while stocks
and bonds rallied, REITs did not.
The second half of 1995 also was a period of consolidation for REITs. The
industry had enjoyed tremendous but unsustainable growth in the previous two
years, and as the growth rate slowed REITs underperformed the broader markets.
For the full year, it was the first time in five years that REITs lagged the
stock and bond markets.
However, the fundamentals for REITs remain strong and the recent lack of en-
thusiasm has created good values. In recent months empty office, retail, in-
dustrial and apartment space was absorbed at a fairly strong rate, boosting
occupancy and rental rates.
Q DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE PORTFOLIO'S STRUCTURE DURING
THE PAST SIX MONTHS?
A Our investment strategy remains the same: to be diversified among the ma-
jor property sectors. We historically have invested a large portion of the
portfolio's assets in the office and industrial sector and that continued to
do well. We also added to our investments in hotel REITs, while cutting our
investment in retail REITs because of weak retail sales. The diversification
of the portfolio among the REIT sectors at year-end is illustrated by the
chart below.
[Pie Chart Holdings by Sector as a Percentage of Net Assets as of
December 31, 1995 appears here]
Hotels 8%
Diversified and Other 20%
Office/Industrial 27%
Health Care Facilities 8%
Shopping Centers 8%
Shopping Malls 12%
Apartments 17%
Q HOW DID THE FUND PERFORM FROM INCEPTION ON JULY 3, 1995 THROUGH DECEMBER
31, 1995?
A The Fund achieved a total return at net asset value of 8.35 percent/1/,
including reinvestment of dividends totalling $0.0925 per share.
During the same period, the NAREIT Equity REIT Index achieved a total return
of 9.05 percent. The NAREIT Index is an unmanaged index that reflects the gen-
eral performance of a broad range of equity REITS, including some specialized
REITs in which your Fund typically does not invest but which performed well
during the reporting period. The Standard & Poor's 500-Stock Index, a broad-
based, unmanaged index that reflects general stock market performance,
achieved a total return of 14.40 percent. Neither the NAREIT nor the S&P 500
reflect any commissions or fees that would be paid by an investor purchasing
the securities they represent. (For more detailed performance information,
please see page four of this report.)
14
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
REAL ESTATE FUND
Q WHAT'S THE OUTLOOK FOR THE PORTFOLIO IN THE NEXT SIX MONTHS?
A Since our investment style is to remain fully invested and diversified
among the various types of REITs, we will continue to focus on stock selec-
tion and buy stock in REITs that have solid fundamentals. These types of REITs
should do well regardless of changes in interest and economic growth rates.
/s/ Alan T. Sachtleben /s/ Mary Jayne Maly
Alan T. Sachtleben Mary Jayne Maly
Executive Vice President Portfolio Manager
Equity Investments Real Estate Fund
Please see footnotes on page four
15
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
EMERGING GROWTH FUND
The following is an interview with the management team of Van Kampen American
Capital Life Investment Trust--Emerging Growth Fund. The team is led by Gary
M. Lewis, portfolio manager, and Alan T. Sachtleben, executive vice president
for equity investments.
Q THE STOCK MARKET ENJOYED STRONG RETURNS DURING 1995. WHAT FACTORS HAD THE
MOST IMPACT ON THE FUND'S PERFORMANCE FROM INCEPTION THROUGH YEAR-END?
A The stock market as a whole benefited from continued--although slower--
economic growth that generated strong corporate profits without experienc-
ing increased inflation. The Portfolio benefited from having significant
investments in technology, finance and health care stocks, which were some of
the strongest sectors during the reporting period. While the portfolio bene-
fited from technology's strong performance during the third quarter, our in-
sistence on being diversified limited our investment in technology stocks,
which benefited the portfolio in the fourth quarter when the technology sector
began to show some signs of weakness. We reduced the Fund's technology hold-
ings--particularly semiconductor stocks--toward year-end, when the valuations
had reached high levels and an improved supply and demand balance reduced
earnings growth projections.
We continue to focus on stock selection rather than market timing or sector
rotation. We attempt to control risk by maintaining a broadly diversified
portfolio and trying to pick the best stocks in each sector. The best stocks
generally have rising earnings estimates and improving valuations. The
portfolio's diversification at the end of the year is illustrated by the chart
below.
[Pie Chart Holdings by Sector as a Percentage of Net Assets as of
December 31, 1995 appears here]
Other 7%
Technology 27%
Producer Manufacturing 5%
Raw Materials/Processing Industries 4%
Health Care 16%
Finance 14%
Energy 4%
Consumer Non-Durables 5%
Consumer Services 10%
Consumer Distribution 8%
Q HOW DID THE FUND PERFORM FROM INCEPTION ON JULY 3, 1995 THROUGH DECEMBER
31, 1995?
A The Fund achieved a total return at net asset value of 17.20 percent./1/
By comparison, the Russell 2000 Index, which reflects the general perfor-
mance of small-cap stocks, achieved a total return of 12.26 percent. The Index
does not reflect any commissions or fees that would be paid by an investor
purchasing the securities it represents. (For more detailed performance infor-
mation, please see page four of this report.)
Q WHAT AREAS ARE YOU FOCUSING ON AS WE ENTER 1996?
A Current themes in the Fund include focusing on companies that we feel
should benefit from the growing popularity of the Internet, firms likely
to be involved in bank consolidations and the trend toward physician practice
management.
/s/ Alan T. Sachtleben /s/ Gary M. Lewis
Alan T. Sachtleben Gary M. Lewis
Executive Vice President Portfolio Manager
Equity Investments Common Stock Fund
16
Please see footnotes on page four
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GLOBAL EQUITY FUND
The following is an interview with the management team of the Van Kampen
American Capital Life Investment Trust--Global Equity Fund. The team is led by
Jeff D. New, portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments.
Q WHAT FACTORS MOST INFLUENCED THE PORTFOLIO'S PERFORMANCE FROM INCEPTION
THROUGH YEAR-END?
A The global economic environment remained broadly positive during the sec-
ond half of the year. Most developed countries continued to experience
subdued inflation and expanding business activity. Our portfolio strategy con-
tinues to be one of focusing on strong, established markets, such as the
United States and Japan. We favor investments in both capital equipment and
service companies. The portfolio's geographic diversification at the end of
1995 is illustrated by the chart below.
Top 5 Countries Repre- Q HOW DID THE FUND PERFORM FROM INCEPTION ON JULY
sented 3, 1995 THROUGH DECEMBER 31, 1995?
in the Portfolio
as of December 31, 1995 A The Fund achieved a total return at net asset
value of 3.00 percent./1/ per share. By compar-
ison, the Morgan Stanley Capital International
World Index achieved a total return of 10.87 per-
cent. The Index does not reflect any commissions or
fees that would be paid by an investor purchasing
the securities it represents. (For more detailed
performance information, please see page four of
this report.)
United States
Japan
United Kingdom
Germany
Sweden
Q WHAT'S THE OUTLOOK FOR GLOBAL EQUITY MARKETS?
A Overall, world inflationary pressures remain low and the central banks are
accommodating economic growth. Given this, we feel conditions remain in
place for an extended period of appreciation in the global equity markets.
/s/ Alan T. Sachtleben /s/ Jeff D. New
Alan T. Sachtleben Jeff D. New
Executive Vice President Portfolio Manager
Equity Investments Global Equity Fund
Please see footnotes on page four
17
<PAGE>
COMMON STOCK FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK AND EQUIVALENTS 94.6%
CONSUMER DISTRIBUTION 5.1%
*7 Best Buy, Inc......................................... $ 112,125
8 Dayton Hudson Corp.................................... 607,500
9 Gap, Inc.............................................. 373,800
*21 Kroger Co............................................. 795,000
10 May Department Stores Co.............................. 401,375
12 Sears, Roebuck & Co................................... 479,700
*11 Sports & Recreation, Inc.............................. 81,225
46 Wal-Mart Stores, Inc.................................. 1,024,775
-----------
3,875,500
-----------
CONSUMER DURABLES 3.8%
11 Chrysler Corp......................................... 592,512
20 Ford Motor Co......................................... 582,900
24 General Motors Corp................................... 1,290,150
15 Newell Co............................................. 385,538
-----------
2,851,100
-----------
CONSUMER NON-DURABLES 7.7%
4 Clorox Co............................................. 286,500
9 Colgate-Palmolive Co.................................. 646,300
28 Dial Corp............................................. 820,612
5 General Mills, Inc.................................... 306,075
15 Nabisco Holdings Corp., Class A....................... 473,063
22 Philip Morris Companies, Inc.......................... 1,954,800
22 Quaker Oats Co........................................ 759,000
4 Ralston-Purina Group.................................. 224,550
8 Tambrands, Inc........................................ 358,125
-----------
5,829,025
-----------
CONSUMER SERVICES 4.9%
*29 Cox Communications, Inc............................... 557,700
5 Disney (Walt) Co...................................... 283,200
9 Harcourt General, Inc................................. 381,063
*3 ITT Corp.............................................. 180,200
9 Marriott International, Inc........................... 344,250
2 McGraw Hill, Inc...................................... 174,250
11 New York Times Co., Class A........................... 319,950
40 Time Warner, Inc...................................... 1,511,213
-----------
3,751,826
-----------
ENERGY 14.9%
7 Amoco Corp............................................ 488,750
3 Atlantic Richfield Co................................. 299,025
11 Baker Hughes, Inc..................................... 258,375
17 Coastal Corp.......................................... 644,425
15 Exxon Corp............................................ 1,177,837
7 Halliburton Co........................................ 369,562
6 Mobil Corp............................................ 627,200
20 Noble Affiliates, Inc................................. 597,500
15 Norsk Hydro, SA, ADR.................................. 615,563
20 Occidental Petroleum Corp............................. 427,500
9 Pacific Enterprises................................... 240,125
</TABLE>
See Notes to Financial Statements
18
<PAGE>
COMMON STOCK FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
27 Panhandle Eastern Corp................................ $ 741,475
17 Pogo Producing Co..................................... 483,075
11 Repsol SA, ADR........................................ 361,625
10 Royal Dutch Petroleum Co., ADR........................ 1,411,250
7 Schlumberger, Ltd..................................... 463,975
17 Sonat, Inc............................................ 619,875
12 Texaco, Inc........................................... 949,850
4 Tosco Corp............................................ 156,313
11 Total, SA, ADR........................................ 384,200
-----------
11,317,500
-----------
FINANCE 11.5%
7 Aetna Life & Casualty Co.............................. 463,975
6 Allmerica Financial Corp.............................. 148,500
20 Allstate Corp......................................... 825,749
6 AMBAC, Inc............................................ 281,250
4 American Bankers Insurance Group...................... 163,800
5 American International Group, Inc..................... 457,875
5 BankAmerica Corp...................................... 310,800
7 Bankers Trust New York Corp........................... 445,550
24 Bear Stearns Companies, Inc........................... 482,962
*189 Chase Manhattan Corp., warrants (expiring 6/30/96).... 4,938
12 Chemical Banking Corp................................. 722,625
7 Federal National Mortgage Association................. 819,225
7 Fleet Financial Group, Inc............................ 277,100
11 Franklin Resources, Inc............................... 539,012
15 Great Western Financial Corp.......................... 369,750
9 Morgan (J.P.) & Co., Inc.............................. 738,300
19 Providian Corp........................................ 757,950
14 St. Paul Companies, Inc............................... 750,938
5 SunAmerica, Inc....................................... 213,750
-----------
8,774,049
-----------
HEALTH CARE 8.5%
5 American Home Products Corp........................... 455,900
*5 Amgen, Inc............................................ 267,187
6 Bristol-Myers Squibb Co............................... 532,425
63 Caremark International, Inc........................... 1,134,625
25 Community Psychiatric Centers......................... 305,025
27 Mallinckrodt Group, Inc............................... 978,488
9 Merck & Co., Inc...................................... 618,050
4 Pfizer, Inc........................................... 264,600
10 Pharmacia & Upjohn, Inc............................... 393,313
8 Schering-Plough Corp.................................. 448,950
*14 Tenet Healthcare Corp................................. 286,350
8 Warner-Lambert Co..................................... 786,713
-----------
6,471,626
-----------
PRODUCER MANUFACTURING 9.1%
4 Emerson Electric Co................................... 318,825
5 Fluor Corp............................................ 330,000
10 Foster Wheeler Corp................................... 425,000
19 General Electric Co................................... 1,389,600
7 Honeywell, Inc........................................ 325,788
</TABLE>
See Notes to Financial Statements
19
<PAGE>
COMMON STOCK FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*3 ITT Industries........................................ $ 81,600
10 Rockwell International Corp........................... 528,750
11 TRW, Inc.............................................. 829,250
*10 Varity Corp........................................... 378,675
76 WMX Technologies, Inc................................. 2,282,450
-----------
6,889,938
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 11.9%
4 Air Products & Chemicals., Inc........................ 216,275
24 Barrick Gold Corp..................................... 635,637
14 Boise Cascade Corp.................................... 495,137
7 Consolidated Papers................................... 381,650
*2 Crown Vantage, Inc.................................... 33,487
16 Du Pont (E.I) de Nemours & Co, Inc.................... 1,124,987
9 Freeport McMoRan, Inc., Copper and Gold, Class B...... 244,687
8 Georgia-Pacific Corp.................................. 562,725
9 Homestake Mining and Gold............................. 146,875
20 International Paper Co................................ 757,500
51 James River Corp...................................... 1,218,313
7 Mead Corp............................................. 339,625
7 Monsanto Co........................................... 796,250
7 Nalco Chemical Co..................................... 201,838
4 Newmont Gold Co....................................... 192,500
9 Nucor Corp............................................ 491,275
13 Union Camp Corp....................................... 600,075
6 Union Carbide Corp.................................... 217,500
7 Willamette Industries, Inc............................ 388,125
-----------
9,044,461
-----------
TECHNOLOGY 4.6%
3 Avnet, Inc............................................ 152,150
*10 Gateway 2000, Inc..................................... 254,800
13 General Dynamics Corp................................. 762,712
7 General Motors Corp., Class H......................... 343,875
4 Hewlett-Packard Co.................................... 293,125
4 Intel Corp............................................ 215,650
8 International Business Machines Corp.................. 743,175
*11 LSI Logic Corp........................................ 363,525
4 Motorola, Inc......................................... 228,000
*8 National Semiconductor Corp........................... 171,325
-----------
3,528,337
-----------
TRANSPORTATION 1.0%
*4 AMR Corp.............................................. 311,850
3 Canadian National Railway............................. 48,000
10 Illinois Central Corp................................. 364,563
-----------
724,413
-----------
UTILITIES 11.6%
4 American Electric Power, Inc.......................... 170,100
7 Ameritech Corp........................................ 383,500
13 AT&T Corp............................................. 867,650
6 Bell Atlantic Corp.................................... 374,500
9 Bellsouth Corp........................................ 391,500
</TABLE>
See Notes to Financial Statements
20
<PAGE>
COMMON STOCK FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
1 Boston Edison Co..................................... $ 38,350
4 Carolina Power & Light Co............................ 131,100
4 Central & South West Corp............................ 103,137
3 CMS Energy Group..................................... 80,662
4 Detroit Edison Co.................................... 151,800
9 FPL Group, Inc....................................... 426,650
11 Frontier Corp........................................ 315,000
2 General Public Utilities Corp........................ 78,200
8 Illinova Corp........................................ 249,000
22 MCI Communications Corp.............................. 569,525
3 New York State Electric & Gas Corp................... 77,625
2 NIPSCO Industries, Inc............................... 76,500
2 Northern State Power................................. 78,600
7 NYNEX Corp........................................... 356,400
3 Ohio Edison Co....................................... 77,550
2 Oklahoma Gas & Electric Co........................... 77,400
6 Pacific Telesis Group................................ 188,300
4 Pacificorp........................................... 80,750
20 Peco Energy Co....................................... 608,525
3 Pinnacle West Capital Corp........................... 80,500
3 Public Service Co. of Colorado....................... 106,125
11 Public Service Co. of New Mexico..................... 193,875
3 Rochester Gas & Electric Co.......................... 72,400
7 SBC Communications, Inc.............................. 379,500
3 Southwestern Public Service Co....................... 81,875
24 Sprint Corp.......................................... 964,975
9 Telefonica de Espana, SA, ADR........................ 381,063
3 Texas Utilities Co................................... 115,150
7 US West Communications Group......................... 250,250
2 Unicom Corp.......................................... 75,325
*5 WorldCom, Inc........................................ 172,725
-----------
8,826,087
-----------
TOTAL COMMON STOCK AND EQUIVALENTS (Cost
$62,609,418)......................................... 71,883,862
-----------
Par
Amount
(000)
------
REPURCHASE AGREEMENTS 5.4%
$4,145 Lehman Government Securities, Inc., dated 12/29/95,
5.85%, due 01/02/96, (collateralized by U.S.
Government obligations in a pooled cash account)
repurchase proceeds $4,147,694
(Cost $4,145,000).................................... 4,145,000
-----------
TOTAL INVESTMENTS (Cost $66,754,418) 100.0%..................... 76,028,862
OTHER ASSETS AND LIABILITIES, NET 0.0%.......................... (19,002)
-----------
NET ASSETS 100%................................................. $76,009,860
-----------
</TABLE>
* Non-income producing security
21
See Notes to Financial Statements
<PAGE>
COMMON STOCK FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $66,754,418).................... $76,028,862
Cash............................................................... 745
Receivable for investments sold.................................... 165,995
Dividends and interest receivable.................................. 154,343
Other assets....................................................... 20,403
-----------
Total Assets...................................................... 76,370,348
-----------
LIABILITIES
Payable for investments purchased.................................. 200,775
Payable for Fund shares redeemed................................... 66,703
Due to Adviser..................................................... 26,292
Deferred Trustees' compensation.................................... 20,167
Due to shareholder service agent................................... 1,200
Accrued expenses................................................... 45,351
-----------
Total Liabilities................................................. 360,488
-----------
NET ASSETS, equivalent to $14.69 per share......................... $76,009,860
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 5,173,759 shares outstanding................... $ 51,738
Capital surplus.................................................... 64,118,310
Undistributed net realized gain on securities...................... 2,532,183
Net unrealized appreciation of securities.......................... 9,274,444
Undistributed net investment income................................ 33,185
-----------
NET ASSETS......................................................... $76,009,860
-----------
</TABLE>
22
See Notes to Financial Statements
<PAGE>
COMMON STOCK FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends..................................................... $ 1,632,554
Interest...................................................... 259,259
-----------
Investment income............................................ 1,891,813
-----------
EXPENSES
Management fees............................................... 355,715
Shareholder service agent's fees and expenses................. 15,940
Accounting services........................................... 55,772
Trustees' fees and expenses................................... 13,161
Audit fees.................................................... 14,703
Custodian fees................................................ 16,307
Legal fees.................................................... 3,795
Reports to shareholders....................................... 7,487
Miscellaneous................................................. 657
Expense reimbursement......................................... (56,680)
-----------
Total expenses............................................... 426,857
-----------
NET INVESTMENT INCOME......................................... 1,464,956
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities............................... 10,869,574
Net unrealized appreciation of securities during the period... 9,837,636
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................ 20,707,210
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $22,172,166
-----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $67,471,922 $72,259,545
----------- -----------
OPERATIONS
Net investment income............................... 1,464,956 1,190,278
Net realized gain on securities..................... 10,869,574 6,950,717
Net unrealized appreciation (depreciation) of
securities during the period........................ 9,837,636 (10,647,731)
----------- -----------
Increase (decrease) in net assets resulting from
operation.......................................... 22,172,166 (2,506,736)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................... (1,446,938) (1,197,291)
Net realized gain on securities..................... (8,808,250) (6,788,651)
----------- -----------
(10,255,188) (7,985,942)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold........................... 6,340,082 11,714,030
Proceeds from shares issued for distributions
reinvested.......................................... 10,255,188 7,985,942
Cost of shares redeemed............................. (19,974,310) (13,994,917)
----------- -----------
Increase (decrease) in net assets from capital
transactions....................................... (3,379,040) 5,705,055
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.................... 8,537,938 (4,787,623)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $33,185
and $15,167, respectively).......................... $76,009,860 $67,471,922
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold.......................................... 438,275 827,085
Shares issued for distributions reinvested........... 703,905 648,452
Shares redeemed...................................... (1,413,351) (989,273)
----------- -----------
Increase (decrease) in capital shares outstanding.. (271,171) 486,264
----------- -----------
</TABLE>
23
See Notes to Financial Statements
<PAGE>
COMMON STOCK FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. $12.39 $14.57 $14.21 $13.44 $10.09
------- ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income................... .41 .33 .30 .31 .335
Expenses............................ (.10) (.09) (.11) (.10) (.10)
Expense reimbursement(/1/).......... .01 .01 .02 .02 .03
------- ------- ------ ------ ------
Net investment income................ .32 .25 .21 .23 .265
Net realized and unrealized gain
(loss) on securities................ 4.22 (.7625) 1.0325 .77 3.37
------- ------- ------ ------ ------
Total from investment operations..... 4.54 (.5125) 1.2425 1.00 3.635
------- ------- ------ ------ ------
LESS DISTRIBUTIONS FROM
Net investment income............... (.3175) (.25) (.215) (.23) (.285)
Net realized gain on securities..... (1.9225) (1.4175) (.6675) -- --
------- ------- ------ ------ ------
Total distributions.................. (2.24) (1.6675) (.8825) (.23) (.285)
------- ------- ------ ------ ------
Net asset value, end of period....... $14.69 $12.39 $14.57 $14.21 $13.44
------- ------- ------ ------ ------
TOTAL RETURN......................... 36.98% (3.39%) 8.98% 7.48% 36.41%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions). $76.0 $67.5 $72.3 $65.6 $57.8
Average net assets (millions)........ $71.1 $69.3 $69.0 $58.0 $36.4
Ratios to average net assets(/1/)
Expenses............................ .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement...................... .68% .68% .72% .74% .90%
Net investment income............... 2.06% 1.72% 1.41% 1.78% 2.33%
Net investment income, without
expense reimbursement.............. 1.98% 1.64% 1.29% 1.64% 2.03%
Portfolio turnover rate.............. 145% 153% 139% 116% 95%
</TABLE>
(1) See Note 2.
24
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 84.4%
CONSUMER DISTRIBUTION 12.8%
$ 500 Americold Corp......................... 15.000% 05/01/07 $ 500,000
500 Borden, Inc. .......................... 7.875 02/15/23 475,100
300 ConAgra, Inc. ......................... 9.750 03/01/21 392,127
500 Nabisco, Inc........................... 7.550 06/15/15 522,950
500 Ralphs Grocery Co...................... 13.750 06/15/05 535,000
500 Specialty Retailers, Inc............... 11.000 08/15/03 465,000
500 Sysco Corp............................. 6.500 06/15/05 516,620
-----------
3,406,797
-----------
CONSUMER NON-DURABLES 5.4%
500 Dr Pepper/Seven-Up Companies, Inc...... ** 11/01/02 470,625
500 Fieldcrest Cannon, Inc................. 11.250 06/15/04 465,000
500 Westpoint Stevens...................... 9.375 12/15/05 491,875
-----------
1,427,500
-----------
CONSUMER SERVICES 18.2%
500 Continental Cablevision (private
placement, purchased on 12/08/95)...... 8.300 05/15/06 502,500
500 Cox Communications, Inc................ 7.250 11/15/15 518,150
500 New York Times Co...................... 8.250 03/15/25 575,300
500 News America Holdings, Inc............. 10.125 10/15/12 612,870
500 Petro PSC Properties................... 12.500 06/01/02 475,000
500 TCI Communications, Inc................ 8.750 08/01/15 554,200
500 Time Warner, Inc....................... 9.125 01/15/13 563,350
500 Valassis Communications, Inc........... 9.550 12/01/03 516,950
500 Viacom, Inc............................ 7.625 01/15/16 505,900
-----------
4,824,220
-----------
ENERGY 14.1%
300 Coastal Corp. ......................... 10.250 10/15/04 373,170
500 HS Resources, Inc...................... 9.875 12/01/03 492,500
500 Occidental Petroleum Corp.............. 10.125 11/15/01 597,350
500 PDV America, Inc....................... 7.875 08/01/03 503,800
500 Plains Resources, Inc.................. 12.000 10/01/99 526,250
500 Texaco Capital, Inc.................... 8.625 06/30/10 615,900
250 Union Oil Co. of California............ 9.250 02/01/03 292,500
350 Vintage Petroleum...................... 9.000 12/15/05 354,375
-----------
3,755,845
-----------
FINANCE 2.8%
247 Blue Bell Funding, Inc................. 11.850 05/01/99 217,360
500 Phoenix Re Corp........................ 9.750 08/15/03 532,500
-----------
749,860
-----------
HEALTH CARE 3.0%
500 Quorum Health Group.................... 11.875 12/15/02 561,250
200 Tenet Healthcare Corp.................. 10.125 03/01/05 221,250
-----------
782,500
-----------
</TABLE>
25
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING
INDUSTRIES 11.4%
$ 500 Boise Cascade Corp................. 9.450% 11/01/09 $ 622,100
500 Georgia-Pacific Corp. ............. 9.950 06/15/02 598,080
400 IMC Fertilizer Group, Inc.......... 9.450 12/15/11 429,000
500 Noranda, Inc....................... 8.125 06/15/04 554,200
500 Smurfit Capital Funding............ 6.750 11/20/05 513,000
265 UCAR Global Enterprise, Inc........ 12.000 01/15/05 304,088
-----------
3,020,468
-----------
TECHNOLOGY 1.8%
500 Unisys Corp........................ 13.500 07/01/97 476,250
-----------
TRANSPORTATION 11.9%
500 Delta Air Lines, Inc............... 9.750 05/15/21 619,350
500 International Shipholding Corp..... 9.000 07/01/03 500,000
350 Kansas City Southern Industries,
Inc................................ 8.800 07/01/22 394,975
250 Southern Pacific Rail Corp......... 9.375 08/15/05 271,875
500 Southwest Airlines Co.............. 9.400 07/01/01 577,050
500 Union Pacific Co................... 8.350 05/01/25 560,400
200 United Air Lines, Inc., Series
1991-A............................. 10.020 03/22/14 240,760
-----------
3,164,410
-----------
UTILITIES 3.0%
350 Monongahela Power Co. ............. 8.375 07/01/22 396,515
350 Public Service Co. of Colorado..... 8.750 03/01/22 409,255
-----------
805,770
-----------
TOTAL CORPORATE OBLIGATIONS (Cost $21,173,889)..... 22,413,620
-----------
GOVERNMENT OBLIGATIONS 15.0%
*1,000 Federal National Mortgage
Association, Forward............... 7.500 12/31/23 1,024,380
1,010 Federal National Mortgage
Association, Pool.................. 10.000 04/01/21 1,109,506
350 Province of Newfoundland (Canada).. 8.650 10/22/22 417,445
350 Province of Saskatchewan (Canada).. 8.000 02/01/13 398,160
(/1/)1,000 United States Treasury Notes....... 6.750 06/30/99 1,045,470
-----------
TOTAL GOVERNMENT OBLIGATIONS (Cost $3,789,708)..... 3,994,961
-----------
</TABLE>
26
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<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....................... $ 43,129
*2,500 F F Holdings Co. (private placement,
purchased on 10/6/92)............... 5,000
*6,889 Supermarkets General Holdings Corp.,
$3.52 preferred stock, Payment in
Kind (cost $166,940)................ 199,781
-----------
TOTAL COMMON AND PREFERRED STOCK (Cost $184,374)..... 247,910
-----------
<CAPTION>
Par
Amount
(000)
- ------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT 1.7%
$ 445 Lehman Government Securities, Inc.,
dated 12/29/95 (collateralized by
U.S. Government obligations in a
pooled cash account) repurchase
proceeds $445,289 (Cost $445,000)... 5.850% 01/02/96 445,000
-----------
TOTAL INVESTMENTS (Cost $25,592,971) 102.0%.................... 27,101,491
OTHER ASSETS AND LIABILITIES, NET (2.0%)....................... (539,196)
-----------
NET ASSETS 100%................................................ $26,562,295
-----------
</TABLE>
*Non-income producing security.
**Zero Coupon
(/1/)Security with a market value of $1.0 million was placed as collateral for
forward commitments (see Note 1B).
27
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investment, at market value (Cost $25,592,971).................... $27,101,491
Cash.............................................................. 554
Receivable for investments sold................................... 2,037,500
Interest receivable............................................... 492,763
Receivable for Fund shares sold................................... 10,183
Other assets...................................................... 18,339
-----------
Total Assets..................................................... 29,660,830
-----------
LIABILITIES
Payable for investments purchased................................. 3,026,250
Deferred Trustees' compensation................................... 15,505
Due to Adviser.................................................... 9,728
Payable for Fund shares redeemed.................................. 1,635
Due to shareholder service agent.................................. 1,155
Accrued expenses and other liabilities............................ 44,262
-----------
Total Liabilities................................................ 3,098,535
-----------
NET ASSETS, equivalent to $8.21 per share......................... $26,562,295
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 3,235,694 shares outstanding.................. $ 32,357
Capital surplus................................................... 27,033,560
Accumulated net realized loss on securities....................... (2,028,673)
Net unrealized appreciation of securities......................... 1,508,520
Undistributed net investment income............................... 16,531
-----------
NET ASSETS........................................................ $26,562,295
-----------
</TABLE>
28
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
- ----------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest.................. $2,263,167
Dividends................. 3,821
----------
Investment income....... 2,266,988
----------
EXPENSES
Management fees........... 130,064
Shareholder service
agent's fees and expenses. 15,840
Accounting services....... 49,819
Trustees' fees and
expenses.................. 11,467
Audit fees................ 20,124
Custodian fees............ 3,969
Legal fees................ 3,948
Reports to shareholders... 6,212
Miscellaneous............. 1,520
Expense reimbursement..... (86,887)
----------
Total expenses.......... 156,076
----------
NET INVESTMENT INCOME..... 2,110,912
----------
REALIZED AND UNREALIZED
GAIN ON SECURITIES
Net realized gain on
securities................ 222,049
Net unrealized
appreciation of securities
during the period......... 2,671,771
----------
NET REALIZED AND
UNREALIZED GAIN ON
SECURITIES............... 2,893,820
----------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $5,004,732
----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $21,273,969 $27,443,291
----------- -----------
OPERATIONS
Net investment income............................... 2,110,912 2,178,975
Net realized gain (loss) on securities.............. 222,049 (857,071)
Net unrealized appreciation (depreciation) of secu-
rities during the period........................... 2,671,771 (2,543,211)
----------- -----------
Increase (decrease) in net assets resulting from
operations...................................... 5,004,732 (1,221,307)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME.............................................. (2,098,216) (2,170,097)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold........................... 7,719,168 9,066,088
Proceeds from shares issued for distributions rein-
vested............................................. 2,098,217 2,170,097
Cost of shares redeemed............................. (7,435,575) (14,014,103)
----------- -----------
Increase (decrease) in net assets from capital
transactions.................................... 2,381,810 (2,777,918)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.................... 5,288,326 (6,169,322)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $16,531
and $11,622, respectively).......................... $26,562,295 $21,273,969
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold.......................................... 997,934 1,100,823
Shares issued for distributions reinvested........... 258,208 296,939
Shares redeemed...................................... (915,148) (1,700,172)
----------- -----------
Increase (decrease) in capital shares outstanding... 340,994 (302,410)
----------- -----------
</TABLE>
29
See Notes to Financial Statements
<PAGE>
DOMESTIC STRATEGIC INCOME FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <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
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income............... .76 .91 .77 .74 .725
Expenses........................ (.08) (.10) (.09) (.07) (.07)
Expense reimbursement(/1/)...... .03 .04 .04 .02 .03
------- ------- ------- ------- -------
Net investment income............ .71 .85 .72 .69 .685
Net realized and unrealized gain
(loss) on securities............ .8525 (1.2275) .5825 .2725 .7525
------- ------- ------- ------- -------
Total from investment operations. 1.5625 (.3775) 1.3025 .9625 1.4375
------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM NET
INVESTMENT INCOME............... (.7025) (.8525) (.7225) (.7025) (.6775)
------- ------- ------- ------- -------
Net asset value, end of period... $8.21 $7.35 $8.58 $8.00 $7.74
------- ------- ------- ------- -------
TOTAL RETURN..................... 21.37% (4.33%) 16.32% 12.50% 21.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)...................... $26.6 $21.3 $27.4 $21.1 $17.4
Average net assets (millions).... $26.0 $26.1 $26.7 $18.8 $10.6
Ratios to average net assets(/1/)
Expenses........................ .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement.................. .93% .95% .95% .95% .95%
Net investment income........... 8.11% 8.35% 7.80% 8.89% 9.72%
Net investment income, without
expense reimbursement.......... 7.78% 8.00% 7.40% 8.54% 9.37%
Portfolio turnover rate.......... 54% 94% 130% 117% 90%
</TABLE>
(1) See Note 2.
30
See Notes to Financial Statements
<PAGE>
GOVERNMENT FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES AGENCY
OBLIGATIONS 64.4%
Federal Home Loan Mortgage
$2,807 Corp., Pools.............. 7.000% 12/31/23 to 07/01/24 $ 2,831,914
Federal Home Loan Mortgage
1,672 Corp., Pools.............. 7.500 06/01/24 to 10/01/24 1,714,248
Federal Home Loan Mortgage
1,900 Corp., Pools.............. 8.000 09/01/24 to 10/01/24 1,968,094
Federal National Mortgage
2,484 Association, CMO.......... 6.294 03/25/09 2,490,878
Federal National Mortgage
2,385 Association, Pool......... 6.274 03/25/09 2,387,947
Federal National Mortgage
**1,928 Association, Pools........ 7.000 12/01/23 to 06/01/24 1,942,177
Federal National Mortgage
1,761 Association, Pools........ 7.500 05/01/24 to 10/01/24 1,804,249
Federal National Mortgage
**3,768 Association, Pools........ 8.000 04/01/24 to 10/01/24 3,902,465
Federal National Mortgage
1,488 Association, Pool......... 11.000 11/01/20 1,663,149
Government National
Mortgage Association,
**6,859 Pools..................... 7.000 04/15/23 to 10/15/24 6,936,058
Government National
Mortgage Association,
**5,493 Pools..................... 7.500 04/15/22 to 06/15/24 5,647,105
Government National
Mortgage Association,
3,278 Pools..................... 8.000 05/15/17 to 11/15/24 3,411,836
Government National
Mortgage Association,
755 Pools..................... 8.500 04/15/17 to 07/15/17 792,886
Government National
Mortgage Association,
307 Pools..................... 11.000 09/15/10 to 08/15/20 343,398
Student Loan Marketing
**5,000 Association............... 7.500 03/08/00 5,357,800
-----------
TOTAL UNITED STATES AGENCY OBLIGATIONS (Cost
$41,578,470)........................................... 43,194,204
-----------
UNITED STATES TREASURY
OBLIGATIONS 26.4%
1,500 Treasury Notes............ 6.250 05/31/00 1,550,385
**6,000 Treasury Notes............ 7.750 12/31/99 6,510,000
**6,000 Treasury Notes............ 7.875 01/15/98 6,304,680
**2,000 Treasury Notes............ 8.000 05/15/01 2,237,180
1,000 Treasury Notes............ 9.000 05/15/98 1,082,660
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost
$17,369,531)........................................... 17,684,905
-----------
FORWARD PURCHASE
COMMITMENTS 13.6%
*2,000 Government National
Mortgage Association...... 7.000 settling 01/96 2,022,500
*7,000 United States Treasury
Notes..................... 5.750 settling 01/96 7,064,540
-----------
TOTAL FORWARD PURCHASE COMMITMENTS (Cost $9,026,953)... 9,087,040
-----------
REPURCHASE AGREEMENT 7.8%
5,210 Lehman Government
Securities, Inc., dated
12/29/95 (collateralized
by U.S. Government
obligations in a pooled
cash account) repurchase
proceeds $5,213,387 (Cost
$5,210,000)............... 5.850 01/02/96 5,210,000
-----------
TOTAL INVESTMENTS (Cost $73,184,954) 112.2%.................... 75,176,149
OTHER ASSETS AND LIABILITIES, NET (12.2%)...................... (8,156,941)
-----------
NET ASSETS 100%................................................ $67,019,208
-----------
</TABLE>
*Non-income producing security.
**Securities with a market value of approximately $38.8 million were placed as
collateral for futures contracts and forward purchase commitments (see Note
1B).
ARM--adjustable rate mortgage backed security
CMO--collateralized mortgage obligation
31
See Notes to Financial Statements
<PAGE>
GOVERNMENT FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investments, at market value (Cost $73,184,954).................. $ 75,176,149
Cash............................................................. 4,138
Receivable for investments sold.................................. 5,510,781
Interest receivable.............................................. 916,013
Unrealized appreciation on forward commitments................... 85,020
Receivable from broker for variation margin...................... 51,406
Other assets..................................................... 63,582
------------
Total Assets.................................................... 81,807,089
------------
LIABILITIES
Payable for investments purchased................................ 14,641,583
Unrealized depreciation on forward commitments................... 23,914
Due to Adviser................................................... 21,689
Deferred Trustees' compensation.................................. 20,025
Payable for Fund shares redeemed................................. 19,303
Due to shareholder service agent................................. 1,200
Accrued expenses................................................. 60,167
------------
Total Liabilities............................................... 14,787,881
------------
NET ASSETS, equivalent to $9.06 per share........................ $ 67,019,208
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share;
unlimited shares authorized; 7,399,648 shares outstanding....... $ 73,996
Capital surplus.................................................. 78,076,858
Accumulated net realized loss on securities...................... (13,544,629)
Net unrealized appreciation of securities
Investments..................................................... 1,991,195
Forward commitments............................................. 61,106
Futures contracts............................................... 345,267
Undistributed net investment income.............................. 15,415
------------
NET ASSETS....................................................... $ 67,019,208
------------
</TABLE>
See Notes to Financial Statements
32
<PAGE>
GOVERNMENT FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest.................................................... $ 4,992,539
-----------
EXPENSES
Management fees............................................. 333,447
Shareholder service agent's fees and expenses............... 16,066
Accounting services......................................... 57,526
Trustees' fees and expenses................................. 12,049
Audit fees.................................................. 23,204
Custodian fees.............................................. 25,654
Legal fees.................................................. 3,727
Reports to shareholders..................................... 5,233
Miscellaneous............................................... 651
Expense reimbursement....................................... (77,421)
-----------
Total expenses............................................ 400,136
-----------
NET INVESTMENT INCOME....................................... 4,592,403
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain (loss) on securities
Investments................................................ 387,319
Forward commitments........................................ 1,092,109
Futures contracts.......................................... (221,413)
Net unrealized appreciation of securities during the period
Investments................................................ 4,323,795
Forward commitments........................................ 34,537
Futures contracts.......................................... 347,644
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.............. 5,963,991
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $10,556,394
-----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period..................... $65,513,261 $80,630,053
----------- -----------
OPERATIONS
Net investment income.............................. 4,592,403 4,717,706
Net realized gain (loss) on securities............. 1,258,015 (6,083,772)
Net unrealized appreciation (depreciation) of secu-
rities during the period.......................... 4,705,976 (2,217,746)
----------- -----------
Increase (decrease) in net assets resulting from
operations..................................... 10,556,394 (3,583,812)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME............................................. (4,588,452) (4,508,286)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold.......................... 2,668,721 3,484,195
Proceeds from shares issued for distributions rein-
vested............................................ 4,588,452 4,508,286
Cost of shares redeemed............................ (11,719,168) (15,017,175)
----------- -----------
Decrease in net assets from capital transactions.. (4,461,995) (7,024,694)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS................... 1,505,947 (15,116,792)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $15,415 and accumulated
net investment loss of $4,137, respectively)....... $67,019,208 $65,513,261
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold......................................... 307,711 405,270
Shares issued for distributions reinvested.......... 524,601 524,430
Shares redeemed..................................... (1,347,594) (1,719,219)
----------- -----------
Decrease in capital shares outstanding............ (515,282) (789,519)
----------- -----------
</TABLE>
33
See Notes to Financial Statements
<PAGE>
GOVERNMENT FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <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
----- ------ ------ ------- -----
INCOME FROM INVESTMENT OPERATIONS
Investment income..................... .65 .61 .62 .72 .79
Expenses.............................. (.06) (.06) (.06) (.064) (.06)
Expense reimbursement(/1/)............ .01 .01 .01 .009 .01
----- ------ ------ ------- -----
Net investment income.................. .60 .56 .57 .665 .74
Net realized and unrealized gain (loss)
on securities......................... .78 (.985) .135 (.1575) .60
----- ------ ------ ------- -----
Total from investment operations....... 1.38 (.425) .705 .5075 1.34
----- ------ ------ ------- -----
LESS DISTRIBUTIONS FROM NET INVESTMENT
INCOME................................ (.60) (.555) (.575) (.6675) (.75)
----- ------ ------ ------- -----
Net asset value, end of period......... $9.06 $8.28 $9.26 $9.13 $9.29
----- ------ ------ ------- -----
TOTAL RETURN........................... 17.17% (4.63%) 7.86% 5.73% 16.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)... $67.0 $65.5 $80.6 $74.8 $77.0
Average net assets (millions).......... $66.7 $70.3 $78.6 $74.6 $72.9
Ratios to average net assets(/1/)
Expenses.............................. .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement........................ .72% .70% .70% .70% .70%
Net investment income................. 6.89% 6.71% 6.45% 7.29% 8.37%
Net investment income, without expense
reimbursement........................ 6.77% 6.61% 6.35% 7.19% 8.27%
Portfolio turnover rate................ 164% 192% 91% 36% 57%
</TABLE>
(1) See Note 2.
34
See Notes to Financial Statements
<PAGE>
MONEY MARKET FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES AGENCY AND GOVERNMENT
OBLIGATIONS 49.6%
$1,000 Federal Farm Credit Banks............... 5.428% 05/03/96 $ 981,710
1,825 Federal Home Loan Banks................. 5.677 03/15/96 1,803,974
2,000 Federal Home Loan Mortgage Corp......... 5.606 01/04/96 1,998,755
1,000 Federal National Mortgage Association... 5.384 06/13/96 975,983
2,000 Federal National Mortgage Association... 5.417 06/14/96 1,951,399
3,000 United States Treasury Bills............ 4.406 02/15/96 2,982,480
-----------
TOTAL UNITED STATES AGENCY AND GOVERNMENT OBLIGATIONS
(Cost $10,694,301)....................................... 10,694,301
-----------
REPURCHASE AGREEMENTS 31.2%(/1/)
2,000 BA Securities, repurchase proceeds
$2,001,289.............................. 5.800 01/02/96 2,000,000
2,370 Lehman Government Securities, Inc.,
repurchase proceeds $2,371,547.......... 5.875 01/02/96 2,370,000
2,370 SBC Capital Markets, Inc., repurchase
proceeds $2,371,541..................... 5.850 01/02/96 2,370,000
-----------
TOTAL REPURCHASE AGREEMENTS (Cost $6,740,000)............ 6,740,000
-----------
COMMERCIAL PAPER 19.4%
1,000 Associates Corp. of North America....... 5.772 01/09/96 998,578
1,000 Chevron Oil Finance Co.................. 5.778 01/10/96 998,403
1,100 General Electric Capital Corp........... 5.659 02/12/96 1,092,669
1,100 Toronto Dominion Holdings............... 5.708 03/06/96 1,088,808
-----------
TOTAL COMMERCIAL PAPER (Cost $4,178,458)................ 4,178,458
-----------
TOTAL INVESTMENTS (Cost $21,612,759) 100.2%..................... 21,612,759
OTHER ASSETS AND LIABILITIES, NET (0.2%)........................ (37,842)
-----------
NET ASSETS 100%................................................. $21,574,917
-----------
</TABLE>
(1) Dated 12/29/95, collateralized by U.S. Government obligations in a pooled
cash account
35
See Notes to Financial Statements
<PAGE>
MONEY MARKET FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost.................................... $21,612,759
Cash.............................................................. 5,647
Other assets...................................................... 21,548
-----------
Total Assets..................................................... 21,639,954
-----------
LIABILITIES
Deferred Trustees' compensation................................... 18,162
Payable for Fund shares redeemed.................................. 6,873
Due to Adviser.................................................... 2,876
Due to shareholder service agent.................................. 1,215
Accrued expenses.................................................. 35,911
-----------
Total Liabilities................................................ 65,037
-----------
NET ASSETS, equivalent to $1.00 per share......................... $21,574,917
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 21,575,617 shares outstanding................. $ 215,756
Capital surplus................................................... 21,359,861
Accumulated net investment loss................................... (700)
-----------
NET ASSETS........................................................ $21,574,917
-----------
</TABLE>
36
See Notes to Financial Statements
<PAGE>
MONEY MARKET FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest..................................................... $1,440,718
----------
EXPENSES
Management fees.............................................. 121,552
Shareholder service agent's fees and expenses................ 16,192
Accounting services.......................................... 48,109
Trustees' fees and expenses.................................. 11,074
Audit fees................................................... 14,003
Custodian fees............................................... 5,136
Legal fees................................................... 3,889
Reports to shareholders...................................... 5,844
Miscellaneous................................................ 700
Expense reimbursement........................................ (80,637)
----------
Total expenses.............................................. 145,862
----------
NET INVESTMENT INCOME........................................ 1,294,856
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $1,294,856
----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $28,547,675 $29,966,001
----------- -----------
OPERATIONS
Net investment income............................... 1,294,856 1,109,674
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME.............................................. (1,295,753) (1,109,772)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold........................... 10,862,643 22,474,029
Proceeds from shares issued for distributions
reinvested......................................... 1,295,753 1,107,713
Cost of shares redeemed............................. (19,130,257) (24,999,970)
----------- -----------
Decrease in net assets from capital transactions... (6,971,861) (1,418,228)
----------- -----------
DECREASE IN NET ASSETS............................... (6,972,758) (1,418,326)
----------- -----------
NET ASSETS, end of period (including accumulated net
investment loss of $700 and undistributed net
investment income of $197, respectively)............ $21,574,917 $28,547,675
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold.......................................... 10,862,643 22,474,029
Shares issued for distributions reinvested........... 1,295,753 1,107,713
Shares redeemed...................................... (19,130,257) (24,999,970)
----------- -----------
Decrease in capital shares outstanding............. (6,971,861) (1,418,228)
----------- -----------
</TABLE>
37
See Notes to Financial Statements
<PAGE>
MONEY MARKET FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial outstanding throughout each of the
periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................... .0593 .0425 .0322 .0391 .0607
Expenses.............................. (.0093) (.0087) (.0095) (.009) (.0087)
Expense reimbursement(/1/)............ .0033 .0027 .0035 .003 .0026
------ ------ ------ ------ ------
Net investment income.................. .0533 .0365 .0262 .0331 .0546
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM NET INVESTMENT
INCOME................................ (.0533) (.0365) (.0262) (.0331) (.0546)
------ ------ ------ ------ ------
Net asset value, end of period......... $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
TOTAL RETURN........................... 5.46% 3.71% 2.66% 3.36% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)... $21.6 $28.5 $30.0 $32.9 $38.0
Average net assets (millions).......... $24.3 $30.5 $28.9 $36.2 $36.3
Ratios to average net assets(/1/)
Expenses.............................. .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement........................ .93% .87% .95% .89% .87%
Net investment income................. 5.33% 3.63% 2.63% 3.32% 5.44%
Net investment income, without expense
reimbursement........................ 5.00% 3.37% 2.28% 3.03% 5.17%
</TABLE>
(1) See Note 2.
38
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 60.2%
CONSUMER DISTRIBUTION 3.3%
*3,900 Best Buy, Inc.......................................... $ 63,375
4,000 Dayton Hudson Corp..................................... 300,000
5,100 Gap, Inc............................................... 214,200
*11,400 Kroger Co.............................................. 427,500
5,100 May Department Stores Co............................... 215,475
6,600 Sears, Roebuck & Co.................................... 257,400
*5,700 Sports & Recreation, Inc............................... 40,613
24,600 Wal-Mart Stores, Inc................................... 550,425
-----------
2,068,988
-----------
CONSUMER DURABLES 2.4%
5,900 Chrysler Corp.......................................... 326,713
10,000 Ford Motor Co.......................................... 290,000
12,200 General Motors Corp.................................... 645,075
8,400 Newell Co.............................................. 217,350
-----------
1,479,138
-----------
CONSUMER NON-DURABLES 4.7%
2,000 Clorox Co.............................................. 143,250
5,000 Colgate-Palmolive Co................................... 351,250
13,400 Dial Corp.............................................. 396,975
2,600 General Mills, Inc..................................... 150,150
7,300 Nabisco Holdings Corp., Class A........................ 238,162
10,800 Philip Morris Companies, Inc........................... 977,400
11,500 Quaker Oats Co......................................... 396,750
1,800 Ralston-Purina Group................................... 112,275
3,700 Tambrands, Inc......................................... 176,675
-----------
2,942,887
-----------
CONSUMER SERVICES 3.1%
*14,400 Cox Communications, Inc................................ 280,800
2,400 Disney (Walt) Co....................................... 141,600
4,600 Harcourt General, Inc.................................. 192,625
*1,500 ITT Corp............................................... 79,500
5,600 Marriott International, Inc............................ 214,200
1,400 McGraw Hill, Inc....................................... 121,975
5,700 New York Times Co., Class A............................ 168,863
19,900 Time Warner, Inc....................................... 753,712
-----------
1,953,275
-----------
</TABLE>
39
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY 9.3%
3,700 Amoco Corp............................................ $ 265,937
1,400 Atlantic Richfield Co................................. 155,050
5,500 Baker Hughes, Inc..................................... 134,062
9,000 Coastal Corp.......................................... 335,250
7,200 Exxon Corp............................................ 576,900
3,700 Halliburton Co........................................ 187,312
3,100 Mobil Corp............................................ 347,200
10,000 Noble Affiliates, Inc................................. 298,750
7,800 Norsk Hydro, SA, ADR.................................. 326,625
10,200 Occidental Petroleum Corp............................. 218,025
4,400 Pacific Enterprises................................... 124,300
14,300 Panhandle Eastern Corp................................ 398,612
8,500 Pogo Producing Co..................................... 240,125
7,000 Repsol, SA, ADR....................................... 230,125
5,000 Royal Dutch Petroleum Co., ADR........................ 705,625
3,300 Schlumberger, Ltd..................................... 228,525
8,500 Sonat, Inc............................................ 302,812
6,500 Texaco, Inc........................................... 510,250
2,100 Tosco Corp............................................ 80,063
5,900 Total, SA, ADR........................................ 200,600
-----------
5,866,148
-----------
FINANCE 7.4%
3,300 Aetna Life & Casualty Co.............................. 228,525
2,900 Allmerica Financial Corp.............................. 78,300
10,800 Allstate Corp......................................... 444,150
3,000 AMBAC, Inc............................................ 140,625
2,100 American Bankers Insurance Group...................... 81,900
2,700 American International Group, Inc..................... 249,750
2,500 BankAmerica Corp...................................... 161,875
3,500 Bankers Trust New York Corp........................... 232,750
12,200 Bear Stearns Companies, Inc........................... 242,475
6,300 Chemical Banking Corp................................. 370,125
3,300 Federal National Mortgage Association................. 409,612
3,600 Fleet Financial Group, Inc............................ 146,700
7,700 Franklin Resources, Inc............................... 387,888
7,800 Great Western Financial Corp.......................... 198,900
4,900 Morgan (J.P.) & Co., Inc.............................. 393,225
9,400 Providian Corp........................................ 383,050
7,200 St. Paul Companies, Inc............................... 400,500
2,300 SunAmerica, Inc....................................... 109,250
-----------
4,659,600
-----------
HEALTH CARE 5.4%
2,500 American Home Products Corp........................... 242,500
*2,400 Amgen, Inc............................................ 142,500
3,300 Bristol-Myers Squibb Co............................... 283,387
32,400 Caremark International, Inc........................... 587,250
12,500 Community Psychiatric Centers......................... 153,125
13,500 Mallinckrodt Group, Inc............................... 491,063
4,700 Merck & Co., Inc...................................... 309,025
2,200 Pfizer, Inc........................................... 138,600
5,365 Pharmacia & Upjohn, Inc............................... 207,894
5,000 Schering-Plough Corp.................................. 273,750
*7,100 Tenet Healthcare Corp................................. 147,325
4,300 Warner-Lambert Co..................................... 417,638
-----------
3,394,057
-----------
</TABLE>
40
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
PRODUCER MANUFACTURING 6.0%
1,900 Emerson Electric Co................................... $ 155,325
2,600 Fluor Corp............................................ 171,600
5,000 Foster Wheeler Corp................................... 212,500
11,800 General Electric Co................................... 849,600
3,300 Honeywell, Inc........................................ 160,462
1,500 ITT Industries........................................ 36,000
5,900 Rockwell International Corp........................... 311,963
5,800 TRW, Inc.............................................. 449,500
*5,400 Varity Corp........................................... 200,475
41,300 WMX Technologies, Inc................................. 1,233,837
-----------
3,781,262
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 7.4%
2,200 Air Products & Chemicals, Inc......................... 116,050
14,300 Barrick Gold Corp..................................... 377,163
9,100 Battle Mountain Gold Co............................... 76,213
7,100 Boise Cascade Corp.................................... 245,837
3,700 Consolidated Papers................................... 207,662
*1,210 Crown Vantage, Inc.................................... 17,243
8,000 DuPont (E.I.) de Nemours & Co., Inc................... 559,000
4,400 Freeport McMoRan Inc., Copper and Gold, Class B....... 123,750
4,000 Georgia Pacific Corp.................................. 274,500
4,700 Homestake Mining and Gold............................. 73,438
10,000 International Paper Co................................ 378,750
25,200 James River Corp...................................... 607,950
3,500 Mead Corp............................................. 182,875
3,300 Monsanto Co........................................... 404,250
3,400 Nalco Chemical Co..................................... 102,425
1,800 Newmont Gold Corp..................................... 78,750
4,600 Nucor Corp............................................ 262,775
6,100 Union Camp Corp....................................... 290,513
3,000 Union Carbide Corp.................................... 112,500
3,500 Willamette Industries, Inc............................ 196,875
-----------
4,688,519
-----------
TECHNOLOGY 2.7%
1,700 Avnet, Inc............................................ 76,075
*5,300 Gateway 2000, Inc..................................... 129,850
6,900 General Dynamics Corp................................. 407,962
3,700 General Motors Corp., Class H......................... 181,763
1,800 Hewlett-Packard Co.................................... 150,750
2,000 Intel Corp............................................ 113,500
4,000 International Business Machines Corp.................. 367,000
3,400 LSI Logic Corp........................................ 111,350
2,000 Motorola, Inc......................................... 114,000
*3,300 National Semiconductor Corp........................... 73,425
-----------
1,725,675
-----------
TRANSPORTATION 0.6%
*2,300 AMR Corp.............................................. 170,775
2,500 Canadian National Railway............................. 37,500
4,800 Illinois Central Corp................................. 184,200
-----------
392,475
-----------
</TABLE>
41
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES 7.9%
2,800 American Electric Power, Inc.......................... $ 113,400
3,400 Ameritech Corp........................................ 200,600
6,700 AT&T Corp............................................. 433,825
2,800 Bell Atlantic Corp.................................... 187,250
4,500 Bellsouth Corp........................................ 195,750
2,000 Boston Edison Co...................................... 59,000
4,500 Carolina Power & Light Co............................. 155,250
800 Central & South West Corp............................. 22,300
1,300 CMS Energy Group...................................... 38,837
3,400 Detroit Edison Co..................................... 117,300
5,000 FPL Group, Inc........................................ 231,875
6,300 Frontier Corp......................................... 189,000
2,300 General Public Utilities Corp......................... 78,200
4,500 Illinova Corp......................................... 135,000
10,900 MCI Communications Corp............................... 284,762
3,100 New York State Electric & Gas Corp.................... 80,213
1,000 NIPSCO Industries, Inc................................ 38,250
1,000 Northern State Power.................................. 49,125
3,600 NYNEX Corp............................................ 194,400
1,600 Ohio Edison Co........................................ 37,600
900 Oklahoma Gas & Electric Co............................ 38,700
2,800 Pacific Telesis Group................................. 94,150
1,900 Pacificorp............................................ 40,375
12,100 Peco Energy Co........................................ 364,512
2,100 Pinnacle West Capital Corp............................ 60,375
1,300 Public Service Co. of Colorado........................ 45,988
*7,600 Public Service Co. of New Mexico...................... 133,950
1,700 Rochester Gas & Electric Co........................... 38,462
3,300 SBC Communications, Inc............................... 189,750
2,600 Southwestern Public Service Co........................ 85,150
12,000 Sprint Corp........................................... 478,500
4,900 Telefonica de Espana, SA, ADR......................... 205,188
1,400 Texas Utilities Co.................................... 57,575
4,000 US West Communications Group.......................... 143,000
2,400 Unicom Corp........................................... 78,600
*2,500 WorldCom, Inc......................................... 88,125
-----------
4,984,337
-----------
TOTAL COMMON STOCK (Cost $33,439,690)................. 37,936,361
-----------
</TABLE>
See Notes to Financial Statements
42
<PAGE>
MULTIPLE STRATEGY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 19.2%
CONSUMER DISTRIBUTION 1.6%
$1,000 Sears, Roebuck & Co.................... 6.750% 09/15/05 $ 1,036,100
-----------
CONSUMER NON-DURABLES 1.7%
1,000 Anheuser-Busch Companies, Inc.......... 7.000 09/01/05 1,047,500
-----------
CONSUMER SERVICES 1.6%
1,000 Cox Communications, Inc................ 6.875 06/15/05 1,036,820
-----------
ENERGY 3.7%
1,000 Burlington Resources, Inc.............. 9.125 10/01/21 1,274,700
1,000 Enron Corp............................. 6.875 10/15/07 1,040,200
-----------
2,314,900
-----------
FINANCE 1.8%
1,000 American General Corp.................. 9.625 02/01/18 1,117,500
-----------
PRODUCER MANUFACTURING 1.6%
1,000 Raytheon Co............................ 6.500 07/15/05 1,026,100
-----------
TECHNOLOGY 3.7%
1,000 Boeing Co.............................. 8.100 11/15/06 1,153,700
1,000 Philips Electronics, NV................ 8.375 09/15/06 1,151,600
-----------
2,305,300
-----------
UTILITIES 3.5%
Pacific Gas & Electric Co., 1st Mtg.,
1,000 Series 92-D............................ 8.250 11/01/22 1,074,100
1,000 Texas Utilities Electric Co., 1st Mtg.. 8.250 04/01/04 1,122,800
-----------
2,196,900
-----------
TOTAL CORPORATE OBLIGATIONS (Cost $11,324,067).......... 12,081,120
-----------
GOVERNMENT OBLIGATIONS 10.2%
1,000 Province of Nova Scotia (Canada)....... 7.250 07/27/13 1,041,500
3,700 United States Treasury Bonds........... 7.125 02/15/23 4,231,283
1,000 United States Treasury Notes........... 7.250 08/15/04 1,112,500
-----------
TOTAL GOVERNMENT OBLIGATIONS (Cost $5,606,035).......... 6,385,283
-----------
REPURCHASE AGREEMENT 10.5%
6,625 Lehman Government Securities, Inc.,
dated 12/29/95 (collateralized by U.S.
Government obligations in a pooled cash
account) repurchase proceeds $6,629,306
(Cost $6,625,000)...................... 5.850 01/02/96 6,625,000
-----------
TOTAL INVESTMENTS (Cost $56,994,792) 100.1%.................... 63,027,764
OTHER ASSETS AND LIABILITIES, NET (0.1)%....................... (46,647)
-----------
NET ASSETS 100%................................................ $62,981,117
-----------
</TABLE>
*Non-income producing security
43
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $56,994,792).................... $63,027,764
Interest and dividends receivable.................................. 457,697
Receivable for investments sold.................................... 172,296
Other assets....................................................... 18,812
-----------
Total Assets..................................................... 63,676,569
-----------
LIABILITIES
Payable for investments purchased.................................. 559,732
Payable for Fund shares redeemed................................... 35,535
Due to Adviser..................................................... 22,939
Deferred Trustees' compensation.................................... 17,522
Bank overdraft..................................................... 1,524
Due to shareholder service agent................................... 1,210
Accrued expenses and other liabilities............................. 56,990
-----------
Total Liabilities................................................ 695,452
-----------
NET ASSETS, equivalent to $11.64 per share......................... $62,981,117
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 5,409,616 shares outstanding................... $ 54,096
Capital surplus.................................................... 55,782,358
Undistributed net realized gain on securities...................... 1,092,149
Net unrealized appreciation of securities.......................... 6,032,972
Undistributed net investment income................................ 19,542
-----------
NET ASSETS......................................................... $62,981,117
-----------
</TABLE>
44
See Notes to Financial Statements
<PAGE>
MULTIPLE STRATEGY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
- ---------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest.................. $ 1,861,454
Dividends................. 826,046
-----------
Investment income....... 2,687,500
-----------
EXPENSES
Management fees........... 302,141
Shareholder service
agent's fees and
expenses................. 15,970
Accounting services....... 57,576
Trustees' fees and
expenses................. 12,543
Audit fees................ 24,203
Custodian fees............ 24,703
Legal fees................ 4,176
Reports to shareholders... 6,196
Miscellaneous............. 663
Expense reimbursement..... (85,602)
-----------
Total expenses.......... 362,569
-----------
NET INVESTMENT INCOME..... 2,324,931
-----------
REALIZED AND UNREALIZED
GAIN ON SECURITIES
Net realized gain on
securities............... 6,122,759
Net unrealized
appreciation of
securities during the
period................... 7,920,361
-----------
NET REALIZED AND
UNREALIZED GAIN ON
SECURITIES............... 14,043,120
-----------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $16,368,051
-----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $56,635,933 $64,857,688
----------- -----------
OPERATIONS...........................................
Net investment income............................... 2,324,931 2,280,114
Net realized gain on securities..................... 6,122,759 4,566,704
Net unrealized appreciation (depreciation) of
securities during the period....................... 7,920,361 (9,205,867)
----------- -----------
Increase (decrease) in net assets resulting from
operations........................................ 16,368,051 (2,359,049)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (see Note 1H)
Net investment income............................... (2,326,257) (2,288,536)
Net realized gain on securities..................... (4,841,441) (4,566,704)
Excess of book-basis net realized gain.............. -- (106,886)
----------- -----------
(7,167,698) (6,962,126)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold........................... 1,931,514 3,800,820
Proceeds from shares issued for distributions
reinvested......................................... 7,167,697 6,962,125
Cost of shares redeemed............................. (11,954,380) (9,663,525)
----------- -----------
Increase (decrease) in net assets from capital
transactions...................................... (2,855,169) 1,099,420
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.................... 6,345,184 (8,221,755)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $19,542
and $14,467, respectively).......................... $62,981,117 $56,635,933
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold.......................................... 166,906 327,001
Shares issued for distributions reinvested........... 619,366 700,508
Shares redeemed...................................... (1,045,554) (857,318)
----------- -----------
Increase (decrease) in capital shares outstanding.. (259,282) 170,191
----------- -----------
</TABLE>
See Notes to Financial Statements
45
<PAGE>
MULTIPLE STRATEGY FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <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
------- ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income................... .55 .52 .37 .44 .54
Expenses............................ (.09) (.09) (.09) (.09) (.09)
Expense reimbursement(/1/).......... .02 .02 .01 .02 .02
------- ------ ------- ------ ------
Net investment income................ .48 .45 .29 .37 .47
Net realized and unrealized gain
(loss) on securities................ 2.6425 (.89) .6025 .493 2.27
------- ------ ------- ------ ------
Total from investment operations..... 3.1225 (.44) .8925 .863 2.74
------- ------ ------- ------ ------
LESS DISTRIBUTIONS FROM (see Note 1H)
Net investment income............... (.4775) (.45) (.2925) (.3689) (.4825)
Net realized gain on securities..... (.995) (.90) (.63) (.6541) (.6075)
Excess of book-basis net realized
gain on securities................. -- (.02) (.09) -- --
------- ------ ------- ------ ------
Total distributions.................. (1.4725) (1.37) (1.0125) (1.023) (1.09)
------- ------ ------- ------ ------
Net asset value, end of period....... $11.64 $ 9.99 $11.80 $11.92 $12.08
------- ------ ------- ------ ------
TOTAL RETURN......................... 31.36% (3.66%) 7.71% 7.28% 27.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions). $63.0 $56.6 $64.9 $59.6 $52.2
Average net assets (millions)........ $60.4 $61.6 $63.9 $54.8 $44.4
Ratios to average net assets(/1/)
Expenses............................ .60% .60% .60% .60% .60%
Expenses, without expense
reimbursement...................... .74% .72% .74% .77% .80%
Net investment income............... 3.85% 3.70% 2.34% 3.05% 4.12%
Net investment income, without
expense reimbursement.............. 3.71% 3.58% 2.20% 2.88% 3.92%
Portfolio turnover rate.............. 124% 163% 150% 126% 88%
</TABLE>
(1) See Note 2.
See Notes to Financial Statements
46
<PAGE>
REAL ESTATE FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 88.1%
APARTMENTS 17.1%
11 Bay Apartment Communities, Inc........................ $ 264,323
7 Equity Residential Properties Trust................... 223,563
12 Irvine Apartment Communities, Inc..................... 234,850
9 Merry Land & Investment, Inc.......................... 207,900
7 Prime Residential, Inc................................ 120,250
11 Security Capital Pacific Trust........................ 225,150
13 United Dominion Realty Trust.......................... 190,500
----------
1,466,536
----------
DIVERSIFIED 2.6%
9 Colonial Properties Trust............................. 224,400
----------
HEALTH CARE FACILITIES 7.9%
11 American Health Properties............................ 225,750
7 Health Care Property Investors, Inc................... 249,388
5 Nationwide Health Properties, Inc..................... 205,800
----------
680,938
----------
HOTELS 8.0%
8 Felcor Suite Hotels, Inc.............................. 210,900
10 Patriot American Hospitality.......................... 252,350
8 Starwood Lodging Trust................................ 226,100
----------
689,350
----------
MANUFACTURED HOME PARKS 2.7%
10 ROC Communities, Inc.................................. 235,200
----------
OFFICE/INDUSTRIAL 26.6%
11 Beacon Properties Corp................................ 248,400
12 Cali Realty Corp...................................... 258,125
10 Carr Realty Corp...................................... 255,938
8 Crescent Real Estate.................................. 266,175
9 Highwoods Properties, Inc............................. 251,425
12 Liberty Property Trust................................ 240,700
9 Reckson Associates Realty Co.......................... 264,375
14 Security Capital Industrial Trust..................... 248,500
10 Spieker Properties, Inc............................... 248,738
----------
2,282,376
----------
SELF-STORAGE 2.5%
11 Public Storage, Inc................................... 216,600
----------
</TABLE>
See Notes to Financial Statements
47
<PAGE>
REAL ESTATE FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of
Shares Market
(000) Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
SHOPPING CENTERS 8.4%
12 Bradley Real Estate, Inc................................. $ 168,750
7 Federal Realty Investment Trust.......................... 166,075
7 Kimco Realty Corp........................................ 192,113
5 Vornado Realty Trust..................................... 191,250
----------
718,188
----------
SHOPPING MALLS 12.3%
15 DeBartolo Realty Corp.................................... 189,800
9 JP Realty, Inc........................................... 196,875
11 Macerich Co.............................................. 226,000
11 Rouse Co................................................. 215,975
9 Simon Property Group, Inc................................ 224,250
----------
1,052,900
----------
TOTAL COMMON STOCK (Cost $7,234,383)..................... 7,566,488
----------
<CAPTION>
Par
Amount
(000)
------
<C> <S> <C>
REPURCHASE AGREEMENT 18.9%
$1,620 Lehman Government Securities, Inc., dated 12/29/95,
5.875%, due 1/02/96
(Collateralized by U.S. Government obligations in a
pooled cash account) repurchase proceeds $1,621,058 (Cost
$1,620,000).............................................. $1,620,000
----------
TOTAL INVESTMENTS (Cost $8,854,383) 107.0%....................... 9,186,488
OTHER ASSETS AND LIABILITIES (7.0%).............................. (601,167)
----------
NET ASSETS 100%.................................................. $8,585,321
----------
</TABLE>
See Notes to Financial Statements
48
<PAGE>
REAL ESTATE FUND_________________________STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $8,854,383).................... $9,186,488
Cash.............................................................. 7,367
Receivable for Fund shares sold................................... 245,466
Receivable for investments sold................................... 155,515
Interest and dividends receivable................................. 51,396
Other assets...................................................... 8,447
----------
Total Assets.................................................... 9,654,679
----------
LIABILITIES
Payable for investments purchased................................. 914,414
Payable for options closed........................................ 125,640
Deferred Trustees' compensation................................... 1,050
Due to shareholder service agent.................................. 100
Accrued expenses.................................................. 28,154
----------
Total Liabilities............................................... 1,069,358
----------
NET ASSETS, equivalent to $10.74 per share........................ $8,585,321
----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 799,347 shares outstanding.................... $ 7,993
Capital surplus................................................... 8,269,041
Accumulated net realized loss on securities....................... (32,530)
Net unrealized appreciation of securities......................... 332,105
Undistributed net investment income............................... 8,712
----------
NET ASSETS........................................................ $8,585,321
----------
</TABLE>
49
See Notes to Financial Statements
<PAGE>
REAL ESTATE FUND________________________________________FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- ----------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends................. $ 99,314
Interest.................. 14,118
--------
Investment income....... 113,432
--------
EXPENSES
Management fees........... 18,136
Shareholder service
agent's expenses.......... 307
Accounting services....... 3,153
Trustees' fees and
expenses.................. 2,280
Audit fees................ 20,403
Custodian fees............ 3,000
Legal fees................ 500
Reports to shareholders... 752
Registration and filing
fees...................... 2,855
Miscellaneous............. 1,128
Expense reimbursement..... (7,173)
--------
Total expenses.......... 45,341
--------
NET INVESTMENT INCOME..... 68,091
--------
REALIZED AND UNREALIZED
GAIN (LOSS) ON SECURITIES
Net realized loss on
securities
Investment............... (32,460)
Options.................. (70)
Net unrealized
appreciation of securities
during the period......... 332,105
--------
NET REALIZED AND
UNREALIZED GAIN ON
SECURITIES............... 299,575
--------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $367,666
--------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS, beginning of period............................. $ 100
----------
OPERATIONS
Net investment income...................................... 68,091
Net realized loss on securities............................ (32,530)
Net unrealized appreciation of securities during the
period..................................................... 332,105
----------
Increase in net assets resulting from operations.......... 367,666
----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME.... (60,786)
----------
CAPITAL TRANSACTIONS
Proceeds from shares sold.................................. 11,796,374
Proceeds from shares issued for distributions reinvested... 60,786
Cost of shares redeemed.................................... (3,578,819)
----------
Increase in net assets from capital transactions.......... 8,278,341
----------
INCREASE IN NET ASSETS...................................... 8,585,221
----------
NET ASSETS, end of period (including undistributed net
investment income of $8,712)................................ $8,585,321
----------
CAPITAL SHARE TRANSACTIONS
Shares sold................................................. 1,140,133
Shares issued for distributions reinvested.................. 5,789
Shares redeemed............................................. (346,585)
----------
Increase in capital shares outstanding.................... 799,337
----------
</TABLE>
*Commencement of operations
50
See Notes to Financial Statements
<PAGE>
REAL ESTATE FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995(/1/)
through
December 31, 1995(/2/)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C>
Net asset value, beginning of period.................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Investment income...................................... .33
Expenses............................................... (.15)
Expense reimbursement (/3/)............................ .02
------
Net investment income................................... .20
Net realized and unrealized gain on securities.......... .6325
------
Total from investment operations........................ .8325
------
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME........... (.0925)
------
Net asset value, end of period.......................... $10.74
------
TOTAL RETURN(/4/)....................................... 8.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions).................... $8.6
Average net assets (millions)........................... $3.6
Ratios to average net assets (annualized) (/3/)
Expenses............................................... 2.50%
Expenses, without expense reimbursement................ 2.90%
Net investment income.................................. 3.75%
Net investment income, without expense reimbursement... 3.36%
Portfolio turnover rate................................. 85%
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) See Note 2.
(4) Total return for a period less than one year is not annualized.
51
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND________________________________PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 98.8%
CONSUMER DISTRIBUTION 7.8%
200 Alco Standard Corp.................................... $ 9,125
*200 Baby Superstore, Inc.................................. 11,400
100 Bed Bath & Beyond, Inc................................ 3,881
*200 Boise Cascade Office Products Corp.................... 8,550
100 Cardinal Health, Inc.................................. 5,475
200 Casey's General Stores, Inc........................... 4,375
*200 CompUSA, Inc.......................................... 6,225
*400 Consolidated Stores Corp.............................. 8,700
*400 Corporate Express, Inc................................ 12,050
100 Eckerd Corp........................................... 4,460
200 Fastenal Co........................................... 8,450
*200 Garden Ridge Corp..................................... 7,750
*500 General Nutrition Companies, Inc...................... 11,500
200 Just For Feet, Inc.................................... 7,150
*400 Kroger Co............................................. 15,000
*200 Micro Warehouse, Inc.................................. 8,650
*200 Petco Animal Supplies................................. 5,850
200 Richfood Holdings, Inc................................ 5,350
*200 Safeway, Inc.......................................... 10,300
*300 Staples, Inc.......................................... 7,310
*300 Sunglass Hut International, Inc....................... 7,125
100 Vons Companies, Inc................................... 2,825
400 Zale Corp............................................. 6,450
----------
177,951
----------
CONSUMER DURABLES 1.7%
200 Beazer Homes USA, Inc................................. 4,125
200 Centex Corp........................................... 6,950
250 Clayton Homes, Inc.................................... 5,344
200 Harman International Industries, Inc.................. 8,025
100 Snap On, Inc.......................................... 4,525
*400 Toll Brothers, Inc.................................... 9,200
----------
38,169
----------
CONSUMER NON-DURABLES 5.1%
300 Coca Cola Enterprises, Inc............................ 8,025
200 Fila Holdings, ADR.................................... 9,100
200 First Brands Corp..................................... 9,525
400 Liz Claiborne, Inc.................................... 11,100
300 Nautica Enterprises, Inc.............................. 13,125
*200 Nu Kote Holdings Inc., Class A........................ 3,400
*100 Quiksilver, Inc....................................... 3,419
200 St. John Knits, Inc................................... 10,625
400 Starbucks Corp........................................ 8,400
*500 Tommy Hilfiger Corp................................... 21,185
*100 USA Detergents, Inc................................... 2,350
500 Wolverine World Wide, Inc............................. 15,750
----------
116,004
----------
</TABLE>
See Notes to Financial Statements
52
<PAGE>
EMERGING GROWTH FUND____________________PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER SERVICES 9.5%
200 Accustaff, Inc........................................ $ 8,800
*100 Alternative Resources Corp............................ 3,025
300 Applebees International, Inc.......................... 6,825
*400 Boston Chicken, Inc................................... 12,850
*300 Clear Channel Communications, Inc .................... 13,235
*600 Corrections Corp. of America.......................... 22,275
400 Equifax, Inc.......................................... 8,550
*300 Evergreen Media Corp., Class A........................ 9,600
*400 Gartner Group, Inc.................................... 19,150
*100 HA-LO Industries, Inc................................. 3,075
200 Hospitality Franchise Systems, Inc.................... 16,350
*300 Infinity Broadcasting Corp............................ 11,175
200 Interpublic Group Companies, Inc...................... 8,675
200 La Quinta Inns, Inc................................... 5,475
*200 Lone Star Steakhouse Saloon, Inc ..................... 7,675
200 Meredith Corp......................................... 8,375
*300 Mirage Resorts, Inc................................... 10,350
200 National Data Corp.................................... 4,950
100 National Media Corp................................... 2,100
*200 Outback Steakhouse, Inc............................... 7,175
*450 Regal Cinemas, Inc.................................... 13,385
300 Reynolds & Reynolds Co................................ 11,663
*100 SITEL Corp............................................ 3,063
----------
217,796
----------
ENERGY 4.3%
*200 BJ Services Corp...................................... 5,800
*450 Chesapeake Energy Corp................................ 14,963
*1,000 Global Marine, Inc.................................... 8,750
200 Kerr McGee Corp....................................... 12,700
200 Newfield Exploration Co............................... 5,400
200 Phoenix Resource Co................................... 3,450
300 Pogo Producing Co..................................... 8,475
*300 Pride Petroleum Services, Inc......................... 3,188
*400 Smith International, Inc.............................. 9,400
400 Sonat Offshore Drilling, Inc.......................... 17,900
300 Tidewater, Inc........................................ 9,450
----------
99,476
----------
FINANCE 13.5%
100 AAMES Financial Corp.................................. 2,788
200 American Bankers Insurance Group...................... 7,800
400 American Travellers Corp.............................. 11,250
200 Bank New York, Inc.................................... 9,750
400 Bank of Boston Corp................................... 18,500
200 BayBanks, Inc......................................... 19,650
200 City National Corp.................................... 2,800
200 CMAC Investment Corp.................................. 8,800
400 Coast Savings Financial, Inc.......................... 13,850
200 Cullen Frost Bankers, Inc............................. 10,000
200 EXEL Ltd.............................................. 12,200
300 FINOVA Group, Inc..................................... 14,475
200 First American Corp................................... 9,475
</TABLE>
See Notes to Financial Statements
53
<PAGE>
EMERGING GROWTH FUND____________________PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
100 First Bank System, Inc................................ $ 4,963
300 Fremont General Corp.................................. 11,025
400 Green Tree Financial Corp............................. 10,550
100 MBNA Corp............................................. 3,688
100 Mercantile Bancorporation, Inc........................ 4,600
300 Mercury Financial Co.................................. 3,975
250 Mercury General Corp.................................. 11,938
125 Money Store, Inc...................................... 1,953
200 North Fork Bancorporation............................. 5,050
200 Old Republic International Corp....................... 7,100
*500 Oxford Resources Corp., Class A....................... 11,250
300 Penncorp Financial Group, Inc......................... 8,813
200 Peoples Heritage Financial Group, Inc................. 4,550
100 Raychem Corp.......................................... 5,688
100 Reliastar Financial Corp.............................. 4,438
200 Star Banc Corp........................................ 11,900
175 Student Loan Marketing Association.................... 11,528
400 TCF Financial Corp.................................... 13,250
200 TIG Holdings, Inc..................................... 5,700
400 United Companies Financial Corp....................... 10,550
300 Vesta Insurance Group, Inc............................ 16,350
----------
310,197
----------
HEALTH CARE 15.8%
*300 Boston Scientific Corp................................ 14,700
300 Circon Corp........................................... 6,075
*100 Coherent, Inc......................................... 4,050
*400 CompDent Corp......................................... 16,600
*200 Cycare Systems, Inc................................... 5,125
*300 Dura Pharmaceuticals, Inc............................. 10,425
300 Guidant Corp.......................................... 12,675
*200 Gulf South Medical Supply, Inc........................ 6,050
500 HBO & Co.............................................. 38,313
*300 Health Management Associates, Inc., Class A........... 7,838
*400 Health Management Systems, Inc........................ 15,600
*500 Healthsouth Rehabilitation............................ 14,563
*100 HPR, Inc.............................................. 3,013
300 Invacare Corp......................................... 7,575
400 Maxicare Health Plans................................. 10,750
100 Medisense, Inc........................................ 3,163
*100 MedPartners/Mullikin, Inc............................. 3,300
300 Medtronic, Inc........................................ 16,763
200 Mentor Corp........................................... 4,600
100 Minimed, Inc.......................................... 1,250
100 Nellcor, Inc.......................................... 5,800
*200 OccuSystems, Inc...................................... 4,000
400 OmniCare, Inc......................................... 17,900
*500 PhyCor, Inc........................................... 25,281
*300 Physician Reliance Network............................ 11,925
*300 Physician Sales & Service, Inc........................ 8,550
*200 Quintiles Transnational Corp.......................... 8,200
*200 Renal Treatment Centers, Inc.......................... 8,800
*400 Research Industries Corp.............................. 10,800
100 Respironics, Inc...................................... 2,100
</TABLE>
54
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND____________________PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
100 Spine Tech, Inc....................................... $ 2,325
*400 Sybron Corp........................................... 9,500
*100 Thermedics, Inc....................................... 2,775
*200 United Dental Care, Inc............................... 8,250
100 United Healthcare Corp................................ 6,550
300 Universal Health Services, Inc., Class B.............. 13,313
*300 Watson's Pharmaceuticals, Inc......................... 14,700
----------
363,197
----------
PRODUCER MANUFACTURING 5.4%
200 Camco International, Inc.............................. 5,600
*400 Cognex Corp........................................... 13,900
200 Danaher Corp.......................................... 6,350
300 Dover Corp............................................ 11,063
200 Duriron, Inc.......................................... 4,675
*100 FMC Corp.............................................. 6,763
*100 Glenayre Technologies, Inc............................ 6,225
300 Granite Construction, Inc............................. 9,450
100 Illinois Tool Works, Inc.............................. 5,900
*200 Kent Electronics Corp................................. 11,675
200 Measurex Corp......................................... 5,650
*200 Mueller Industries, Inc............................... 5,850
100 Precision Castparts Co................................ 3,975
*300 Sanifill, Inc......................................... 10,013
200 U S Filter Corp....................................... 5,325
*200 United Waste Systems, Inc............................. 7,450
*200 USA Waste Services, Inc............................... 3,775
----------
123,639
----------
RAW MATERIALS/PROCESSING INDUSTRIES 3.6%
100 Agrium, Inc........................................... 4,500
200 Albemarle Corp........................................ 3,875
200 Goodrich (BF) Co...................................... 13,625
100 Hercules, Inc......................................... 5,638
400 IMC Global, Inc....................................... 16,350
200 Millipore Corp........................................ 8,225
100 Mineral Technologies, Inc............................. 3,650
200 Potash Corp Sask, Inc................................. 14,175
*200 Sealed Air Corp....................................... 5,625
100 Sonoco Products Co.................................... 2,625
*100 UCAR International, Inc............................... 3,375
----------
81,663
----------
TECHNOLOGY 27.2%
100 Allen Group, Inc...................................... 2,238
*200 Altera Corp........................................... 9,950
*400 America Online, Inc................................... 15,000
*150 Analog Devices, Inc................................... 5,306
*600 Ascend Communications, Inc............................ 48,675
*300 Aspect Telecommunications Corp........................ 10,050
*300 Aspen Technology, Inc................................. 10,125
*150 Atmel Corp............................................ 3,356
*400 Bay Networks, Inc..................................... 16,450
200 BMC Industries, Inc................................... 4,650
*200 Cabletron Systems, Inc................................ 16,200
</TABLE>
55
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND____________________PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*600 Cadence Design Systems, Inc........................... $ 25,200
*200 Cambridge Technology Partners, Inc.................... 11,500
*100 Cascade Communications................................ 8,525
*400 C-Cube Microsystems, Inc.............................. 25,000
*100 Ceridian Corp......................................... 4,125
*200 CIBER, Inc............................................ 4,675
*400 Cyberoptics Corp...................................... 15,900
*300 Dell Computer Corp.................................... 10,388
*200 DSP Communications, Inc............................... 8,725
200 ECI Telecommunications, Ltd........................... 4,563
*100 Global Village Communications......................... 1,938
*300 Informix Corp......................................... 9,000
*300 Input/Output, Inc..................................... 17,325
*100 INSO Corp............................................. 4,250
*600 International Rectifier Corp.......................... 15,000
*200 Jabil Circuit, Inc.................................... 2,250
*300 KEMET Corp............................................ 7,163
*100 KLA Instruments Corp.................................. 2,606
*100 Kronos, Inc........................................... 4,750
300 Linear Technology Corp................................ 11,775
*300 Macromedia, Inc....................................... 15,675
*400 McAfee Associates, Inc................................ 17,550
*300 Medic Computer Systems, Inc........................... 18,150
*200 MICROS Systems, Inc................................... 9,850
*400 Mylex Corp............................................ 7,650
*50 Netscape Communications Corp.......................... 6,950
*100 Network General Corp.................................. 3,338
*100 Oak Technology, Inc................................... 4,225
*100 Oracle System Corp.................................... 4,238
*200 PairGain Technologies, Inc............................ 10,950
*300 Parametric Technology Corp............................ 19,950
*300 PeopleSoft, Inc....................................... 12,900
*200 PictureTel Corp....................................... 8,625
*200 PRI Automation........................................ 7,025
*100 Project Software & Development, Inc................... 3,488
*300 Quarterdeck Office Systems............................ 8,250
*200 Robotic Vision Systems, Inc........................... 4,825
*300 SCI Systems, Inc...................................... 9,300
*100 Security Dynamics Technology, Inc..................... 5,450
*300 Structural Dynamics Research Corp..................... 8,813
*600 Sun Microsystems, Inc................................. 27,375
100 Sundstrand Corp....................................... 7,038
*200 SunGuard Data Systems, Inc............................ 5,700
100 Tektronix, Inc........................................ 4,913
*200 3Com Corp............................................. 9,325
300 US Robotics Corp...................................... 26,325
*200 Ultratech Stepper, Inc................................ 5,150
*75 UUNET Technologies, Inc............................... 4,725
200 V-Tel Corp............................................ 3,700
100 Watkins Johnson Co.................................... 4,375
----------
622,486
----------
</TABLE>
56
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND____________________PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION 2.5%
300 Airborne Freight Corp................................. $ 7,985
200 Comair Holdings, Inc.................................. 5,375
100 Conrail, Inc.......................................... 7,000
*300 Continental Airlines, Inc., Class B................... 13,050
*200 Fritz Companies, Inc.................................. 8,300
*300 Northwest Airlines, Inc., Class A..................... 15,300
----------
57,010
----------
UTILITIES 2.4%
600 AT&T Corp............................................. 22,950
400 Cincinnati Bell, Inc.................................. 13,900
200 Frontier Corp......................................... 6,000
*400 LCI International, Inc................................ 8,200
*100 MIDCOM Communications, Inc............................ 1,825
*100 Palmer Wireless, Inc.................................. 2,200
----------
55,075
----------
</TABLE>
<TABLE>
<S> <C>
TOTAL COMMON STOCK (Cost $2,017,998) 98.8%........................... 2,262,663
OTHER ASSETS AND LIABILITIES, NET 1.2%............................... 26,994
----------
NET ASSETS 100%...................................................... $2,289,657
----------
</TABLE>
*Non-income producing security
57
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND_____________________STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,017,998).................... $2,262,663
Cash.............................................................. 48,245
Receivable for investments sold................................... 8,298
Receivable for Fund shares sold................................... 6,018
Dividends receivable.............................................. 841
Other assets...................................................... 17,233
----------
Total Assets.................................................... 2,343,298
----------
LIABILITIES
Payable for investments purchased................................. 26,467
Due to auditors................................................... 20,000
Deferred Trustees' compensation................................... 1,050
Due to shareholder service agent.................................. 80
Accrued expenses.................................................. 6,044
----------
Total Liabilities............................................... 53,641
----------
NET ASSETS, equivalent to $11.72 per share........................ $2,289,657
----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 195,420 shares outstanding.................... $ 1,954
Capital surplus................................................... 2,101,591
Accumulated net realized loss on securities....................... (57,503)
Net unrealized appreciation of securities......................... 244,665
Accumulated net investment loss................................... (1,050)
----------
NET ASSETS........................................................ $2,289,657
----------
</TABLE>
58
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND____________________________________FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- ----------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends................. $ 3,298
Interest.................. 3,897
--------
Investment income....... 7,195
--------
EXPENSES
Management fees........... 4,798
Shareholder service
agent's expenses.......... 192
Accounting services....... 3,222
Trustees' fees and
expenses.................. 2,280
Audit fees................ 20,403
Custodian fees............ 3,000
Legal fees................ 250
Reports to shareholders... 978
Miscellaneous............. 1,872
Expense reimbursement..... (19,858)
--------
Total expenses.......... 17,137
--------
NET INVESTMENT LOSS....... (9,942)
--------
REALIZED AND UNREALIZED
GAIN (LOSS) ON SECURITIES
Net realized loss on
securities................ (57,503)
Net unrealized
appreciation of securities
during the period......... 244,665
--------
NET REALIZED AND
UNREALIZED GAIN ON
SECURITIES................ 187,162
--------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. $177,220
--------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS, beginning of period............................. $ 100
----------
OPERATIONS
Net investment loss........................................ (9,942)
Net realized loss on securities............................ (57,503)
Net unrealized appreciation of securities during the
period..................................................... 244,665
----------
Increase in net assets resulting from operation........... 177,220
----------
CAPITAL TRANSACTIONS
Proceeds from shares sold.................................. 2,362,883
Cost of shares redeemed.................................... (250,546)
----------
Increase in net assets from capital transactions.......... 2,112,337
----------
INCREASE IN NET ASSETS...................................... 2,289,557
----------
NET ASSETS, end of period (including accumulated net
investment loss of $1,050).................................. $2,289,657
----------
CAPITAL SHARE TRANSACTIONS
Shares sold................................................. 217,875
Shares redeemed............................................. (22,465)
----------
Increase in capital shares outstanding.................... 195,410
----------
</TABLE>
*Commencement of operations.
59
See Notes to Financial Statements
<PAGE>
EMERGING GROWTH FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995(/1/)
through
December 31, 1995(/2/)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C>
Net asset value, beginning of period................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................................... .06
Expenses.............................................. (.30)
Expense reimbursement (/3/)........................... .16
------
Net investment loss.................................... (.08)
Net realized and unrealized gain on securities......... 1.80
------
Total from investment operations....................... 1.72
------
Net asset value, end of period......................... $11.72
------
TOTAL RETURN(/4/)...................................... 17.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)................... $2.3
Average net assets (millions).......................... $1.4
Ratios to average net assets (annualized) (/3/)
Expenses.............................................. 2.50%
Expenses, without expense reimbursement............... 5.40%
Net investment loss................................... (1.45)%
Net investment loss, without expense reimbursement.... (4.35)%
Portfolio turnover rate................................ 41%
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) See Note 2.
(4) Total return for a period less than one year is not annualized.
60
See Notes to Financial Statements
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 96.8%
AUSTRALIA 0.2%
*200 News Corp............................................. $ 4,275
----------
FINLAND 1.6%
750 Kymmene Corp.......................................... 19,830
390 Nokia (AB) OY, Series A............................... 15,333
*100 Nokia Corp............................................ 3,887
----------
39,050
----------
FRANCE 2.1%
280 Christian Dior........................................ 30,190
*500 SGS Thomson Micro..................................... 19,144
----------
49,334
----------
GERMANY 5.7%
*500 Adidas................................................ 26,455
600 Berliner Elektro Holdings............................. 19,575
35 CKAG Colonia Konzern.................................. 22,691
500 Deutsche Bank......................................... 23,691
70 Mannesmann............................................ 22,286
500 Veba.................................................. 21,227
----------
135,925
----------
HONG KONG 4.4%
20,000 First Pacific Co...................................... 22,244
6,000 Hutchison Whampoa..................................... 36,547
*70,000 Jilin Chemical Industries, Class H.................... 14,484
4,000 Swire Pacific......................................... 31,038
----------
104,313
----------
ITALY 0.8%
500 Gucci Group........................................... 19,438
----------
INDONESIA 0.5%
500 Perusahaan Persero Telekom............................ 12,625
----------
JAPAN 23.0%
2,000 Amada Co.............................................. 19,758
2,000 Bank of Tokyo......................................... 35,061
2,000 Daimei Telecom Engineering............................ 17,240
3,000 Daiwa Securities...................................... 45,908
1,000 Fuji Photo Film Co.................................... 28,862
2,000 Fujitsu............................................... 22,276
2,000 Hitachi............................................... 20,145
2,000 Honda Motor Co........................................ 41,259
2,000 Mitsubishi Estate..................................... 24,988
3,000 Mitsubishi Heavy Industries........................... 23,913
1,000 Mitsubishi Trust & Banking............................ 16,659
2,000 Mitsukoshi............................................ 18,789
2,000 Nomura Securities..................................... 43,584
3,000 Ricoh Co.............................................. 32,833
2,000 SXL Corporation....................................... 20,726
2,000 Tokio Marine & Fire Insurance Co. .................... 26,150
1,000 Tokyo Electron........................................ 38,741
3,000 Toshiba Corp.......................................... 23,506
2,000 Wishimatsu Construction............................... 23,438
1,000 Yamanouchi Pharmacy................................... 21,501
----------
545,337
----------
</TABLE>
See Notes to Financial Statements
61
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
MALAYSIA 1.1%
5,000 Resorts World......................................... $ 26,775
----------
MEXICO 1.3%
1,100 Cemex................................................. 7,631
1,000 Empresas Ica Sociedad................................. 10,250
400 Telefonos de Mexico................................... 12,750
----------
30,631
----------
NETHERLANDS 3.8%
*1,500 BE Semiconductor Industries........................... 19,630
440 ING Group............................................. 29,394
50 Philips Electronics................................... 1,807
300 Philips Electronics, Inc.............................. 10,762
200 Ver Ned Uitgevers..................................... 27,457
----------
89,050
----------
NORWAY 1.7%
*2,000 Fokus Bank............................................ 10,799
*5,500 Uni Storebrand........................................ 30,391
----------
41,190
----------
SINGAPORE 2.4%
2,000 Fraser & Neave........................................ 25,451
5,000 Singapore Land........................................ 32,343
----------
57,794
----------
SWEDEN 3.5%
800 Astra, Series B....................................... 31,688
1,100 Ericsson (LM) Telephone, Series B..................... 21,537
11,000 Rottneros............................................. 11,597
1,600 Stora Kopparbergs..................................... 19,157
----------
83,979
----------
SWITZERLAND 4.6%
38 Alusuisse Lonza Holdings.............................. 30,110
33 Ciba Geigy............................................ 29,038
*200 Logitech International................................ 20,633
70 Schweizerischer Bankverein............................ 28,582
----------
108,363
----------
UNITED KINGDOM 11.9%
10,000 Astec................................................. 17,705
1,500 BOC Group............................................. 20,989
1,200 Carlton Communications................................ 17,994
4,000 Dixons Group.......................................... 27,582
5,000 Farnell Electronic.................................... 55,793
2,000 General Accident...................................... 20,205
2,800 Marks & Spencer....................................... 19,568
2,000 National Westminster.................................. 20,143
2,000 Reuters Holdings...................................... 18,310
2,000 Severn Trent.......................................... 21,354
2,200 SmithKline Beecham.................................... 24,258
4,000 Tesco................................................. 18,450
----------
282,351
----------
</TABLE>
See Notes to Financial Statements
62
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES 28.2%
*100 Adaptec, Inc........................................... $ 4,100
100 Aetna Life & Casualty Co............................... 6,925
200 Allstate Corp.......................................... 8,225
*100 American Radio System Corp., Class A................... 2,800
*100 Amgen, Inc............................................. 5,937
100 Analog Devices, Inc.................................... 3,538
100 Applied Materials, Inc................................. 3,937
100 AT&T Corp.............................................. 6,475
100 BankAmerica Corp....................................... 6,475
100 Bank of Boston Corp.................................... 4,625
100 Bank of New York, Inc.................................. 4,875
100 BayBanks, Inc.......................................... 9,825
*150 Bay Networks, Inc...................................... 6,169
100 Bristol-Myers Squibb Co................................ 8,587
*100 Buffets, Inc........................................... 1,375
*100 Cabletron Systems, Inc................................. 8,100
100 Cadence Design Systems, Inc............................ 4,200
100 Cellular Communications, Inc........................... 4,975
100 Chemical Banking Corp.................................. 5,875
100 Circon Corp............................................ 2,025
*100 Cisco Systems, Inc..................................... 7,462
150 Citicasters, Inc....................................... 3,544
100 Citicorp............................................... 6,725
*100 Community Health System, Inc........................... 3,562
*100 Compaq Computer Corp................................... 4,800
200 Computer Associates International, Inc................. 11,375
100 ConAgra, Inc........................................... 4,125
100 Conseco, Inc........................................... 6,263
100 Consolidated Stores Corp............................... 2,175
100 Continental Homes Holding Corp......................... 2,463
*300 Cox Communications, Inc., Class A...................... 5,850
100 CPC International, Inc................................. 6,863
*100 Cytec Industries, Inc.................................. 6,237
*100 Dell Computer Corp..................................... 3,463
100 Disney (Walt) Co....................................... 5,900
100 Dover Corp............................................. 3,687
*100 DST Systems, Inc....................................... 2,850
*100 Eckerds Corp........................................... 4,463
*100 Emmis Broadcasting Corp., Class A...................... 3,100
*100 Evergreen Media Corp., Class A......................... 3,200
100 EXEL, Ltd.............................................. 6,100
100 Exxon Corp............................................. 8,013
200 Federal National Mortgage Association.................. 24,825
100 Federated Department Stores, Inc....................... 2,750
100 First Data Corp........................................ 6,687
*100 Foundation Health Corp................................. 4,300
100 Franklin Resources, Inc................................ 5,038
300 Frontier Corp.......................................... 9,000
100 General Nutrition Companies, Inc....................... 2,300
100 Genzyme Corp........................................... 6,237
*150 Grand Casinos, Inc..................................... 3,488
100 Greenfield Industries, Inc............................. 3,125
</TABLE>
See Notes to Financial Statements
63
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
200 Green Tree Financial Corp.............................. $ 5,275
100 Guidant Corp........................................... 4,225
100 Harnischfeger Industries, Inc.......................... 3,325
*100 Health Management Association, Inc., Class A........... 2,612
100 Illinois Central Corp.................................. 3,838
100 Ilinois Tool Works, Inc................................ 5,900
100 Intel Corp............................................. 5,675
*200 International Rectifier Corp........................... 5,000
100 James River Corp....................................... 2,412
100 Johnson & Johnson...................................... 8,562
78 Kimberly Clark Corp.................................... 6,454
100 Komag, Inc............................................. 4,613
*100 Kroger Co.............................................. 3,750
300 LG Chemical, Ltd....................................... 6,285
100 Lincare Holdings, Inc.................................. 2,500
*100 Linear Technology Corp................................. 3,925
*100 Litton Industries, Inc................................. 4,450
*100 LSI Logic Corp......................................... 3,275
100 Marriott International, Inc............................ 3,825
*100 Maxicare Health Plans, Inc............................. 2,687
400 MCI Communications Corp................................ 10,450
100 Medtronic, Inc......................................... 5,588
200 Merck & Co., Inc....................................... 13,150
150 Mercury Financial Co................................... 1,988
3,000 Metaclad Corp.......................................... 12,000
*100 Microsoft Corp......................................... 8,775
100 Mobil Corp............................................. 11,200
*100 MSC Industrial Direct, Inc., Class A................... 2,750
*100 Nautica Enterprises, Inc............................... 4,375
*100 Nellcor Puritan Bennett, Inc........................... 5,800
*100 Oak Technology, Inc.................................... 4,225
*200 Office Max, Inc........................................ 4,475
200 Omnicom Group, Inc..................................... 7,450
*100 Oracle System Corp..................................... 4,238
200 Panhandle Eastern Corp................................. 5,575
100 Parker Hannifin Corp................................... 3,425
100 Penncorp Financial Group, Inc.......................... 2,938
200 PepsiCo., Inc.......................................... 11,175
145 Pharmacia & Upjohn, Inc................................ 5,619
300 Phillip Morris Companies, Inc.......................... 27,150
200 Praxair, Inc........................................... 6,725
200 Reliastar Financial Corp............................... 8,875
*100 Renal Treatment Centers, Inc........................... 4,400
*200 Safeway, Inc........................................... 10,300
200 Schering-Plough Corp................................... 10,950
*100 SCI Systems, Inc....................................... 3,100
*100 Seagate Technology, Inc................................ 4,750
100 Sears, Roebuck & Co.................................... 3,900
300 Service Corp. International............................ 13,200
100 Sigma-Aldrich.......................................... 4,950
*200 Smith International, Inc............................... 4,700
200 Sprint Corp............................................ 7,975
</TABLE>
See Notes to Financial Statements
64
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*100 S3, Inc............................................... $ 1,762
100 SunAmerica, Inc....................................... 4,750
*100 Symantec Corp......................................... 2,325
200 Terra Industries, Inc................................. 2,825
*200 Trump Hotels & Casino Resorts......................... 4,300
100 Union Carbide Corp.................................... 3,750
200 United Waste Systems, Inc............................. 7,450
*100 Varity Corp........................................... 3,712
*100 Viacom, Inc., Class B................................. 4,738
*100 Watson's Pharmaceuticals, Inc......................... 4,900
100 Williams Companies, Inc............................... 4,388
*300 WorldCom, Inc......................................... 10,575
----------
669,247
----------
TOTAL COMMON STOCK (Cost $2,198,338).................. 2,299,677
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
---------
<C> <S> <C>
CONVERTIBLE CORPORATE OBLIGATION 0.9%
$16,000 United Micro, 1.25%, 06/08/04 (Cost $29,520)............ 20,160
----------
TOTAL INVESTMENTS (Cost $2,227,858) 97.7%.......................... 2,319,837
OTHER ASSETS AND LIABILITIES 2.3%.................................. 55,332
----------
NET ASSETS 100%.................................................... $2,375,169
----------
</TABLE>
*Non-income producing security.
See Notes to Financial Statements
65
<PAGE>
GLOBAL EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,227,858).................... $2,319,837
Foreign currency, at market value (Cost $80,097).................. 80,240
Receivable from Adviser........................................... 29,605
Unrealized appreciation of forward currency exchange contracts.... 11,123
Receivable for investments sold................................... 6,664
Interest and dividends receivable................................. 2,321
Other assets and receivables...................................... 27,078
----------
Total Assets.................................................... 2,476,868
----------
LIABILITIES
Due to auditors................................................... 30,000
Payable for investments purchased................................. 29,940
Bank overdraft.................................................... 23,875
Due to custodian.................................................. 11,500
Deferred Trustees' fees........................................... 1,050
Unrealized depreciation of forward currency exchange contracts.... 561
Due to shareholder service agent.................................. 102
Payable for Fund shares redeemed.................................. 71
Accrued expenses and other payables............................... 4,600
----------
Total Liabilities............................................... 101,699
----------
NET ASSETS, equivalent to $10.30 per share........................ $2,375,169
----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
shares authorized; 230,530 shares outstanding.................... $ 2,305
Capital surplus................................................... 2,290,202
Accumulated net realized loss on securities....................... (7,843)
Net unrealized appreciation (depreciation) of securities
Investments...................................................... 91,979
Foreign currency................................................. 143
Forward currency exchange contracts.............................. 10,562
Other foreign denominated assets and liabilities................. (6)
Accumulated net investment loss................................... (12,173)
----------
NET ASSETS........................................................ $2,375,169
----------
</TABLE>
66
See Notes to Financial Statements
<PAGE>
GLOBAL EQUITY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of $893 of foreign taxes withheld at
source).................................................... $ 9,942
Interest................................................... 7,481
-------
Total income............................................. 17,423
-------
EXPENSES
Management fees............................................ 10,983
Shareholder service agent's expenses....................... 161
Accounting services........................................ 7,200
Trustees' fees and expenses................................ 2,280
Audit fees................................................. 30,403
Custodian fees............................................. 36,580
Legal fees................................................. 500
Reports to shareholders.................................... 750
Registration and filing fees............................... 800
Organization expenses...................................... 688
Miscellaneous.............................................. 444
Expense reimbursement...................................... (43,031)
-------
Total expenses........................................... 47,758
-------
NET INVESTMENT LOSS........................................ (30,335)
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain (loss) on securities
Investments.............................................. (7,843)
Foreign currency and forward currency exchange contracts. 1,787
Net unrealized appreciation (depreciation) of securities
during the period
Investments.............................................. 91,979
Foreign currency......................................... 143
Forward currency exchange contracts...................... 10,562
Other foreign denominated assets and liabilities......... (6)
-------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES............. 96,622
-------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $66,287
-------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
July 3, 1995*
through
December 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS, beginning of period............................. $ 100
----------
OPERATIONS
Net investment loss........................................ (30,335)
Net realized loss on securities............................ (6,056)
Net unrealized appreciation of securities during the
period..................................................... 102,678
----------
Increase in net assets resulting from operations.......... 66,287
----------
CAPITAL TRANSACTIONS
Proceeds from shares sold.................................. 2,319,291
Cost of shares redeemed.................................... (10,509)
----------
Increase in net assets from capital transactions.......... 2,308,782
----------
INCREASE IN NET ASSETS...................................... 2,375,069
----------
NET ASSETS, end of period (including accumulated net
investment loss of $12,173)................................. $2,375,169
----------
CAPITAL SHARE TRANSACTIONS
Shares sold................................................. 231,560
Shares redeemed............................................. (1,040)
----------
Increase in capital shares outstanding.................... 230,520
----------
</TABLE>
*Commencement of operations
67
See Notes to Financial Statements
<PAGE>
GLOBAL EQUITY FUND FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995(/1/)
through
December 31, 1995(/2/)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C>
Net asset value, beginning of period................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................................... .09
Expenses.............................................. (.48)
Expense reimbursement (/3/)........................... .23
------
Net investment loss.................................... (.16)
Net realized and unrealized gain on securities......... .46
------
Total from investment operations....................... .30
------
Net asset value, end of period......................... $10.30
------
TOTAL RETURN(/4/)...................................... 3.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)................... $2.4
Average net assets (millions).......................... $2.2
Ratios to average net assets (annualized) (/3/)
Expenses.............................................. 4.35%
Expenses, without expense reimbursement............... 8.27%
Net investment loss................................... (2.76)%
Net investment loss, without expense reimbursement.... (6.68)%
Portfolio turnover rate................................ 42%
</TABLE>
(1) Commencement of operations.
(2) Based on average month-end shares outstanding.
(3) See Note 2.
(4) Total return for a period less than one year is not annualized.
68
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Life Investment Trust (the "Trust", formerly Amer-
ican Capital Life Investment Trust) is registered under the Investment Company
Act of 1940, as amended, as a diversified open-end management investment com-
pany comprised of eight Funds: Common Stock Fund ("Common Stock"), Domestic
Strategic Income Fund ("Domestic Strategic"), Government Fund ("Government"),
Money Market Fund ("Money Market"), Multiple Strategy Fund ("Multiple Strate-
gy"), Emerging Growth Fund ("Emerging Growth"), Real Estate Fund ("Real Es-
tate") and Global Equity Fund ("Global Equity"). Each Fund is accounted for as
a separate entity.
The goals of the Funds are as follows: Common Stock seeks capital apprecia-
tion by investing principally in common stocks; Domestic Strategic seeks in-
come as its primary objective and capital appreciation as a secondary
objective; Government seeks high current return consistent with preservation
of capital; Money Market seeks protection of capital and high current income
by investing in short-term money market instruments; Multiple Strategy seeks a
high total investment return consistent with prudent risk; Emerging Growth
seeks capital appreciation by investing principally in common stocks of small
and medium sized companies; Real Estate seeks long-term growth of capital by
investing principally in securities of companies operating in the real estate
industry; and Global Equity seeks long-term growth of capital through an in-
ternationally diversified portfolio of equity securities of any nation, in-
cluding the United States.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported. Actual amounts may differ from the
estimates.
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 secu-
rities which may be more susceptible to a decline in value due to adverse eco-
nomic conditions than other investment grade holdings. These securities are
often subordinated to the prior claims of other senior lenders and uncertain-
ties exist as to an issuer's ability to meet principal and interest payments.
Debt securities rated below investment grade and comparable unrated securities
represented approximately 33% of Domestic Strategic's investment portfolio at
the end of the period.
Investments in foreign securities involve certain risks not ordinarily asso-
ciated with investments in securities of domestic issuers, including fluctua-
tions in foreign exchange rates, future political and economic developments,
and the possible imposition of exchange controls or other foreign governmental
laws or restrictions.
B. FUTURES CONTRACTS, FORWARD COMMITMENTS AND OPTIONS-General--Transactions in
futures contracts, forward commitments, and options are utilized in strategies
to manage the market risk of a Fund's investments. The purchase of a futures
contract, forward commitment, or call option (or the writing of a put option)
increases the impact on net asset value of changes in the market price of in-
vestments. Forward commitments have a risk of loss due to nonperformance of
counterparties. There is a risk that the market movement of such instruments
may not be in the direction forecasted. Note 3--Investment Activity contains
additional information.
Futures Contracts--Upon entering into futures contracts, a 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 ac-
quiring 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,
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
variation margin payments are received from or made to the broker. Upon the
closing or cash settlement of a contract, gains or losses are realized. The
cost of securities acquired through delivery under a contract is adjusted by
the unrealized gain or loss on the contract.
Forward Commitments--A Fund trades certain securities under the terms of for-
ward commitments whereby the settlement for payment and delivery occurs at a
specified future date. Forward commitments are privately negotiated transac-
tions between a Fund and
dealers. Upon executing a forward commitment and during the period of obliga-
tion, a Fund maintains collateral of cash or securities in a segregated account
with its custodian in an amount sufficient to relieve the obligation. If the
intent of a Fund is to accept delivery of a security traded under a forward
purchase commitment, the commitment is recorded as a long-term purchase. For
forward purchase commitments for which security settlement is not intended by a
Fund, and for all forward sales commitments, 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, a 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, a 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.
Options--Options purchased are recorded as investment, options written (sold)
are accounted for as liabilities. When an option expires, the premium (original
option value) is realized as a gain if the option was written or realized as a
loss if the option was purchased. When the exercise of an option results in a
cash settlement, the difference between the premium and the settlement proceeds
is realized as a gain or loss. When an option is closed, the difference between
the premium and the cost to close the position is realized as a gain or loss.
C. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which a Fund acquires ownership of a debt security and the seller agrees to re-
purchase the security at a future time and specified price. A Fund may invest
independently in repurchase agreements, or transfer uninvested cash balances
into a pooled cash account along with other investment companies advised by Van
Kampen American Capital Asset Management, Inc. (the "Adviser"), the daily ag-
gregate of which is invested in repurchase agreements. Repurchase agreements
are collateralized by the underlying debt security. A Fund will make payment
for such securities only upon physical delivery or evidence of book entry
transfer to the account of the custodian bank. The seller is required to main-
tain the value of the underlying security at not less than the repurchase pro-
ceeds due a Fund.
D. FOREIGN CURRENCY TRANSLATION-The market values of foreign securities, for-
ward currency exchange contracts and other assets and liabilities stated in
foreign currency are translated into U.S. dollars based on quoted exchange
rates as of noon Eastern Time. The cost of securities is determined using his-
torical exchange rates. Income and expenses are translated at prevailing ex-
change rates when accrued or incurred. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency in-
cludes the net realized amount from the sale of currency and the amount real-
ized between trade date and settlement date on security transactions.
E. FORWARD CURRENCY EXCHANGE CONTRACTS-Global Equity enters into forward cur-
rency exchange contracts in order to hedge its exposure to changes in foreign
currency exchange rates on its foreign portfolio holdings or to settle transac-
tions. A forward currency exchange contract is a commitment to buy or sell a
foreign currency at a set price on a future date. Changes in the value of the
contract are recognized by marking the contract to market on a daily basis. The
Fund realizes gains or losses at the time the forward currency exchange con-
tract is closed. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts, and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
F. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause each of the Funds has elected to be qualified as a "regulated investment
company" under the Internal Revenue Code and intends to maintain this qualifi-
cation by annually distributing all taxable net investment income and taxable
net realized capital gains on investments to shareholders. It is anticipated
that no distributions of net realized capital gains will be made until tax ba-
sis capital loss carryforwards, if any, expire or are offset by net realized
capital gains.
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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,
1995 with expiration dates.
<TABLE>
<CAPTION>
Common Domestic Money Multiple Emerging Real Global
Stock Strategic Government Market Strategy Growth Estate Equity
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Identified cost......... $66,854,310 $25,601,004 $73,227,636 $21,612,759 $57,112,937 $2,017,998 $8,875,739 $2,309,755
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------
Gross unrealized
appreciation........... $ 9,928,432 $ 1,746,960 $ 1,972,463 -- $ 6,303,781 $ 295,831 $ 356,534 $ 180,032
Gross unrealized
depreciation........... 753,880 246,473 23,950 -- 388,954 51,166 45,785 89,710
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------
Net unrealized
appreciation........... $ 9,174,552 $ 1,500,487 $ 1,948,513 -- $ 5,914,827 $ 244,665 $ 310,749 $ 90,322
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------
Capital loss
carryforward utilized
during the period...... -- $ 104,892 $ 1,385,949 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------
Net realized capital
loss carryforward...... -- $ 2,020,640 $13,105,418 $ 2,059 -- $ 36,712 $ 10,729 $ 6,043
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------
Expiration dates of
capital loss
carryforward............ -- 1998-2002 1996-2002 2002-2003 -- 2003 2003 2003
</TABLE>
The net capital loss carryforwards at the end of the period may be utilized
to offset any future capital gains until expiration.
Additionally, $20,791 and $445 of post October losses for Emerging Growth and
Real Estate, respectively, are deferred for federal income tax purposes to the
1996 fiscal year.
G. 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 or when information becomes available, which-
ever is later. Interest income is accrued daily. Issuers of Payment-in-Kind se-
curities may make dividend or interest payments by issuing additional stocks or
bonds in lieu of cash payments.
Under the applicable foreign tax laws, a withholding tax may be imposed on
interest, dividends and realized gains generated from foreign investments. Such
withholding taxes are reflected on the Statement of Operations as a reduction
of the related income or gain.
H. DIVIDENDS AND DISTRIBUTIONS-Government and Money Market declare dividends
from net investment income on each business day. Domestic Strategic, Common
Stock, Multiple Strategy, Emerging Growth, Real Estate and Global Equity
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.
Each of the Funds distributes tax basis earnings in accordance with the mini-
mum distribution requirements of the Internal Revenue Code, which may differ
from generally accepted accounting principles. Such dividends or distributions
may exceed financial statement earnings.
I. DEBT DISCOUNT AND PREMIUM-The Trust 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.
J. PRIVATE PLACEMENTS-A Fund may own securities purchased in private placement
transactions, which have not been registered under the Securities Act of 1933.
Such securities generally may be resold only in a privately negotiated transac-
tion with a limited number of purchasers or in a public offering after they
have been registered under the Securities Act of 1933. The issuers of privately
placed debt securities held by a Fund generally have agreed to register the se-
curities within specified time periods or increase the interest paid on such
securities.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Trust. Management fees are paid
monthly, based on the average daily net assets of the Funds (Common Stock, Do-
mestic Strategic, Government, Money Market and Multiple Strategy) 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
Fund (Common Stock, Domestic Strategic, Government, Money Market and Multiple
Strategy) based on its average daily net assets. The Adviser
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
has volunteered to reimburse each of these Funds for all ordinary business ex-
penses, exclusive of taxes and interest, in excess of .60% of the average daily
net assets. For the period, such voluntary expense reimbursements were:
<TABLE>
<S> <C>
Common Stock...................................................... $56,680
Domestic Strategic................................................ 86,887
Government........................................................ 77,421
Money Market...................................................... 80,637
Multiple Strategy................................................. 85,602
</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 Funds (Common Stock,
Domestic Strategic, Government, Money Market and Multiple Strategy) for the
amount of the excess. The contractual expense reimbursement shall be made
monthly. For the period, none of the above Funds had contractual expense reim-
bursements.
For Emerging Growth, management fees are paid monthly, based on the average
daily net assets at an annual rate of .70%.
For Real Estate, the Adviser has entered into a subadvisory agreement with
Hines Interest Realty Advisors Limited Partnership ("Subadviser--Real Estate"),
who provides advisory services to Real Estate and the Adviser with respect to
Real Estate's investments in real estate. Management fees are calculated month-
ly, based on the average daily net assets of Real Estate at the annual rate of
1.00%. The Adviser pays 50% of its management fee to the Subadviser--Real Es-
tate.
For Global Equity, the Adviser has entered into a subadvisory agreement with
John Govett & Co., Limited ("Subadviser--Global Equity), who provides advisory
services to Global Equity and the Adviser with respect to Global Equity's in-
vestments in foreign securities. Management fees are calculated monthly, based
on the average daily net assets of Global Equity at the annual rate of 1.00%.
The Adviser pays 50% of its management fee to the Subadviser--Global Equity.
Under the terms of the advisory agreements, if the total ordinary business
expenses of the Funds (Emerging Growth, Real Estate and Global Equity), exclu-
sive of taxes, interest and other extraordinary expenses, exceed the most re-
strictive expense limitation applicable in the states where the Funds' shares
are qualified for sale, the Adviser will reimburse the Funds for the excess.
Such reimbursement shall be made monthly. The most restrictive expense limita-
tion in effect was California's which aggregated 2 1/2% of the first $30 mil-
lion of average daily net assets, 2% of the next $70 million of average daily
net assets and 1 1/2% of the average daily net assets in excess of $100
milllion. For the period, $19,858 for Emerging Growth, $7,173 for Real Estate,
and $43,031 for Global Equity was reimbursed due to the expense limitation.
As of January 1, 1996, the Adviser has volunteered to reimburse for all ex-
penses in excess of .85% for Emerging Growth, 1.10% for Real Estate, and 1.20%
for Global Equity, each of the Fund's average daily net assets.
Other transactions with affiliates during the period were as follows:
<TABLE>
<CAPTION>
Common Domestic Money Multiple Emerging Real Global
Stock Strategic Government Market Strategy Growth Estate Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accounting officers..... $ 7,336 $ 6,696 $ 7,274 $ 6,664 $ 7,182 $1,357 $1,370 -0-
Shareholder service
agent's fees............ 15,514 15,514 15,514 15,514 15,514 -0- -0- -0-
Legal fees.............. 3,614 3,766 3,546 3,708 3,980 250 500 500
</TABLE>
Accounting services include the salaries and overhead expenses of the Trust'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 Trust. 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
Trust's shareholder service agent. These services are provided at cost plus a
profit. Legal fees during the period were for services rendered by former coun-
sel of the Trust, O'Melveny & Myers. A former trustee was of counsel to that
firm. Certain officers and trustees of the Trust are officers and trustees of
the Adviser and the shareholder service agent.
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward commitments, were:
<TABLE>
<CAPTION>
Common Domestic Multiple Emerging Real Global
Stock Strategic Government Strategy Growth Estate Equity
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $ 98,217,059 $17,345,053 $106,514,498 $65,674,248 $2,586,768 $9,986,356 $2,994,454
Sales................... 109,821,318 14,448,328 117,494,867 77,631,643 511,267 2,719,513 758,759
</TABLE>
Money Market held only short-term investments.
At the end of the period, Government held the following forward purchase com-
mitments settling in January 1996 for which delivery is not intended and long
U.S. Treasury futures contracts expiring in March 1996.
FORWARD PURCHASE COMMITMENTS:
<TABLE>
<CAPTION>
Par Unrealized
Amount Appreciation
(000) Security Market Value (Depreciation)
--------------------------------------------------------------------------
<C> <S> <C> <C>
Federal Home Loan Mortgage
$1,500 Corp., 8.00%, short............. $(1,553,445) $(23,914)
----------- --------
Federal Home Loan Mortgage
1,000 Corp., 7.00%, long.............. 1,008,750 16,563
Government National Mortgage
4,000 Association, 7.50%, long........ 4,112,520 68,457
----------- --------
5,121,270 85,020
----------- --------
$ 3,567,825 $ 61,106
----------- --------
</TABLE>
FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Unrealized
Contracts Description Market Value Appreciation
---------------------------------------------------------------------------
<C> <S> <C> <C>
60 U.S. Treasury Bonds................ $ 7,288,125 $178,120
20 U.S. Treasury Notes (five year).... 2,208,125 25,686
95 U.S. Treasury Notes (ten year)..... 10,886,406 141,461
----------- --------
$20,382,656 $345,267
----------- --------
</TABLE>
During the period, Real Estate and Global Equity had the following option
activity on S&P 500 index futures:
<TABLE>
<CAPTION>
Real Estate Global Equity
------------------- ------------------
Number of Number of
Contracts Premium Contracts Premium
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options open at beginning of the
period.......................... 0 $0 0 $0
Options written................. 120 149,875 80 95,917
Options closed.................. (60) (47,938) (40) (53,958)
Options expired................. (60) (101,937) (40) (41,959)
--- -------- --- -------
Options open at the end of the
period.......................... 0 $0 0 $0
--- -------- --- -------
</TABLE>
At the end of the period Global Equity held the following forward currency
exchange contracts:
<TABLE>
<CAPTION>
U.S. Unrealized
Settlement Dollar Appreciation
Currency Date Value (Depreciation)
---------------------------------------------------------------------------
<S> <C> <C> <C>
JAPANESE YEN
9,892,000 (payable)................... 09/24/96 $ 99,256 $ 745
9,629,000 (payable)................... 11/13/96 97,207 2,793
9,574,000 (payable)................... 11/13/96 96,652 3,348
9,486,000 (payable)................... 11/13/96 95,763 4,237
-------- -------
388,878 11,123
-------- -------
SWEDISH KRONA
343,400 (payable)................... 11/13/96 50,561 (561)
-------- -------
Total forward currency exchange contracts....... $439,439 $10,562
-------- -------
</TABLE>
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 4--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Trust
at the annual rate of $3,342 plus a fee of $96 per day for the Board and Com-
mittee meetings attended. 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 each 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 Trustee covered under the Plan elects to be cred-
ited with an earnings component on amounts deferred equal to the income earned
by each Fund on its short-term investments or equal to the total return of each
Fund.
Trustees' fees for the period were:
<TABLE>
<CAPTION>
Common Domestic Money Multiple Emerging Real Global
Stock Strategic Government Market Strategy Growth Estate Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trustee fees............ $10,917 $10,601 $11,182 $10,192 $11,676 $2,280 $2,280 $2,280
</TABLE>
NOTE 5--FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Trust to
a Delaware Business Trust and the election of additional trustees. On September
16, 1995, the reorganization became effective.
NOTE 6--SUBSEQUENT EVENT
Effective March 6, 1996, the Trust will make the following name changes to
three of the Funds: Common Stock to Enterprise, Domestic Strategic Income to
Domestic Income, and Multiple Strategy to Asset Allocation.
74
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Common Stock
Fund, Domestic Strategic Income Fund, Government Fund, Money Market Fund,
Multiple Strategy Fund, Real Estate Fund, Emerging Growth Fund and Global
Equity Fund (constituting Van Kampen American Capital Life Investment Trust,
hereafter referred to as the "Trust") at December 31, 1995, and the results of
each of their operations, the changes in each of their net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 21, 1996
75
<PAGE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HEGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT INC.
2800 Post Oak Blvd.,
Houston, Texas 77056
INVESTMENT SUBADVISER
(REAL ESTATE FUND)
HINES INTEREST REALTY ADVISORS
LIMITED PARTNERSHIP
2800 Post Oak Blvd.
Houston, Texas 77056
INVESTMENT SUBADVISER
(GLOBAL EQUITY FUND)
JOHN GOVETT & CO. LIMITED
4 Battle Bridge Lane
London SE1 2HR
England
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
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60806
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
(C) Van Kampen American Capital Distributors, Inc., 1996
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. If used for distribution to prospective investors
after 03/31/96, this annual report must be accompanied by a Van Kampen American
Capital Life Investment Trust performance data update for the most recent
quarter.
76
